Progress Illinois

Back in March, we noted that Sen. Dick Durbin's foreclosure prevention bill -- passed after some cosmetic changes in the House -- might not get a full vote in the Senate until after the Easter recess. At issue was the scope of the bill, which aims to allow bankruptcy judges to modify mortgage terms to make them affordable for homeowners facing foreclosure. Republicans, Blue Dog Democrats, and the financial services industry have been lobbying hard to limit the measure to subprime and other risky loans.  They also want a provision blocking judicial modifications if the lender has already offered to revise the mortgage terms. Housing advocates have responded that both of these suggestions would neuter the bill's impact. 

Well, the holiday has come and gone and Senate Democrats may finally be nearing an agreement. The Hill's Silla Brushhas the scoop: 

Senate Democrats are aiming to reach a compromise with a handful of the nation's largest banks and some credit unions by early next week on a bill that would allow judges to modify the value of home mortgages, financial industry sources said on Friday.

An industry source close to the negotiations said the goal was to finish by the end of Tuesday.

Although a Durbin spokesperson denied any deal had been reached, National Journal reported the same news yesterday.

The Hill has more details:

A draft compromise proposal indicates that borrowers who have been offered modifications consistent with the president's Homeowner Affordability and Stability Plan or with a congressional program on refinancings would not be able to turn to courts to modify their mortgage. Under the proposal, judges would be able to reduce mortgage principal to a "fair market rate" and limit interest payments to a conventional rate plus a "reasonable" risk premium. Only loans made before 2009 and less than $729,750 would be eligible. The bill would sunset in 2014.

Whether or not the bill has broad enough support to survive a filibuster isn't clear. Pennsylvania Sen. Arlen Specter -- the lone Republican who supports judicial modifications -- only backs adjusting the interest rate of a first mortgage, not the principal. And other "moderate" Democrats have issued only wavering support. But it is increasingly clear that the ever-growing foreclosure crisis requires urgent action.