Elsie Law's Daily Dose Of The Law: Cramdown

According to the Teach Me Finance website, a cramdown is a situation in which: "A court-ordered reduction of the secured balance due on a home mortgage loan, [is] granted to a homeowner who has filed for personal bankruptcy. In a cramdown, the bankruptcy court splits the outstanding mortgage balance into two parts. The amount of debt equal to the current appraised value of the home is treated as a secured claim, which the borrower must continue to pay. The amount of debt in excess of the current property's value becomes an unsecured claim, which is usually not repaid in full.

In areas where home prices have depreciated, cramdowns can result in significant mortgage reductions.

In some cases, the judge may order the remaining secured debt amortized over the remaining life of the loan term, thus lowering monthly payments. In other cases, monthly payments remain the same as before the cramdown, and the secured mortgage is simply paid off faster."