FACTBOX: U.S. housing bill casts bankruptcy as housing relief

WASHINGTON (Reuters) - The House of Representatives is expected to approve legislation on Thursday that would let federal judges erase mortgage debt for homeowners who enter bankruptcy.

The bill will dovetail with President Barack Obama's housing market recovery plan announced last week and includes other provisions meant to aid struggling borrowers.

The legislation will almost certainly pass the House where Democrats have a healthy majority. The plan must then be paired with a companion plan that has not yet been introduced in the Senate.

Here are some details of the House plan:

* Bankruptcy judges would be permitted to rewrite loan terms for homeowners who seek protection from their creditors in bankruptcy. For the first time, borrowers could have the courts erase some home loan balance and lower interest rates. The lending industry is trying to pare back the terms of this provision, and changes might be made before it becomes law.

* Eases terms and increases incentives under the Hope for Homeowners program conceived last year to help arrest the housing crisis but which has aided only a handful of troubled borrowers. Specifically, the legislation would lower the monthly payments of borrowers who qualify for refinancing under the program and clear some bureaucratic underbrush that has choked the program.

* The mortgage service companies that collect homeowners' monthly checks would get legal protection if they try to ease loan terms. The "safe harbor" provisions of the legislation would indemnify lenders if they modify a loan in order to preserve its long-term viability. Currently, mortgage companies are hamstrung by contracts that force them to foreclose on delinquent borrowers.

* Washington's deposit insurance coverage would be permanently increased from $100,000 to $250,000 while the Federal Deposit Insurance Corp's credit line with the Treasury Department would increase from $30 billion to $100 billion. The FDIC would be given broad freedom to rebuild its insurance trust fund and charge new insurance fees under its own terms.

(Reporting by Patrick Rucker; Editing by Jonathan Oatis)