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.