The days of courts allowing home-owners to cramdown mortgage loans during bankruptcy proceedings seem numbered as the House poises itself to vote on the long-delayed bankruptcy reform bill. But mortgage lenders want lawmakers to add provisions that prevent single-asset debtors from using Chapter 11 filings to delay foreclosures when reorganization isnt the intent. Mortgage bankers rolled out an updated survey during an Aug. 17 hearing before the House Subcommittee on Economic and Commercial Law that showed that of all the single-asset debtor cases placed into bankruptcy between 1985 and 1989, less than 20% of developers and property owners had reorganization plans confirmed. Those owners, contends the Mortgage Bankers Association, are maneuvering to delay foreclosure. Single-asset real estate projects are those in which the owner has no significant business other than simply owning or managing the property, such as a multifamily housing unit, hotel or other commercial property. Owners of these properties filing for protection under Chapter 11 of the Bankruptcy Codewhich is intended to allow debtors to attempt a return to fiscal soundness by reorganizingare often seeking foreclosure delays. MBA Executive Vice President Warren Lasko told the subcommittee in written testimony that single-asset owners seek delays to induce lenders to waive personal liability of the developers and to avoid recapturing tax liabilities. These stall tactics, he added, are also used to induce the lender to pay the owner cash or forgo prepayment penalties to end the delays. The single-asset debtor provision is in the Senate version of the bankruptcy bill that passed unanimously April 21. But adoption of that prov-sion in the House bill, which was authored by Rep. Michael Synar, D-Okla., may have to wait until the House-Senate confer-ence session, although it could be of-fered as an amendment before then. Subcommittee Chairman Jack Brooks, D-Texas, anticipates a full committee vote on the bill when House members reconvene in September. Mortgage bankers also lobbied hard for provisions that would prevent cram-downs under Chapter 13 of the Bank-ruptcy Code. That provision seems a virtual lock for passage. Cramdowns occur when a bankruptcy court sepa-rates a mortgage into two portions, one portion equal to the then-current value of the property and the other equal to the rest of the outstanding mortgage amount, and then forgives the latter portion.

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