Cram Down Crunch Time

Congress needs to finally enact a bankruptcy reform bill that includes one of the few real tools for breaking the grip of the devastating downward foreclosure spiral. There are many sound economic and policy reasons for Congress to provide a judicially approved "cram down" possibility for homeowners. Yet one basic reason gets less mention -- it is simply a matter of fairness.

Few Americans realize that single family homeowners living in their own primary residence are the only real estate owners without cram down protections in bankruptcy. As U.S. Bankruptcy Court Judge Louise DeCarl Adler has aptly captured it, "we could always rewrite the loans on John McCain's second through ninth homes but not on his first." Donald Trump wouldn't -- and couldn't -- sign away his right to have a bankruptcy judge reduce the principal mortgage balance of a loan on one of his properties, but a homeowner starts out with Congress having previously taken that option away. Maybe with 1 in 5 families with a mortgage owing more than their house is worth -- most of whom borrowed within their means when they first took out their loan -- and 8 or 9 million households still potentially facing foreclosure, Congress will put homeowners back on equal footing with real estate moguls.

David Abromowitz is a Senior Fellow at the Center for American Progress, www.americanprogress.org