House Homeowner Bill Lets Judges Reset Mortgages

Measure would allow bankruptcy judges to ease mortgage terms
By Rob Quinn,  Newser Staff
Posted Mar 6, 2009 3:07 AM CST
Signs advertising various promotions are placed on a light pole near a new homes subdivision in California.   (AP Photo/Marcio Jose Sanchez)
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(Newser) – The House has passed a homeowner rescue bill over the strenuous objections of the financial industry that would allow bankruptcy judges to change the terms of mortgages, the Washington Post reports. Judges could cut the principal on mortgages, extend terms and reduce interest rates under terms of the "cramdown" bill, which now faces a tough fight in the Senate.

If the bill becomes law, it's expected to trigger a surge in bankruptcy filings, but would reduce foreclosures by an estimated 20%. The measure has been described by the administration as a stick to use against lenders who don't do enough to help homeowners. Moderate Democrats added provisions aimed at ensuring that bankruptcy remains a last resort for troubled homeowners. The bill passed largely along party lines.