Cramdown Bill Faces Senate Opposition

The bill that would let judges modify the mortgages of home owners in bankruptcy, known as cramdown, is facing still more troubles as it moves to the U.S. Senate.

"I hope we can muster the courage and find the votes, although I know it will be hard," says Senate Majority Whip Richard J. Durbin, an Illinois Democrat. "It's hard to imagine that today the mortgage bankers would have clout in this chamber, but they do."

The bill Senators are being asked to vote on a measure that would require home owners be at least two months delinquent and have an outstanding balance of less than $729,750 to qualify. If a bankruptcy judge lowers the amount they owe, borrowers would have to split any ultimate profit with the lender if they sell while in bankruptcy proceedings.

Scott E. Talbott, senior vice president of government affairs for the Financial Services Roundtable, predicted that passage is unlikely. "The uphill battle that the bill has faced for years has continued. It will be very difficult to garner the votes," he says.