It's Back... But Maybe Not For Long

Sen. Charles Schumer (D-N.Y.) is seeking to resurrect a controversial measure to allow bankruptcy judges to modify certain non-traditional mortgages for primary residences.

He's submitted an amendment containing the bankruptcy language for consideration at Thursday's markup of a new housing bill crafted by Sen. Chris Dodd (D-Conn.), chairman of the Senate Banking, Housing and Urban Affairs Committee.

Like Dodd needs anymore trouble. He still hasn't reached a compromise with the Republicans on his panel on the underlying legislation. "Talks are ongoing," said his spokeswoman, Kate Szostak.

Word is that Dodd has asked Schumer not to offer the amendment.

The Senate has already shown it has no stomach for the controversial bankruptcy provision. Senate Republican leaders insisted it be stripped out of an earlier housing package passed by the Senate in April. Democratic supporters failed to get it added as an amendment.

The mortgage finance industry strongly opposes the bankruptcy provision, arguing it amounts to a violation of contracts and would drive up mortgage costs for all consumers. They mounted a full-scale lobbying war against the legislation, which exists as stand-along legislation in both chambers. And, so far, they've successfully blocked it.

"We remain adamantly opposed to the bankruptcy piece. It would have a detrimental effect on the markets [and] it's highly charged politically," said Scott Talbott, senior vice president of governmental affairs for the Financial Services Roundtable.
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