A proposal to let bankruptcy judges provide new relief to struggling borrowers appears headed to defeat in the Senate Thursday unless a last-minute compromise can be reached.
As of late Wednesday, the measure known as "cramdown," didn't have the 60 votes needed to pass a procedural vote in the Senate, where Republicans and some Democrats are siding with industry groups to oppose it.
The Financial Services Roundtable, the American Bankers Association and a number of other organizations have argued that the bill, which only has the support of Citigroup Inc. (NYSE:C), would ultimately drive up interest rates and further freeze credit lines by adding more risk to the mortgage market.
President Obama and many Democrats see cramdown as important
relief for millions of people who are under water on their mortgages
and for those who signed up for dubious loans with escalating payments.
Billed as a measure of last resort, the bankruptcy option would have
arguably had the most immediate impact in stemming the tide of
foreclosures facing the nation. Sen. Dick Durbin, D-Ill., the Senate
majority whip, has been working to find a compromise on the measure.
Bankruptcy judges can already reduce loans on investment properties or personal property based on the property's current value.
The measure, once part of a more sweeping housing bill to be considered
Thursday, will now be voted upon separately. The bankruptcy provision
will be offered as an amendment to legislation that boosts the
borrowing authority of the Federal Deposit Insurance Corp. and tweaks
another housing program known as Hope For Homeowners. -
Donna Block
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