As long as the cram-down is recorded (new lien with corresponding deed recording of the new amount) I don’t have a problem with this. It’ll kill the comps and bring some sense back to the market. The contract is between the lender and the borrower, after all, and if it makes sense then there’s little we can do. We’re already seeing the lenders clenching up like they got the travelin’ trots and they’re 300 yards from the nearest head. Cram-downs will make the underwriters positively paranoid.
The moral hazard to all this happened when back when the insane lending standards were in effect. A lot of us bubble sitters knew better and held onto our moral convictions that the money was too easy. Yes, we’ll suffer even if we didn’t surrender our fiscal virtue. That’s OK because we know we were right and we’ll be able to move when others can merely suffer with their just-barely affordable (even after the cram-down) debt load.
