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The House of Representatives Thursday night passed the Helping Families Save Their Homes Act of 2009 by a vote of 234-191.

If enacted into law, the bill will allow bankruptcy judges to reduce (we like to say, “cram down”) mortgage principals on primary residences in chapter 13 cases. 

The heart of the bill appears to have withstood the opposition of the mortgage industry and their Republican allies.  There were some amendments, however.  One requires a homeowner try to negotiate a voluntary mortgage modification with their lender.  BK judges will also have to verify that a homeowner sought the modification before filing for bankruptcy. 

The bill now goes to the Senate, which may vote on a companion bill next week.  

The House of Representatives vote on chapter 13 mortgage modification legislation has been delayed until this week so House Democrats can meet this evening with HUD Secretary Shaun Donovan to discuss the bill.

The House vote will come no earlier than tomorrow.  

The dilution has begun:

The postponement comes shortly after the legislation’s Senate author, Sen. Dick Durbin (D., Ill.), said he would be open to limiting the measure to just subprime mortgages.

Some centrist Democrats began to waver after the remarks, balking at supporting a controversial bill amid signs that the Senate might pass a narrower version. The Obama administration, which backs the measure, also proposed tighter restrictions than are contained in the House legislation.

At a meeting of House Democrats Thursday, centrist Democrats raised concerns that the measure offered little help for troubled homeowners who don’t want to turn to the bankruptcy courts for relief, Rep. Ellen Tauscher (D., Calif.), said.

Limiting relief to subprime mortgage holders will do nothing for homeowners who took out conventional mortgages and find themselves facing foreclosure due to job losses and other fallout from this weak economy.  From Chip Parker of Bankruptcy Law Network:

The high water mark on this economic flood keeps rising.  In 2007, foreclosures comprised primarily of exploding adjustable rate mortgages.  By 2008, however, the foreclosure virus began spreading to more conventional loans, collapsing the housing sector for good.

Today, more and more “responsible” Americans are being sucked into the foreclosure vortex because they are losing jobs, or their personal investments have evaporated.  Even homeowners with actual equity cannot refinance out of trouble.  Nobody is safe from this economy.

A modification law covering all types of mortgages will help troubled homeowners who want to avoid bankruptcy by giving lenders a choice – reduce the monthly payments to a level the homeowner can afford or have a bankruptcy judge do it for them.