UPDATE: US House Vote On Mortgage 'Cram-Down' Bill Delayed
February 26 2009 - 1:24PM
Dow Jones News
House Democrats have pushed back a vote on legislation that
would allow bankruptcy judges to rework the mortgage loans of
troubled borrowers, amid hesitations from moderate Democrats about
the measure.
The postponement comes shortly after the legislation's Senate
author, Sen. Dick Durbin, D-Ill., said he would be open to limiting
the measure to just subprime mortgages, a large concession to the
banking industry.
House Speaker Nancy Pelosi, D-Calif., said the vote, which was
scheduled for Thursday, would now occur Monday evening after the
Democratic caucus meets with Housing Secretary Shaun Donovan to
discuss the measure.
However, she said the House would set guidelines to debate the
measure and begin that debate Thursday.
Moderate Democrats are wavering partly due to the remarks by
Durbin, banking lobbyists said. Durbin on Tuesday told the American
Banker, a trade publication, that, "I'm willing to restrict this to
subprime mortgages."
Some Democrats began to balk at supporting the broader
legislation amid signs the Senate would consider something more
narrow, the lobbyists said. Also, the Obama administration has also
proposed tighter restrictions for the legislation.
Democrats asked their leaders for more time to consider the
legislation at a meeting Thursday morning, according to a House
leadership aide.
Under the legislation, strapped borrowers can have the principal
balance of their mortgage loan reduced by a bankruptcy judge -
known as cram down. Currently only vacation properties, not primary
residences, can be crammed down by judges.
The banking industry has been lobbying fiercely against the
measure, saying it would raise borrowing costs on all homeowners.
The measure has nonetheless gained momentum in recent weeks due to
the shift in power in Washington and the perception that mortgage
servicers haven't done enough to help strapped borrowers.
The Obama administration has made it a central plank of its plan
to prop up the housing market. However, officials have said they
view it as a last resort, to be used only when serious attempts at
voluntary modifications fail.
The administration proposed that only borrowers who prove they
cooperated with requests from mortgage servicers for essential
information be eligible for a cram down. It also proposed limiting
court-ordered modifications only to mortgages below the size that
Fannie Mae (FNM) and Freddie Mac (FRE) are allowed to own or
guarantee.
Neither restriction is contained in the House legislation.
However, Rep. John Conyers, D-Mich., this week the measure's chief
House sponsor, agreed to tighten eligibility requirements slightly.
He has offered an amendment requiring borrowers to provide mortgage
servicers a written statement of their income and expenses at least
15 days prior to filing for bankruptcy.
Aside from the bankruptcy measure, the legislation also includes
provisions to erect a safe harbor against investor lawsuits for
servicers that modify loans and to revamp the Hope for Homeowners
program.
-By Jessica Holzer, Dow Jones Newswires; 202-862-9228;
jessica.holzer@dowjones.com
(Michael Crittenden contributed to this report.)