concurring in part and dissenting in part:

I agree with the majority that negative amortization is not always disallowed by the bankruptcy code, and I concur in that part of the opinion. I write separately, however, because I do not believe it is either necessary or appropriate to reverse and remand in this case.

The majority rejects the district court’s assessment of the reorganization plan, citing In re Hall, Bayoutree Assoc., Ltd., 939 F.2d 802, 804 (9th Cir.1991) for the proposition that a district court may not make its own findings of fact. This statement is true as far as it goes, but fails to account for a district court’s authority to consider issues on appeal not decided by the bankruptcy court if the issues are legal and are supported by the record. Id. at 804 ; see also Matter of Pizza of Hawaii, Inc., 761 F.2d 1374, 1377 (9th Cir.1985). While the inquiry into whéther the plan of reorganization is “fair and equitable” involves questions of fact, it is a legal determination. In re Acequia, 787 F.2d 1352 , 1358 n. 5 (9th Cir.1986). Thus, while the district court does seem to have over stepped by making some factual findings of its own, it was within the power of that district court, and this Court, to determine whether, based on the facts as found by the bankruptcy court, the proposed plan was “fair and equitable.”

Consequently, I think that it is unnecessary to reverse and remand. The district court had, and this Court has, sufficient factual findings by the bankruptcy court to draw the legal conclusion that the “negative amortization” plan, as proposed by the debtor, was not fair and equitable. The plan rejected by the bankruptcy court originally called for three years of interest-only payments at 8%, followed by two years of interest-only payments at the prevailing adjustable note rate of 3% over the Eleventh District Cost of Funds Rate, after which the claim would fully amortize over the balance of the term at the adjustable note rate. Following the bankruptcy court’s denial of this plan because of its provision for negative amortization, Sierra Woods filed a First Amended Plan of Reorganization proposing payments to Great Western Bank over five years at interest-only payments based on the prevailing note rate (8% over Eleventh District Cost of Funds Rate), after which the claim would fully amortize over a period of time extending ten years *1179-1183 beyond the present maturity date of the note. The bankruptcy court found, however, that even this plan would not give Great Western Bank value, and thus provided Great Western with an interest rate of 4.5% over the 11th District Cost of Funds. The increased rate was necessary because the court found that:

Thus the rejected plan, less favorable to Great Western than the First Amended Plan of Reorganization, would certainly have also been rejected by the court for failing to return present value.

Even had the interest rate in the original plan been set at market rate, that would only have aggravated the deferral and accrual of interest, resulting effectively in a full value loan to Sierra Woods, and have ultimately led to a deficiency which would have entirely consumed Great Western’s equity cushion. Approval of a plan calling for negative amortization under such circumstances might itself constitute an abuse of discretion. Analyzed under the ten factors listed in the majority opinion, such a plan would (3) not have a satisfactory debt-to-value for a significant portion of the life of the loan, (4) not have reasonable financial projections in light of the inability to provide for deferred maintenance and repairs, (6) unduly shift the risks to Great Western, (7) cause Great Western to bear the risks, and (9) contravene the original loan terms which did not provide for negative amortization. Furthermore, the court could reasonably find that (2) the amount of the proposed deferral is not reasonable.

Based on the findings of fact made by the bankruptcy court, the district court was correct in concluding that the original plan calling for negative amortization would not have been fair and equitable. As a result, the failure of the bankruptcy court to conduct a hearing on the plan constituted harmless error. Bankr.Rule 9005, 11 U.S.C.A.; see Kane v. Johns-Manville Corp., 843 F.2d 636, 648 (2nd Cir.1988). Because reversing and remanding now would unnecessarily prolong the bankruptcy proceedings to the prejudice of the creditor, I respectfully dissent.