What is it that you want? To punish the banks for their loose loans? To prevent decreasing property values? To prevent current homeowners from losing their homes?
To prevent homelessness?

Cram-down only works for one of these but has expensive consequences.

1. Bank punishment. I get this. Really. I’m furious that every decision maker in this business seemed to make worse decisions than Hunter Thompson and John Belushi with a case of bourbon and a few 8-balls of coke. Unfortunately, these bad loans got processed like ground beef and sold to everyone looking for a safe bet. Pension funds and insurers bought them up, because they were historically safe. The fund managers bought instruments they didn’t understand, which was stupid as well.

Where does that leave us? Every pension fund and insurer is finding their investments losing principal, let alone interest. They have less money to pay their beneficiaries. If they go insolvent, the bill falls to the states, which means the U.S. government.

Cram-down will further reduce the value and increase the risk attached to these instruments. You’re not punishing the banks, you’re punishing, well, everyone else.

2. Property values. I’m not even sure foreclosures reduce values or merely show the current market value of the property. If you remove qualified buyers from the pool, property values drop as well.

3. Cram-down will prevent homeowners who can’t afford their current mortgages, unless their finances change. We’re still not sure how it’s going to work then.

4. Preventing homelessness? Anyone who can afford (reduced) payments can afford rent. Heck- Fannie Mae and Freddie Mac are going to offer rentals of foreclosed properties to previous owners.

By allowing cram-down, you’re privileging one group of people (current insolvent homeowners) to the detriment of, well, everybody else.

So what? didn’t you just say that was because too many people bought houses they couldn’t afford? if anything higher rates would weed out those who can’t afford to buy.

Besides, no one actually knows who the creditors even ARE anymore. That’s why so mnay people are using “produce the note” to stall/stop foreclosure proceedings.

maybe if everyone who bought a house was a flipper, but not when I know that banks were lying to prospective buyers, whot he BANKS knew they shouldn’t loan to but did anyway to make a profit.

Nope. also, when those people lose their homes, they drive down the value of homes still owned. that is, if three of my neighbors lose their homes to foreclosure, that dmaages the value of MY home too, and brings crime into the neighborhood (looters, squatters).

No, I don’t agree with this. I don’t LIKE it, but if i’m expected to bail out the people who caused the problem to begin with, I want to bail out ordinary people too.

Cram-down is a bad idea. Really bad. Here’s why:

One of the reasons that home loans have different rates than credit cards is because they’re secured by an interest in the property they were used to purchase. The lender gets to rely on more than my promise and ability to pay the money back.

Secured loans are normally kept out of bankruptcy proceedings if the debtor wants to keep the property. Either keep paying the loan, or give up the shiny thing. Creditors with unsecured loans take a loss. That’s why they charged more interest in the first place.

If we allow debtors to keep the shiny thing (their house) but make the creditor lose money on the deal, that will reduce the lender’s willingness to make new loans, or refinance existing loans, unless they get paid higher rates or get some other guarantee (government?)

That’s going to screw the following people:
1. The next generation of homebuyers. Try taking a 30 year mortgage at 12% interest. Can’t afford as much house any more.

2. People moving to take work elsewhere- If you want to buy a house in your new location, you’re going to need to get a new loan, right?

3. People trying to sell a house. Buyers won’t be able to afford as much for an existing house, since they’ll have to pay unsecured interest rates.

4. Those of us who recognized that we shouldn’t buy a house we could not afford and kept renting.

Keeping people in their houses is a nice gesture, but has nasty unintended consequences.