I am afraid you are going to be hearing the term “Cramdown” a lot in the near future. It is one of the tools available to help ease the foreclosure free fall that is occurring in the real estate world.
Cramdowns can have some positive impacts on the market, but there is also some negatives as well. I will elaborate but first watch this great video explaining what a cramdown is.
This video below is done by Marketplace.org Whiteboard Series. I highly recommend it.
Cramdowns from Marketplace on Vimeo.
Now as the video explains there is some good and bad that comes out of a cramdown. Primarily good for the homeowner, and good and bad for the lender.
What is left out of this video is what happens to the $250,000 the was removed from Fred’s primary mortgage. Does the bank just eat it? Will they be reimbursed for this loss from the Federal Government? If the house is eventually sold for more than $750,000 who gets the extra income?
To be honest, I don’t know the answer, but it is important because it will determine whether this cramdowns actually have an impact on the foreclosure market or not.
More to come….
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2 comments… Join the conversation and add your own!
Great link. . .there are more alternatives sprouting up everyday, it’s a new world in our old marketplace. Thankfully, I am in a very stable market with primarily high end homes slow to move due to low supply of the right income-earners. Thank you for sharing and LOVE the whiteboard!
~M
Thanks McKenzie.
Things are not dead as many feel. Opportunities abound if you are looking in the right places.