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House OKs ‘cram-down’ compromise

Bill would let bankruptcy judges modify mortgages

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In a compromise intended to appease lenders, the House of Representatives today passed legislation that will allow bankruptcy judges to rewrite the terms of troubled borrowers' mortgages -- but only if they have first tried to work with their loan servicer to obtain a loan modification or other alternative to foreclosure. The Obama administration considers so-called bankruptcy cram-downs a useful tool for encouraging lenders to participate in an initiative aimed at helping up to 9 million families restructure or refinance their mortgages (see story). The House version of a bill that would amend the bankruptcy code, HR 1106, the Helping Families Save Their Homes Act of 2009, passed in a 234-191 vote. Most of the opposition came from Republican members, although seven members of the Grand Old Party voted for the bill and 24 Democrats voted against it.Further compromise may be required to gain passage of SB 61, a companion bill in the Senate, where Republicans opposed to cram-dow...