Bankruptcy judges won’t get the power to rewrite the terms of mortgages on primary residences anytime soon, after a dozen Democrats joined Republicans in the Senate on Thursday and voted against tacking bankruptcy "cram down" legislation onto another housing bill.

Bankruptcy judges won’t get the power to rewrite the terms of mortgages on primary residences anytime soon, after a dozen Democrats joined Republicans in the Senate on Thursday and voted against tacking bankruptcy "cram down" legislation onto another housing bill.

In a 45-51 vote, the Senate rejected an amendment to S 896, the Helping Families Save Their Homes Act. Introduced by Sen. Dick Durbin, D-Ill., the amendment would have allowed cram downs on mortgages when homeowners were already in foreclosure and lenders had not offered a loan modification.

In a 234-191 vote March 5, the House of Representatives signed off on cram-down language in passing the House version of the bill, HR 1106 (see story).

Cram-down supporters say they want to force lenders to step up efforts to help homeowners avoid foreclosure. Bankruptcy judges already have cram-down powers over mortgages on second homes and investment properties.

But opponents in the lending industry continued to lobby against an expansion of cram-down powers. Judicial modifications of mortgages on primary residences would raise the cost of borrowing, they said, by introducing new risks for lenders and investors who fund lending through purchases of investments backed by mortgages.

While loan servicers are on track to engage in 3 million "workouts" with borrowers this year, foreclosure starts hit an annualized rate of 3.5 million in March, according to numbers released by the HOPE NOW loan servicers (see story).

Both HR 1106 and S 896 would provide a legal "safe harbor" for loan servicers who modify loans, and expand the scope of the Federal Housing Administration’s "Hope for Homeowners" guarantee program for refinancings.

House and Senate lawmakers had a similar split on cram downs a year ago. After the House included cram-down language in a foreclosure relief bill, the Senate passed its own version of the bill without such a provision (see story).

***

What’s your opinion? Leave your comments below or send a letter to the editor.

Show Comments Hide Comments

Comments

Sign up for Inman’s Morning Headlines
What you need to know to start your day with all the latest industry developments
By submitting your email address, you agree to receive marketing emails from Inman.
Success!
Thank you for subscribing to Morning Headlines.
Back to top
Prepare for this fall with top agents & brokers at Connect Now this Tuesday.GET YOUR TICKET×
Limited time: Get 30 days of Inman Select for $5.SUBSCRIBE×
Log in
If you created your account with Google or Facebook
Don't have an account?
Forgot your password?
No Problem

Simply enter the email address you used to create your account and click "Reset Password". You will receive additional instructions via email.

Forgot your username? If so please contact customer support at (510) 658-9252

Password Reset Confirmation

Password Reset Instructions have been sent to

Subscribe to The Weekender
Get the week's leading headlines delivered straight to your inbox.
Top headlines from around the real estate industry. Breaking news as it happens.
15 stories covering tech, special reports, video and opinion.
Unique features from hacker profiles to portal watch and video interviews.
Unique features from hacker profiles to portal watch and video interviews.
It looks like you’re already a Select Member!
To subscribe to exclusive newsletters, visit your email preferences in the account settings.
Up-to-the-minute news and interviews in your inbox, ticket discounts for Inman events and more
1-Step CheckoutPay with a credit card
By continuing, you agree to Inman’s Terms of Use and Privacy Policy.

You will be charged . Your subscription will automatically renew for on . For more details on our payment terms and how to cancel, click here.

Interested in a group subscription?
Finish setting up your subscription