Question: During a recessionary period, the value of Jeff's property drops below the balance of the remaining mortgage debt. Jeff defaults on his mortgage. Before the lender initiates foreclosure, the lender agrees to reduce the principal balance of the mortgage to the value of the mortgaged real estate. What term best describes this activity? a. Mortgage modification. c. Short sale agreement. b. Mortgage cramdown. d. Capitalization of arrears. Select the letter corresponding to the correct answer.
Response: The term that best describes the activity of the lender reducing the principal balance of the mortgage to the value of the mortgaged real estate in the given scenario is "b. Mortgage cramdown."
"A cramdown is an attempt to involuntarily modify any terms of the security deed, mortgage, or note by court order."
Fannie Mae Servicing Guide
https://servicing-guide.fanniemae.com/THE-SERVICING-GUIDE/Part-E-Defaul….
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