Will the mortgage cramdown bill raise interest rates for future buyers?
BY INYOUNG HWANG The mortgage modification bill currently awaiting a Senate vote has incited a debate over whether the modifying of troubled home loans will increase the risk of raising interest rates for young homebuyers in the future. Supporters of the bill, which passed the House by a wide margin in March but has stalled in the Senate, say it would help troubled homeowners tremendously and the losses from mortgage modifications would be less than losses from foreclosures. Opponents say, however, the mortgage modifications will force lenders to increase interest rates and make it more difficult for homebuyers without a long history of good credit to qualify for loans. Mortgage modifications – called “cramdowns” – would give bankruptcy judges the power to modify the terms of mortgages for individuals who have filed for Chapter 13 bankruptcy protection. Judges would have the ability to reduce interest rates, lengthen loan terms, and cut principal payments on the residence. Supporters o
