The U.S. House of Representatives on Thursday will vote on a housing package that could aid debt-strapped homeowners unable to afford their mortgages to get their monthly payments lowered in bankruptcy court. The plan, which is a controversial element of U.S. President Barack Obama's housing rescue plan, is likely to be the toughest piece of Obama's efforts to prevent foreclosures in the midst of a widespread economic recession. On Wednesday, Obama's team announced details of his broader $75 billion housing plan, which features cash incentives for mortgage holders—known as loan servicers—who cut deals with borrowers for new, more affordable terms. The legislation has been the subject of an intense lobbying campaign by the financial services industry, which has worked hard to kill it. The plan has also deepened tensions between liberal Democrats who regard it as the only real way to help debt-strapped homeowners avoid foreclosures and moderates who want to give voluntary efforts a chance to work before resorting to the courts. The same divisions are present in the Senate, which is expected to consider its own version of the legislation in the coming weeks. Democrats in the House were forced to put off action on the measure when moderates voiced concerns last week that the bill was still overly broad. They wrote a compromise that requires bankruptcy judges to consider whether banks offered homeowners reasonable loan restructuring deals before they weigh in with their own rewrites. Borrowers also would have a responsibility to prove that they tried to modify their mortgages with their lenders before seeking help in bankruptcy court. The deal would require judges to consider whether homeowners were offered a “qualified” loan workout consistent with Obama's plan. That program would let eligible homeowners rework their mortgages to bring their monthly payments down to no more than about one-third of their incomes.
