WASHINGTON (Reuters) - In a win for the banking industry, the U.S. House of Representatives voted on Friday to reject a measure that would have allowed bankruptcy judges to change the terms of mortgages for distressed homeowners.
Known as “mortgage cramdown,” the measure was defeated in a 188-241 decision as a proposed amendment to a broader financial reform bill expected to win House passage later on Friday.
The House had approved a mortgage “cramdown” measure in March over the objections of Republicans and bank lobbyists, but it died in the Senate.
Under present law, bankruptcy courts may reduce many forms of debt for struggling borrowers — including for a boat, car, vacation home or family farm — but not a primary residence.
Cramdown would help stem the home foreclosure wave continuing across the United States, its advocates said.
But opponents said it would raise costs for everyone and divert capital from the mortgage debt market.
Reporting by Kevin Drawbaugh; Editing by Dan Grebler