Mortgage Lenders Win Battle over Bankruptcies
Reerink, Jack, American Banker
WASHINGTON -- In a big victory for home lenders, the Supreme Court ruled Tuesday that borrowers who file for bankruptcy cannot reduce their mortgage debt to the current value of the property.
The decision, which settles conflicting rulings from lower courts, apparently will stop a practice that the mortgage industry had feared would lead to big loan losses.
In recent years, bankruptcy courts have increasingly permitted borrowers to reduce the value of home loans to market value, known as a "cramdown."
For example, a $170,000 loan might be chopped $100,000 if local housing prices had dropped sharply. The remaining $70,000 becomes an unsecured debt, which a …
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Publication information: Article title: Mortgage Lenders Win Battle over Bankruptcies. Contributors: Reerink, Jack - Author. Magazine title: American Banker. Volume: 158. Issue: 104 Publication date: June 2, 1993. Page number: 1+. © 2009 SourceMedia, Inc. COPYRIGHT 1993 Gale Group.
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