In the question of whether or not a first and second mortgage can be combined to what’s considered a “cram down”, the honest answer is no. Today only one’s second mortgage is able to be crammed down. However, has been debate over various bills to change this fact, but not a single one of these has been passed by law makers.  This is due in large to ferocious opposition and lobbying by the banking industry.  The banks are not going to easily agree to what this new “cram down” legislation will do for the benefit of Americans who can “cram down” their first and second mortgage.  There are very few homeowners who know about the “cram down” possibility.

What’s being considered by many to be called “the cram down bill” that has not passed, however, the Helping Families Save Their Home Act, will hopefully be instituted to ease the stressful conundrum many Americans now face in paying their mortgages. In this proposed bill, bankruptcy judges can restructure home loans in many ways to the benefit of homeowners. There are ideas that include the reductions of interest rates for the mortgage holders, loan terms lengthened, or principal due payments cut.  This would indeed add light at the end of the tunnel for many who find them enduring this uphill battle.

That which is on the books to help homeowners grants the main resident(s) exemption affirmed in today’s bankruptcy laws. This grants judges more autonomy to change, or “cram down”, certain mortgage loans. This permits the court, in specifically bankruptcy judges, to adjust mortgages on many kinds of non-owner property.

These aforementioned “non-owner properties” include farmsteads, rental homes, and vacation properties. There is a chance in certain cases that one’s mortgage on a bankrupt borrower’s main home may be adjusted due to the previously decree. It could be due to owner’s house’s value dipping lower than the amount the primary mortgage hold. In these cases, bankruptcy judges may decide that the mortgage in questions isn’t secured by equity in the home anymore resulting in the loan being amended as the bankruptcy proceedings move forward.

Current law, however, still dictates that a property owner filing for bankruptcy with a pending first mortgage on the primary residence has two possibilities when making their decision.  He or she he can either pay for the entire overdue and/or current mortgage payments, or surrender the property in-full by using foreclosure proceedings.

The Helping Families Save Their Home Act, if successfully pushed through all the legal wrangling, will allow a delinquent borrower yet another option. This third alternative grants the debtor the ability to collaborate with bankruptcy judges and hopefully restructure the terms of their loan payment. This is designed to grant the borrower a lower debt, while permitting him or her to keep their beloved home.

The act would instill bankruptcy judges more personal say-so, involved in terms of mortgage modification. The cram down bill will still demand that homeowners make a strong effort follow every letter of the agreement with the amended payment structure after modifying the mortgage with the lender, even before taking that appeal to bankruptcy court.