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The US House of Representatives is scheduled to vote Thursday on a bill that will enable homeowners to modify their mortgages in chapter 13 bankruptcy.

These mortgage modifications are known by the more vernacular term, “cram downs.”  Under the proposed law, a bankruptcy judge could reduce the balance of a first mortgage to fair market value and re-amortize it, reducing the monthly payments and making it easier for financially distressed homeowners to keep their homes.  Chip Parker of Bankruptcy Law Network explains in detail here.

This legislation would help stem the tide of foreclosures by encouraging lenders to cram down mortgages out of court on terms they negotiate with the homeowner rather than having a bankruptcy judge impose them. 

Either way, fewer economically strapped homeowners would lose their homes and house prices in neighborhoods decimated by foreclosures would have a chance to stabilize.

Members of the mortgage industry are rattling the bars of their playpens in protest.  Permitting chapter 13 mortgage cram downs would have long-term regulatory side effects, as described in “Just Say Yes To Cram Downs” by the late, great Tanta of Calculated Risk:

In fact, I have some sympathy with the view that mortgage lenders “perform a valuable social service through their loans.” That’s why, when they stop doing that and become predators, equity strippers, and bubble-blowers instead of valuable social service providers, I like seeing BK judges slap them around. Everybody talks a lot about moral hazard, and the reality is that you’re a lot less likely to put a borrower with a weak credit history, whose income you did not verify and whose debt ratios are absurd, into a 100% financed home purchase loan on terms that are “affordable” only for a year or two, if you face having that loan restructured in Chapter 13. 

Robert Allen Stanford, the alleged mastermind of this month’s Ponzi scheme, once boasted of his plan for a private island mega-resort, a Club Med on steroids for the exponentially rich.  From Dealbook:

In an October 2008 article, Mr. Stanford told Forbes that he was planning to build an elite resort on what the magazine described as an “undisclosed island in the Caribbean.” At the time, Mr. Stanford said that he was working with 17 architectural and engineering firms to build 30 mansions for a development to be called the Islands Club.

Scheduled to open in 2011, it would have featured the largest private aviation complex in the world, Forbes said, with enough room to park 100 private jets as well as a jumbo marina with enough dock space for 30 massive yachts. The super-exclusive resort would require members to shell out a $50 million deposit, which would be refunded if they left the development. That was on top of the $15 million annual membership fee.

Dealbreaker took a James Bond angle:

All we need now is to blow up Tim Geithner’s seaplane with a solar powered laser and for Nick Nack to show up and start tempting regulators into a funhouse gun battle on the Man With The Golden Gun’s private island.

New York Magazine’s Daily Intel took its cue from “Lost,” pasting Stanford’s head on Ben’s parka-clad body as he was about to turn the wheel in the Orchid Station’s secret underground cavern (you can watch the show online).

I see a combination “Wall Street” sequel/“Apocalypse Now” tribute (is this a great pitch or what?):

• Bud Fox (Charlie Sheen) is finishing his time in a post-prison federal halfway house.  Men from an undefined agency visit him and make an offer; “terminate the Ponzi – with extreme prejudice” and he will receive a presidential pardon.  Charlie reprises his dad’s role in “Apocalypse” and gives the publicists a great marketing hook.

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