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US law to help mortgage payers passes first test

Latest update : 2009-03-06

US President Barack Obama's proposed law to lower some homeowners' mortgage repayments was adopted by the House of Representatives on Thursday, drawing fire from Republicans. The Senate is expected to put up harsher opposition.

AFP - Amid a storm of foreclosures and other housing woes, the US House of Representatives passed legislation Thursday to give bankruptcy judges power to lower some homeowners' mortgage payments.


"With the 'Helping Families Save Their Homes Act', we can protect the American Dream and preserve it for America?s families," Democratic House Speaker Nancy Pelosi said after lawmakers voted 234-191 to pass the measure.

The legislation, popularly known as the "cram-down" bill, drew fire from the banking industry and from Republicans who alleged that it lacked safeguards to prevent borrowers who used bad judgment or outright fraud from benefiting.


"It is nothing short of absurd to punish those who acted responsibly while rewarding the reckless -- and sometimes illegal -- actions of others," said the number two Republican in the House, Representative Eric Cantor.

Democrats rejected those charges and said the legislation was critical to relieving some of the pain homeowners face at a time when many homes are valued at less than their mortgage, helping to curb foreclosures and ease pressure on the battered US housing sector.


The bill, which has yet to clear the Senate, would enable bankruptcy judges to reduce the principal or the interest rate on an existing mortgage for qualified homeowners, in danger of default, who have tried and failed to get their lender to help.

House passage came as US mortgage woes hit fresh lows in the fourth quarter of 2008 with more than one out of 10 homeowners late on their payments, the worst since 1972, according to an industry survey.

Date created : 2009-03-06