The Wall Street Journal has a follow-up on the topic I posted about late last week - mortgage "cramdown" legislation. That is legislation giving the power to bankruptcy judges to modify terms of mortgages on primary residences - including principal write-downs.
The WSJ talked to judges, who - not surprisingly - are in support of having the power to alter primary residence mortgages. They cite one of the reasons I brought up in my earlier post:
Allowing a judge to modify loans gets around the problem that many mortgages have been turned into securities and sold to multiple investors. "The bankruptcy system depends on people making deals, but the deal-making piece of it has disappeared when it comes to mortgages because of the way mortgages were sold and packaged," Judge Bufford said. "There's nobody on the lender side to do the deal unless you [get permission] from investors, and that's impossible."
The full article can be read here.
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