Tags: mortgage | relief | delayed

Democrat Spat Delays Mortgage Relief Bill in House

Thursday, 26 Feb 2009 04:35 PM

Share:
  Comment  |
   Contact Us  |
  Print  
|  A   A  
  Copy Shortlink

WASHINGTON – A dispute among House Democrats stalled legislation Thursday to let bankruptcy judges reduce the principal and interest rate on mortgages for debt-strapped homeowners.

The measure, backed by President Barack Obama, is the most controversial part of a broader housing package that had been expected to pass the House this week.

It hit a snag after a group of moderates expressed concerns in a closed-door meeting of House Democrats about how the bill would affect homeowners who are still struggling to make their mortgage payments.

The banking industry has lobbied hard against the measure, mounting a successful multimillion-dollar effort last year to kill it.

This year, mortgage industry players who are scrambling to narrow the scope of the measure to reduce its potential cost for banks have won some key concessions. House Democrats agreed to limit the measure to existing loans made before the bill is enacted and to borrowers who can show they tried other ways of modifying their home loans before resorting to bankruptcy, among other changes.

But banks want to go much further, restricting the bill only to subprime or other exotic loans.

Centrist House Democrats who have been working in tandem with the financial services industry to scale back the bill balked at supporting it on Thursday after a news report suggested that Sen. Dick Durbin, D-Ill., the lead sponsor of the bankruptcy measure in the Senate, was willing to limit it only to subprime mortgages. The Senate is expected to take up the legislation within two weeks.

Durbin's office said Thursday that his earlier comments were taken out of context, and that Durbin believes all mortgages should be eligible to be rewritten in bankruptcy.

In the House, Rep. Ellen Tauscher, D-Calif., the head of the business-minded New Democrat Coalition, raised concerns during the private session that the measure omitted help for homeowners who aren't staring at bankruptcy but are buckling under burdensome mortgage payments.

House leaders said they had postponed a vote until next week to give Democrats time to meet with Obama's housing secretary, Shaun Donovan, about how the measure fits with his housing plan.

"There's an equity question here," said Rep. Ed Perlmutter, D-Colo., another member of the coalition. "The discussion has got to be, what's the benefit to the guy next door who is struggling to pay the bills, is paying the bills and isn't filing for bankruptcy?"

Democratic skeptics are worried "that this could be too hard on the banks," said Rep. John Conyers, D-Mich., the Judiciary Committee chairman who sponsored the bill.

Consumer advocates and most Democrats regard the measure as crucial to slowing the rapid rate of foreclosures. They say it's the only way to force mortgage holders — known as loan servicers — to take steps to help homeowners stay in their homes.

The mortgage industry contends, however, that the measure will impose steep and unpredictable costs on its companies, which will be forced to raise fees and interest rates for borrowers. Opponents, including most Republicans, call it the "cram-down."

Industry lobbyists said Thursday that the debate would give them time to press for a more narrow measure.

"We're encouraged that the House is taking some more time to think this through, and we hope that by next week we can see some more changes to further improve the bill," said Francis Creighton of the Mortgage Bankers Association.

Separately, Donovan told senators Thursday that limiting the measure to loans that have already been made should alleviate concerns that lenders would be forced to charge higher interest rates to compensate for the additional risk of a potential "cram-down."

"The idea is not to have an impact on lenders that are out making loans today," Donovan said.

House leaders included the bankruptcy measure in a broader housing plan that also would raise the Federal Deposit Insurance Corporation's borrowing authority and take other steps to prevent foreclosures. It contains several sweeteners for the mortgage industry designed to prod servicers to allow struggling homeowners to modify or refinance their home loans to bring down their monthly payments.

© 2009 The Associated Press. All rights reserved.

-

Share:
  Comment  |
   Contact Us  |
  Print  
  Copy Shortlink
Around the Web
Join the Newsmax Community
Please review Community Guidelines before posting a comment.
>> Register to share your comments with the community.
>> Login if you are already a member.
blog comments powered by Disqus
 
Email:
Country
Zip Code:
Privacy: We never share your email.
 
Hot Topics
Follow Newsmax
Like us
on Facebook
Follow us
on Twitter
Add us
on Google Plus
Around the Web
Top Stories
You May Also Like

Calpers to Exit Hedge Funds, Citing Expenses, Complexity

Monday, 15 Sep 2014 18:35 PM

The California Public Employees' Retirement System plans to divest the entire $4 billion that it has with hedge funds, s . . .

Homeland Security Denies ISIS Attack From Mexico Imminent

Tuesday, 16 Sep 2014 07:10 AM

Warnings by conservative groups and Republican lawmakers that the Islamic State plans to launch a terrorist attack on U. . . .

ISIS Threatens Attacks Against US

Tuesday, 16 Sep 2014 06:58 AM

A supporter of Islamic State militants has warned of attacks on the United States and its allies if they continue to car . . .

Most Commented

Newsmax, Moneynews, and Independent. American. are registered trademarks of Newsmax Media, Inc. Newsmax TV, NewsmaxWorld, NewsmaxHealth, are trademarks of Newsmax Media, Inc.

 
NEWSMAX.COM
America's News Page
©  Newsmax Media, Inc.
All Rights Reserved