Accord reached on loan revisions

WASHINGTON â€”  House Democrats, under pressure from a group of moderates in their ranks and the banking lobby, agreed Tuesday to narrow legislation that would give bankruptcy judges the power to force lenders to rewrite mortgages for debt-strapped homeowners.

The compromise was expected to come to a vote in the House as early as Thursday.

Under the terms of the agreement, judges would have to consider whether a homeowner had been offered a reasonable deal by the bank to rework his or her home loan before deciding whether to take judicial action to lower the interest rate or principal.

Borrowers also would have a responsibility to prove that they had tried to modify their mortgages with their lenders before seeking help in court.

“If there is modification available, you would prefer that than a bankruptcy,� said Rep. Zoe Lofgren (D-San Jose), one of the centrist negotiators on the bill.

Democrats said the goal was to make bankruptcy clearly a last resort for homeowners in danger of losing their homes.

“The concern is that we want to ensure that those people who get relief have tried other avenues,� said House Majority Leader Steny H. Hoyer (D-Md.).

Mortgage lenders who mounted a costly and successful effort last year to kill the measure, which they call the “cramdown,� have been lobbying intensely to restrict the bill. They argued that mortgage adjustments made in bankruptcy would raise mortgage interest rates for all consumers and create a wave of bankruptcy claims.

Their opposition helped derail the legislation last week, even after leading Democrats had agreed to restrict it to people who had tried other means of reworking their mortgages and those who couldn’t afford their home loans.

Democrats discussed the compromise in a closed meeting Tuesday with Housing Secretary Shaun Donovan, who told them the legislation would dovetail with the administration’s overall efforts to reduce foreclosures. Obama unveiled a $75-billion housing initiative two weeks ago that included a call for legislation to permit adjustments to mortgages in bankruptcy court.