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DUFF & PHELPS REVISITS BANKRUPTCY CRAMDOWN ISSUE

 NEW YORK, June 3 /PRNewswire/ -- In light of the recent Supreme Court decision that prevents a bankruptcy court in a Chapter 13 case from reducing the balance of a first-lien loan secured by a primary residence to the fair market value of the property (a "cramdown"), Duff & Phelps Credit Rating Co.'s Residential Mortgage-Backed Securities Group announces that it will revisit its bankruptcy cramdown requirements for private-label mortgage backed securities.
 Until yesterday's decision in Nobelman v. American Savings Bank, cramdown risk in Chapter 13 required the following credit enhancement. For transactions with pool policies, which exclude losses due to cramdowns and other bankruptcy related losses, the Duff & Phelps guidelines set forth a minimum additional reserve of typically $100,000. In the case of senior-subordinate transactions, if bankruptcy losses absorbed by the subordinate class are capped, D&P's rating on the senior class requires that the cap on bankruptcy-related losses be at least $100,000.
 Duff & Phelps will revisit its current guidelines with the possibility of a reduction in coverage for first-lien transactions to reflect the Supreme Court decision. Nonetheless coverage may be necessary for loans secured by vacation or investor properties. In addition, D&P notes that there is still a remote risk of cramdowns in the Chapter 11 context.
 -0- 6/3/93
 /CONTACT: Andrew B. Jones of Duff & Phelps credit Rating Co., 212-908-0205/


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LD -- NY108 -- 4124 06/03/93 16:54 EDT
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Publication:PR Newswire
Date:Jun 3, 1993
Words:238
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