House OKs mortgage bill, but senators are wary
By: Susan Ferrechio
Chief Congressional Correspondent
March 6, 2009
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| House Minority Whip Eric Cantor, R-Va., said the Democrats’ mortgage bill would punish those who acted responsibly and reward reckless actions. (AP photo) |
Even as mortgage foreclosures continue to rise, congressional lawmakers have misgivings about a bill that would allow bankruptcy judges to rework mortgage agreements in court.
The bill passed the House 234-191 on Thursday after Democrats made minor modifications to attract moderate members of their caucus who blocked its passage last month. Twenty-four Democrats voted against it.
The bill would allow judges to reset the terms of mortgages — including the amount of principal owed — for certain homeowners who file for Chapter 13 bankruptcy.
The bankruptcy language, which passed the House in a larger housing bill, is termed “cramdown” by opponents who say the housing industry will stagnate, bankruptcy filings will skyrocket and borrowers will end up paying higher interest rates if it becomes law.
Supporters say the language is needed to force mortgage companies to negotiate with struggling homeowners avoid foreclosure.
Democrats will push hard to pass the bill, which was originally proposed by Senate Majority Whip Richard Durbin, D-Ill., and is a key component to President Barack Obama’s housing reform plan.
“Until we can begin to stem the tide of foreclosures, until we do a great deal to reduce this, you will not get an end to the current economic crisis,” said House Financial Services Committee Chairman Barney Frank, D-Mass., an architect of the bill. “This is a direct shot.”
The Mortgage Bankers Association, which is reporting record-breaking delinquency rates on home loans, is pressuring lawmakers to defeat the bill, saying it would “adversely impact mortgage interest rates and credit availability because lenders will be faced with new levels of uncertainty as to loss.”
House Republicans argued Thursday that the bankruptcy provision was unfair to homeowners who were paying their loans.
“Congress shouldn’t force them to pay the mortgages of deceitful borrowers who committed fraud or borrowers who made bad decisions,” said House Minority Whip Eric Cantor, R-Va.
“It is nothing short of absurd to punish those who acted responsibly while rewarding the reckless and sometimes illegal actions of others.”
The legislation could now face an uphill battle in the Senate, where resistance from both Democrats and Republicans killed a similar bill last year.
Senate Democrats may have a hard time selling the bill to members of their own party as well, because even though they expanded their majority since last year, many of the newcomers are moderates whose support of the bill is by no means guaranteed.
Senate Democratic leaders on Thursday were trying to determine whether they had enough support to take up the House bill next week.
They would need agreement from all 57 available senators who vote Democratic plus three Republicans in order to achieve a 60-vote threshold that would prevent opponents from blocking the bill. Republicans say they will have a tough time garnering support from the GOP.
“This legislation would be a big mistake,” said Senate Republican Conference Chairman Lamar Alexander, R-Tenn.
“It would make it harder to get a mortgage. I know we need to restart the housing industry, and to allow judges to rework mortgages would slow down the housing industry.”
