Servicing/Default

Bankruptcy Cram-Down Would Deliver $17 Million Benefit to Federal Goverment

By: PAUL JACKSON
February 8, 2008

According to a cost estimate released Thursday by the Congressional Budget Office, enactment of a bill seeking to amend federal bankruptcy law to allow for principal cram-downs on primary residences would deliver $17 million in cost savings and additional revenues to the federal government.

The CBO estimated that HR 3609, the Emergency Home Ownership and Mortgage Equity Protection Act of 2007, would reduce direct spending by $10 million and increase government revenue by $7 million between 2009 and 2018. The report also estimates that while the bill would add to court costs, the CBO believes that such costs “would not be significant.”

While costs to the public sector aren’t expected to be signficant — and, indeed, the bill is expected to benefit the federal government — costs to the private sector may be. The CBO said that while the bill would impose additional costs on businesses, it was unclear if the aggregate costs of complying with the bill’s provisions would exceed a dollar threshold set by the Unfunded Mandates Reform Act, or UMRA.

UMRA was put into place in 1995 to ensure that Congressional leaders do not enact bills that place a costly burden on state-level agencies or private-sector parties without associated funding support.

The CBO said that it could not estimate the cost of private-sector mandates “because of uncertainty about the number of bankruptcy plans that would be modified and how these changes would affect holders of secured claims.”

The debate over whether bankruptcy cram-downs should be allowed has been an intense one; the fact that the proposed bill is likely to drive incremental revenue for the government, while costing the private sector an indeterminable amount of money, is likely to be an area of contention as the bill is debated at varying Congressional levels in the months ahead.

The complete report by the Congressional Budget Office is available here.


Events

Sun - Jul 20

2008 LoanPerformance RiskSummit

Cerberus Capital Management chairman John Snow keynotes this risk management event for LP clients and vendors.

Tue - Aug 12

Western States Loan Servicing Conference

Annual servicing industry conference hosted by the CMBA; usually well attended on a national level.

Sat - Aug 23

Executive Summit on Mortgage Fraud

High-level conference focused on quantifying and managing mortgage fraud. Speakers to include execs from OFHEO, FBI, Fannie, Freddie.

Wed - Sep 17

Five Star Conference

Default and REO industry conference, hosted by trade publication DS News. Heavily attended by REO agents.

Sun - Oct 19

MBA Annual Convention & Expo

The annual conference for MBA members and affiliates, and the largest industry event each year.

newsletter signup

Join more than 3,000 bold subscribers who already get HW's daily email delivered to their inbox -- it's free, and a great way to ensure you don't miss something.