Are You Ready for the Cram-down?

The "Helping Families Save Their Homes Act," a new piece of legislation making its way through Congress, features a controversial provision allowing for mortgage "cram-downs" during bankruptcy. At Slater, Kennon & Jameson, LLP, we are preparing our clients for the potential effects of this new legislation on the practice of bankruptcy law. Call us at 512-472-2431 for more information.

What is a Mortgage "Cram-down"?

The mortgage "cram-down" bill is a response to the housing loan crisis, designed to help struggling homeowners keep their homes by lowering their monthly mortgage payments. Under the proposed bill, a bankruptcy judge would have the power to modify the terms of a homeowner's mortgage in order to lower the required monthly payments. The bill would allow judges to change:

• Mortgage balance
• Repayment period/schedule
• Interest rates

What Does the Helping Families Save Their Homes Act Mean for Me?

If you are struggling to meet high mortgage payments, this new legislation may be your chance to stabilize your finances. By filing bankruptcy, you can ask the judge to change your mortgage terms to something reasonable, depending on your situation.

There are, however, a few requirements.

For example, before you can qualify for a "cram-down" of your mortgage, you must seek a voluntary "loan modification" from the lender. The bank will have a chance to make changes to your mortgage in accordance with goals set by the federal government – that is, with a monthly payment equaling no more than 31% of your gross income.

If a bankruptcy judge decides that the lender has not offered you qualifying loan terms, he/she may choose to forcibly change them.

How Can Slater, Kennon & Jameson, LLP Help?

Filing bankruptcy is often less simple than it sounds. The banking industry, for example, is strongly opposed to "cramming down" mortgages, and will almost certainly fight to keep you from reducing your payments. They may attempt to bog you down with endless bureaucracy while you try to fulfill the voluntary loan modification requirement. Slater, Kennon & Jameson, LLP can help you avoid these traps and pitfalls.

Contact our Austin cram-down attorneys today at 512-338-1100 to learn more.