Senate likely to kill mortgage ‘cram-down’ bill today
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A bill to allow judges to unilaterally rewrite mortgage terms for strapped borrowers who file for bankruptcy protection looks like it’s headed for defeat in the U.S. Senate.
The so-called mortgage cram-down bill is part of the Obama administration’s efforts to stem the foreclosure wave. But amid fierce opposition from lenders, key Democrats in the Senate remained opposed or undecided as debate on the bill began today.
From Bloomberg News:
Sen. Richard Durbin of Illinois, sponsor of the legislation, said it has taken ‘months and months of heroic efforts’ to seek support from the banking industry and credit unions, and New York-based Citigroup Inc. was the sole bank supporting the measure. ‘I can’t tell you how many banks have walked away,’ Durbin, the Senate’s second-ranking Democrat, said as debate began. The House passed its version 234-191 on March 5. Democrats had negotiated with JPMorgan Chase & Co., Wells Fargo & Co. and Bank of America Corp. on a compromise. Durbin said the lenders objected after months of talks, and ‘will not even participate in a negotiation.’ Democrats Mary Landrieu of Louisiana, Ben Nelson of Nebraska and Jon Tester of Montana plan to oppose Durbin’s proposal, while moderate Democrats remain on the fence, Huffington Post reported this week.
UPDATE at 1 p.m. PDT: The bill was defeated by a vote of 51 to 45.
Bankers have asserted that giving cram-down power to bankruptcy court judges would drive lenders to raise interest rates on other borrowers to recoup their losses.
‘The housing market is already unstable and enacting cram-down legislation would make things worse by adding even more risk to the mortgage market, effectively undermining efforts by Congress and the administration to stabilize housing,’ a dozen financial groups, including the American Bankers Assn. and U.S. Chamber of Congress, wrote to senators Wednesday, the Associated Press reported.
-- Tom Petruno