Citing problems with the White House loan-modification plan, Democrats said Thursday that it was time to reconsider bringing back mortgage bankruptcy reform.

Despite strong efforts by Sen. Richard Durbin, D-Ill., to let judges write down mortgage debt for bankrupt borrowers, the Senate blocked his measure in April, scoring a win for the banking industry. Banks have repeatedly opposed the idea.

But at a Judiciary subcommittee hearing, he and others said the administration's plan to subsidize voluntary workouts was not working, and giving judges — not financial institutions — the power to restructure loans was the only answer.

"It seems to me that our best efforts at voluntary renegotiation have really failed," Durbin said.

But Sen. Jeff Session, R-Ala., questioned the cramdown idea. Though he said "loans do need to be renegotiated," Durbin's idea would let judges simply erase a large amount of debt that banks had disbursed.

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.