Tough luck if you're in danger of defaulting on your home loan. Senators rejected a bill today that would have allowed bankruptcy judges to cut mortgage terms to help borrowers avoid foreclosure.
The "cramdown" legislation was voted down 51 to 45. A Bloomberg report described the defeat as a setback for the Obama administration, which included cramdown in the anti-foreclosure plan aiming to help 9 million homeowners.
"These bankers who brought us into this crisis are literally shunning and stiff-arming the people who are facing foreclosure," said Senator Richard Durbin of Illinois, sponsor of the legislation and the Senate's second-ranking Democrat.
The mortgage industry argued cramdowns would push up interest rates for other borrowers, because lenders would try to recoup any losses made on cramdowns by
upping rates for performing mortgage holders.
"The cram-down measure would have increased the cost of buying a home for all Americans, and that is the exact opposite result that everyone is working towards right now," said Scott Talbott, senior vice president of government affairs at the Financial Services Roundtable.