"The industry will still oppose the Durbin bill," said Scott Talbott, a lobbyist for the Financial Services Roundtable, in a statement.

SECOND ROUND FOR PLAN

Last year, Durbin failed to win Senate passage of a similar measure. Opponents, including Republicans, some Democrats and banking and housing industry lobbyists said the proposal would raise costs for future homeowners.

Republicans were wary of staking out a position on the measure. "It's far too early to make that kind of decision," Utah Republican Sen. Robert Bennett told Reuters on Thursday.

Michigan Rep. John Conyers, a Democrat, has introduced the measure in the House of Representatives so the plan can come before Congress even if it is not tacked onto the stimulus.

MORTGAGES PROTECTED

Today, most forms of personal debt such as vacation homes and family farms can be restructured in bankruptcy. But a mortgage on a primary residence cannot.

Under the proposed reform, the senators and Citi agreed that only mortgages entered into prior to its enactment would be eligible for the treatment. Homeowners would have to certify that they have tried to contact their lender before filing for bankruptcy.

Creditor claims on bankruptcy would be invalidated only by major violations of the "Truth in Lending Act" -- meant to protect homebuyers from fraud.