Housing vote may happen Thursday

The House moved closer on Tuesday to passing a broad housing bill that includes a controversial provision empowering bankruptcy judges to re-write homeowners’ mortgages.

House Majority Leader Steny Hoyer (D-Md.) said that the bill would come up for a vote “hopefully Thursday.”

{mosads}House Democrats have been negotiating a compromise since the end of last week that would try to ensure that bankruptcy court is a last resort for strapped homeowners who have first tried to work through a voluntary modification with the lender or servicer of their mortgage.

Centrist Democrats, including Blue Dogs and New Democrats, were pushing for changes to the bill. More liberal Democrats have said the provision, known as “cramdown” in the financial services industry, is a necessary way to force lenders to write down the principal and interest payments on mortgages for primary residences.

The bill up for a possible vote on Thursday is co-sponsored by House Judiciary Committee chairman John Conyers (D-Mich.) and House Financial Services Committee Chairman Barney Frank (D-Mass.). House Speaker Nancy Pelosi (D-Calif.) delayed a vote last Thursday to give members more time to review the provision.

“The concern is we want to ensure that the people who get relief have tried other avenues,” Hoyer said.

One of the original sponsors of the cramdown provision, Rep. Brad Miller (D-N.C.), said he was content with the changes made this week.

“From what I’ve seen, I’m OK with it,” Miller said. “We don’t want people to get loan modifications in bankruptcy if they could get it outside of bankruptcy.

“I could be happier, but I think this will work,” Miller said.

President Obama has supported cramdown generally as part of his broad effort to shore up the housing market, but appeared to signal that he would like it to be a last resort measure.

The language that was circulated on Tuesday includes a provision saying the court should consider whether the modification offered to a homeowner is a “good faith” effort to meet the standards set up by Obama’s housing plan as a “qualified loan modification.” The main component of that plan would mean that the modification would result in the homeowner’s first mortgage payment equaling no more than 31 percent of his income, according to draft language circulated on Tuesday afternoon.

One source in the financial services industry expressed displeasure with the latest language.

“Nothing has really changed from our point of view,” the source said. “It allows banks to compete with the president’s housing plan.”