February 25, 2009
The Los Angeles Times ran the second and third parts of the "Dust-Up" debate featuring SPPD Professor Richard Green. "A cram-down is a court-ordered reduction of the secured balance due on a home mortgage loan," Green wrote in the first story. "Basically, it reduces lenders' collateral to the current value of the house, which is determined with an appraisal. That said, I worry about the impact of cram-downs on the ability of borrowers to get mortgages going forward." In the second Los Angeles Times story, Green recommended a plan to reduce the principal owed in home loans. "I think policymakers are worried that writing down principal will give borrowers something for nothing. But the same is true for reducing payments via a subsidized interest rate," he wrote. "We could help deal with the fairness problem by having a claw-back provision for borrowers whose loans are modified."
The Los Angeles Times ran the second and third parts of the "Dust-Up" debate featuring SPPD Professor Richard Green. "A cram-down is a court-ordered reduction of the secured balance due on a home mortgage loan," Green wrote in the first story. "Basically, it reduces lenders' collateral to the current value of the house, which is determined with an appraisal. That said, I worry about the impact of cram-downs on the ability of borrowers to get mortgages going forward." In the second Los Angeles Times story, Green recommended a plan to reduce the principal owed in home loans. "I think policymakers are worried that writing down principal will give borrowers something for nothing. But the same is true for reducing payments via a subsidized interest rate," he wrote. "We could help deal with the fairness problem by having a claw-back provision for borrowers whose loans are modified."