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Senate Defeats Measure to Allow Bankruptcy Judges to Change Mortgage Terms - washingtonpost.com

Senate Defeats Measure to Allow Bankruptcy Judges to Change Mortgage Terms - washingtonpost.com: "Supporters argued the measure would keep 1.7 million borrowers in their homes, but it ultimately foundered in the face of fierce financial industry and Republican opposition. The bankruptcy modification provision, which was offered an amendment to a broader housing bill, failed by a vote of 45 to 51.

'I'll be back. I'm not going to quit on this,' said Senate Majority Whip Richard J. Durbin (D-Ill.), who sponsored the measure. He noted that estimated foreclosures during the housing crisis has ballooned from 2 million to 8 million since his campaign for the change to the bankruptcy code began."

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But the measure ran into trouble in the House among moderate Democrats before ultimately passing that chamber. Then it faced an even tougher battle in the Senate. Durbin negotiated with Bank of America, J.P. Morgan Chase and Wells Fargo for weeks, hoping their support would bridge the gap. Even after the proposal was weakened significantly, the financial services industry refused to sign on.

"Instead of encouraging homeowners who are at risk of foreclosure to file for bankruptcy, the federal government should continue to encourage lenders to work with owners to modify loans where it is economically viable for homeowners to remain in their homes," Republican Whip Sen. Jon Kyl (R-Ariz.) said. "While it is regrettable that not all homeowners are eligible for a loan modification, Congress should not incentivize bankruptcy by making it the only means to save one's home."

Full post as published by Indiana Civil & Business Lawyer on May 01, 2009 (boomark / email).