Cram Down legislation Fails!

...even a broken clock is right twice a day. Let's take a look.

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Mortgage ‘Cram-Down’ Amendment Fails in U.S. House

Dec. 11 (Bloomberg) -- The U.S. House rejected a mortgage “cram-down” amendment that would have given federal judges the power to lengthen mortgage terms, cut interest rates and reduce loan balances for homeowners in bankruptcy court.

Lawmakers voted 241-188 today against the amendment, which was to be part of broader legislation reining in excessive risk taking on Wall Street. All but four of the Republicans who voted opposed the amendment, pulling with them 71 Democrats to defeat the measure.

The cram-down provision was identical to legislation that passed the House in March and then failed in the Senate amid opposition from the banking industry. Banks and broker-dealers told House leaders in a Dec. 8 letter that the legislation would increase bankruptcy filings, lead to abuses of the court system and undermine efforts to stabilize the housing market.

Lenders are “gratified that the House saw fit to vote down the bankruptcy cram-down amendment that would have further increased costs for borrowers,” the Washington-based Mortgage Bankers Association, the industry’s largest trade group, said in a statement today.

Representative Dan Lungren, a California Republican, said the amendment would increase mortgage insurance premiums for borrowers “and deny help to those we seek to help.”

“This is a prime example of good intentions creating bad policy,” he said before the vote.

http://www.bloomberg.com/apps/news?pid=20601087&sid=azB6PD4NAPSs&pos=3

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Reverse Mortgage Abuse

Reverse Mortgage Abuse. Apparently the same incentives in the mortgage market have lead to abuse in the reverse mortgage market as well. Let us take a look.

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Oct. 6 (Bloomberg) -- Reverse mortgages may be the next subprime crisis, according to the National Consumer Law Center.

Some of the same U.S. lenders that helped drive the real estate boom with loans to home buyers who couldn’t afford the payments are now targeting seniors, the center said. Brokers, who are given financial incentives to sell the loans, may be making misleading claims to potential customers, according to a report titled "Subprime Revisited,’’ that was released today by the Boston-based NCLC.

“This market is designed to serve seniors, so when we find abuses cropping up and migrating from the subprime market to the senior market, that sounds an especially loud warning bell,” said Rick Jurgens, an advocate at the National Consumer Law Center, who contributed to the report.

http://www.bloomberg.com/apps/news?pid=20601087&sid=aBbWil.iMQW0

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