Published on: June 1, 2009
On April 30, 2009, the U.S. Senate voted 51-45 against the legislation that would have allowed bankruptcy judges to rewrite mortgage terms for struggling borrowers before they face foreclosure — the so-called mortgage “cram-down” bill. While the legislation garnered a significant amount of attention from bankruptcy lawyers and lenders, very few people understood the potential impact this legislation might have had on Condominium Associations. The legislation as proposed (and which passed the House of Representatives with flying colors) allowed not just for the cram-down of mortgages, it also provided for the cram-down of junior liens, which in non-super lien states like Massachusetts and Rhode Island, placed collection of condominium fees in serious jeopardy. It also provided a mechanism for debtors and bankruptcy judges to challenge costs and fees incurred in the collection and foreclosure process, which jeopardized the collection process for condominiums everywhere.
MEEB attorneys Stephen Marcus, Edmund Allcock and Matthew Gaines worked with legislative leaders and lobbyists at the CAI National Office in Washington and the College of Community Association Lawyers to explain to Senators the unintended harm this legislation (which was supposed to protect homeowners) would have on condominium owners and associations. MEEB attorneys not only opposed the legislation, but hedged their bets in the event the legislation passed, as many felt it would, by proposing an alternative amendment to the legislation, which, if passed, would effectively exempt condominium associations from its impact.
Fortunately, the cram-down legislation is dead for now, but with the worsening economy MEEB attorneys expect it to be re-introduced in some fashion or form during the next legislative session and are prepared to do battle yet again.