House Approves Mortgage Loan Modification Bill

The US House of Representatives has approved a mortgage loan modification bill. The bill, which was modified in a way so as to require homeowners to show proof that they were not being helped by mortgage lenders, allows so-called cram downs of mortgage principal.

The idea behind the bill is to prevent foreclosure by allowing judges to modify loan terms of a primary residence in some cases. However, there are restrictions to what is allowed:

• Homeowners must show that they have tried to work things out with the lender.
• The mortgage had to have been one that was affordable at one point in time.

Supporters of the bill point out that it's not really all that more onerous than the ability judges have to modify car loans and credit card loans. Opponents say that this would raise costs and take money away from the mortgage debt market.

The bill still has to make it through the Senate, where its passage is far from assured.