Senate Kills "deal Breaker" Proposal On Housing Bill

The Senate has killed a housing proposal that would have provided the most direct aid to homeowners facing foreclosure, keeping alive a delicate compromise on a sweeping housing bill.

The provision, backed by consumer groups and leading Democrats, would have allowed bankruptcy judges to restructure mortgages — lowering principal and interest payments — for people facing foreclosure on their homes. Advocates said this would help as many as 500,000 people who will lose their houses, but Republicans as well as some Democrats were worried the proposal would be perceived as a "bailout" for people who got in over their heads with home loans.

The Senate voted 58-36 to table, or kill, the proposal, which was championed by Sen. Richard Durbin (D-Ill.). The rest of the housing bill, with tax credits for home builders, $100 million in foreclosure funds and tax incentives for purchasing foreclosed houses, is still being debated on the Senate floor.

"That was a deal breaker," said Sen. Richard Shelby (R-Ala.), the top Republican on the Senate Banking Committee and one of the key negotiators on the housing bill. "So this [killing the proposal] is good news."

Consumer advocates didn't see it that way and have complained that the housing bill, with $11 billion in tax credits, is heavily tilted toward the housing and mortgage industry and does little to help individuals actually facing foreclosure.

"This missed opportunity is regrettable," the Center for Responsible Lending said in a joint statement with 15 other civil rights and consumer groups. "Keeping [the bankruptcy provision] out of proposed legislation was a win for the financial services industry that brought us this mess and, in so doing, the country to the brink of recession."

 
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