Dec. 11 (Bloomberg) -- The U.S. House rejected a mortgage “cram-down” amendment that would have given federal judges the power to lengthen mortgage terms, cut interest rates and reduce loan balances for homeowners in bankruptcy court.
Lawmakers voted 241-188 today against the amendment, which was to be part of broader legislation reining in excessive risk taking on Wall Street. All but four of the Republicans who voted opposed the amendment, pulling with them 71 Democrats to defeat the measure.
The cram-down provision was identical to legislation that passed the House in March and then failed in the Senate amid opposition from the banking industry. Banks and broker-dealers told House leaders in a Dec. 8 letter that the legislation would increase bankruptcy filings, lead to abuses of the court system and undermine efforts to stabilize the housing market.
Lenders are “gratified that the House saw fit to vote down the bankruptcy cram-down amendment that would have further increased costs for borrowers,” the Washington-based Mortgage Bankers Association, the industry’s largest trade group, said in a statement today.
Representative Dan Lungren, a California Republican, said the amendment would increase mortgage insurance premiums for borrowers “and deny help to those we seek to help.”
“This is a prime example of good intentions creating bad policy,” he said before the vote.
http://www.bloomberg.com/apps/news?pid=20601087&sid=azB6PD4NAPSs&pos=3
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