Major Obstacle to Prolonging the Housing Crisis Clears Hurdle

Conn Carroll /

If the Senate Democrat/Citigroup plan to allow bankruptcy judges to rewrite mortgage contracts becomes law, there is no doubt that many homeowners who are struggling to pay their mortgages will be helped in the short term. But there is never any such thing as a free lunch. What benefits these homeowners in the short term, only hurts other homeowners trying to sell their homes, and all home buyers trying to afford one.

A mortgage cram down law would

As the Mortgage Bankers Association still opposes the cram downs “because of the destabilizing effect it will have on an already turbulent mortgage market.” Markets need stabilizing rules, not more uncertainty, in order to recover.