WASHINGTON (Reuters) -- Bankruptcy judges could cut the mortgage debt of homeowners in bankruptcy court as a last resort to avert foreclosure, under a bill approved by a 234-191 vote Thursday in the U.S. House of Representatives.
Seen by Democratic supporters as vital to stabilizing the crumbling U.S. real estate market, the so-called "cramdown" bill has been opposed by bankers, despite amendments to limit its scope, including one restricting it to existing mortgages.
The Senate was expected to consider its own version of the House bill soon, but chances of passage are uncertain.
The House bill has additional provisions meant to help homeowners in the worst housing market in decades, a slump that has helped pull the U.S. economy into a deepening recession.
Under present law, bankruptcy courts may reduce many forms of debt for struggling borrowers -- including a boat, car, vacation home or family farm -- but not a primary residence.
Changing bankruptcy law to allow this, say bankers and Republican opponents of the bill, would raise costs for everyone by diverting capital from the mortgage debt market.
Why are we allowing judges to decide not only what interest a house should be cut to but also to decide how much of the cost the owner should be responsible for? Pick the right judge and your $230,000 house may now only cost you $15,000 at 3% interest. That is IF YOU DIDN'T PAY YOUR BILLS IN THE FIRST PLACE. Sorry responsible person (read conservative) you are out of luck once again. By the way, make sure to leave your money at the door when you leave. We'll be redistributing that for you now.