A compromise version of a bill that would allow bankruptcy judges to modify the terms of troubled debtors' mortgage loans -- including reducing the principal to reflect a home's actual value -- has emerged from the House Judiciary Committee, where opponents had hoped to scuttle it. H.R. 3609, the Emergency Home Ownership and Mortgage Equity Protection Act of 2007, squeaked by Wednesday on a 17-15 vote. Critics, including the Mortgage Bankers Association, say that if the bill becomes law, it will increase the cost of all mortgages, because it would undermine confidence in the ability of lenders to collect payments. Interest rates on mortgages might go up 2 percent, some critics have said. Those who support the bill, such as the Center for Responsible Lending, say bankruptcy courts are already allowed to rewrite the terms of automobile loans and credit card debt, and that giving them such power over mortgages would provide lenders an incentive to modify loan terms before t...
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