Research examining the impact of cramdown on agricultural loans found that banks usually got more than foreclosure value on reorganised loans, and that interest rates scarcely rose.

ECONOMIST: Economics focus

"The investors who own these loans recognize that foreclosure is costly, and that a workout plan or mortgage modification often brings them greater value than foreclosure, " he says.

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If mortgages could be written down to a value above the likely foreclosure sale price, that would generate benefits for both creditor and borrower.

ECONOMIST: Economics focus