Senate Rejects Cramdowns

The U.S. Senate easily defeated an amendment that Sen. Richard Durbin, D-Ill., had pushed for the past two years to allow bankruptcy court judges to cram down a mortgage loan as a way to reduce foreclosures and help stabilize the housing market. The amendment was defeated by a vote of 51-45, with just 45 of the 59 Senate Democrats supporting it. The amendment would have given bankruptcy court judges the authority to reduce the interest rate and principal amount of a mortgage secured by a borrower's principal residence. Citigroup was the only bank to support Sen. Durbin's amendment after months of intense negotiations. Sen. Durbin complained the other banks and industry groups refused to compromise and negotiate in good faith. Sen. Tom Carper, D- Del., noted, however, that he might have voted for the amendment if Sen. Durbin had restricted cramdowns to subprime and nontraditional mortgages and made other changes.