This article appeared in the Wall Street Journal.
WASHINGTON — President Barack Obama’s proposal to give homeowners new relief in bankruptcy court appears headed to defeat in the Senate Thursday, barring a last-minute compromise.
As of late Wednesday, a measure allowing judges to reduce the mortgages of homeowners in bankruptcy court, known as “cramdown,” didn’t have the 60 votes needed to pass a procedural vote in the Senate, where Republicans still have the numbers needed to block legislation. The measure lacks the support of some Democrats as well, amid opposition by community banks and credit unions.
The president and many Democrats see cramdown as important relief for millions of people whose homes are worth less than they owe on their mortgages, in some cases because they signed up for dubious loans with escalating payments.
The measure, once part of a more sweeping housing bill to be considered Thursday, will now likely be voted upon separately. Sen. Dick Durbin (D., Ill.), the Senate’s second-ranking Democrat, has been working to find a compromise on the measure, a key part of Democrats’ agenda to help homeowners.
But as of Wednesday night, Sen. Durbin and fellow negotiators had been unable to sway enough moderate Democrats and Republican opponents.