SMF reports for key moderate Democrats in the House, giving debt-strapped homeowners the right to seek mortgage modifications in bankruptcy court had to be a last resort.
So they wrote a compromise to a housing bill that requires bankruptcy judges to consider whether banks offered homeowners reasonable loan restructuring deals before they weigh in with judicial remedies.
The new language is expected to ease the bill onto the House floor for a vote as early as Thursday.
"The concern is that we want to ensure that those people who get relief have tried other avenues," House Majority Leader Steny Hoyer, D-Md., said. Borrowers also would have a responsibility to prove that they tried to modify their mortgages with their lenders before seeking help in bankruptcy court. Rep. Zoe Lofgren, D-Calif., one of the centrist negotiators on the bill, said homeowners in fear of losing their homes would have to show that they provided their financial documents to their lenders, "not just a phone call to an answering machine."