Housing Deal Percolates In The Senate

Democratic sponsors of the Senate housing package are currently hammering out a compromise on its controversial bankruptcy provision that they think will push them over the 60-vote threshold needed to surmount a GOP filibuster of the legislation.

At issue is language – authored by Senate Majority Whip Richard J. Durbin (D-Ill.) that would allow bankruptcy judges to alter the terms of primary residential mortgages, which current law prohibits. Proponents of the change say it could help some 600,000 homeowners avoid foreclosure.

A cloture vote on the housing bill is expected Tuesday.

The series of changes seek to make the bankruptcy language “as targeted as we can make it,” said a Democratic Senate aide, its benefits focused on families in the middle of the current subprime foreclosure crisis.

The final details are still being crafted, but the aide said the new language would make two main changes. First, the bill would set forth “very tight, very strict” entry criteria, the aide said. The measure would be narrowed to cover only to homeowners in the current crunch and not to any future borrowers and would apply only to the specific types of loans that have caused this problem, the aide said.

Secondly, the new language would limit the changes bankruptcy judges could take with to qualifying primary residential mortgages during proceedings, the aide said.

The changes are expected to gain the support of some financial services firms but not the big Wall Street banks or other mortgage originators who made problematic subprime loans.

Senate leaders haven’t finished their vote counting but they’re optimistic the compromise will win over some lawmakers who were uncomfortable with the broader language but still want to do something to help struggling homeowners.

The bill’s sponsors are “quite confident we’re in a good place,” the aide said.