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New Word Alert: Cramdowns

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Jumbos, ARMs, and now "cramdowns": A bill that would help homeowners in foreclosure is gaining more steam, reports the Wall Street Journal. "The proposal from Sen. Dick Durbin, an Illinois Democrat, to allow so-called mortgage "cramdowns," would apply only to homeowners who have filed for Chapter 13 bankruptcy protection. It is the first of several pieces of legislation Democrats intend to push this year to give homeowners more leverage in bargaining with banks and mortgage-servicing companies." Citibank had opposed to bill, which would allow judges reduce the amount of the principal and the interest rate on a mortgage, and extend the terms of the loans, according to the paper, which notes that many banks have been slow to "voluntarily renegotiate mortgages." But apparently that $45 billion given to Citibank has helped changed their mind and as the paper notes, the "government is now keeping the company on a tight leash." [WSJ]