The House is expected to bring legislation back to the floor Thursday that would let judges modify mortgages after making only modest changes to a version that was pulled from consideration last week to allow further negotiations.

The latest draft of the bill would require borrowers who received a loan modification offer under the Obama administration's plan to consider that option before heading to bankruptcy court.

The new language would also let judges reduce a borrower's interest rate to as little as 2% without reducing the principal if the restructured loan reduced the borrower's debt-to-income ratio to 31%.

But neither condition would be mandatory, leaving judges significant latitude to restructure mortgages.

The banking industry continues to seek to narrow the bill's scope, in part by requiring a cramdown to be a last resort. The industry is also seeking to minimize the types of loans eligible for cramdown to subprime and alternative-A mortgages underwritten in the last few years.

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