House OKs Bill to Modify Mortgages

Published by peter | Filed under Real Estate

Bankruptcy judges could cut the mortgage debt of homeowners in bankruptcy court as a last resort to avert foreclosure, under a bill approved by a 234-191 vote Thursday in the U.S. House of Representatives.

Seen by Democratic supporters as vital to stabilizing the crumbling U.S. real estate market, the so-called “cramdown” bill has been opposed by bankers, despite amendments to limit its scope, including one restricting it to existing mortgages.

The Senate was expected to consider its own version of the House bill soon, but chances of passage are uncertain.

The House bill has additional provisions meant to help homeowners in the worst housing market in decades, a slump that has helped pull the U.S. economy into a deepening recession.

Under present law, bankruptcy courts may reduce many forms of debt for struggling borrowers — including a boat, car, vacation home or family farm — but not a primary residence.