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US House of Representatives Approves Home Mortgage Measure

Acting amid more bad news about the pace of home mortgage foreclosures in the United States, the U.S. House of Representatives approved by a vote of 234 to 191 legislation that would allow judges to order changes in mortgage terms to help more Americans facing job losses financial troubles to stay in their homes.

Congressional approval of the legislation, if the Senate also acts on its own version, is a key part of President Barack Obama's effort to help prevent further economic damage resulting from more families losing their homes in the midst of the recession.

The measure approved late Thursday by the House would allow bankruptcy judges to alter the terms of mortgages to give homeowners a better chance of avoiding foreclosure.

A vote was set for last week, but was delayed as some moderate Democrats, along with the home lending industry, demanded changes to prevent abuse by people who might seek reductions while still being able to make mortgage payments under their existing terms.

House Speaker Nancy Pelosi said approval of the measure is but one component of President Obama's program announced last month to refinance and modify mortgages to help as many as nine million homeowners.

"There are several components to the economic turnaround that need to be addressed. Certainly, the housing crisis [and] facing the mortgage foreclosure crisis, changing that is good for the economy," she said.

Under the legislation, judges could reduce the principal owed, interest rates or extend the length of loans on existing mortgages - something Democrats and the president hope could reduce foreclosures by 20 percent.

Democrats pointed to changes they said substantially improved the bill, including stricter conditions for homeowners who are bankrupt and seeking mortgage modifications, and requiring homeowners to share with a lender profit from any sale of a home whose principal was reduced by a bankruptcy judge.

Democrat Zoe Lofgren called the measure a balanced reform that will bring meaningful help to families in genuine need.

"By setting up a homeowner-lender negotiating process that begins well before bankruptcy, it is designed to keep more families out of bankruptcy and out of foreclosure. The number of new Chapter 13 [i.e., bankruptcy] mortgage modifications that may result will be far less than the number of foreclosures that will be prevented," Lofgran said.

Republican Representative Lamar Smith said that the changes in bankruptcy provisions failed to sufficiently narrow the scope of mortgage situations eligible for modification and will not solve the foreclosure crisis.

"The manager's amendment [to the bill] continues the majority's policy of punishing the successful, taxing the responsible and holding no one accountable. It is unfair for Congress to bail out mortgage lenders and borrowers on the backs of responsible homeowners who continue to pay their mortgages, even in these troubled times. Clearly, the American people are not willing to pay for their neighbor's irresponsible actions," he said.

After lawmakers turned back a Republican attempt to kill the bill, House approval came as the nation absorbed more bad news on home foreclosures.

Mortgage Banking Association figures show that more than 11 percent of all mortgages were delinquent or in foreclosure during the last three months of 2008.

The growing unemployment situation was also identified as an increasingly significant factor in mortgage delinquencies, with worsening problems involving fixed prime and sub-prime rate loans affected the most by job and income loss.