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The Obama administration on Tuesday expanded its efforts to support the housing market, as a controversial bill the White House supports on the issue heads for defeat in the Senate.

The bill would allow bankruptcy judges to write down the principal and interest payments on home mortgages, but Senate Democrats have struggled mightily to win support for the measure from Republicans and centrist Democrats. Senate Majority Leader Harry Reid (D-Nev.) indicated that the bill, known as “cramdown” in the financial industry, would come up as early as Thursday. It will be an amendment to a separate and widely supported bill that boosts the authority of the Federal Deposit Insurance Corporation (FDIC) and tweaks another housing program known as Hope For Homeowners.

{mosads}The financial industry has lobbied vigorously against the bankruptcy provision. Weeks of negotiations between Senate Majority Whip Dick Durbin (D-Ill.), a handful of large banks and the Credit Union National Association have failed to produce a compromise.

President Obama has supported the bankruptcy option, but a senior administration official on Tuesday downplayed the likely defeat. “I never imagined it would be a complete solution,” the official said, “but it was an option we perceived would be helpful.”

Separately, the administration unveiled details of a plan to use bailout money to provide incentives for borrowers, lenders and investors to lower payments on second mortgages.

Silla Brush