House to take up housing bill on Thursday

By Susan Cornwell

WASHINGTON (Reuters) - The U.S. House of Representatives is expected to vote on a bill on Thursday that would let bankruptcy judges rewrite home loans and shield mortgage servicers who modify loans from bondholder lawsuits.

The legislation, which aims to ease a deep U.S. housing slump, would also strengthen the ability of the Federal Deposit Insurance Corp to deal with bank failures and make permanent an increase in the insured deposit limit to $250,000.

"Hopefully Thursday," House Speaker Nancy Pelosi told a reporter when asked when the bill would come to the floor.

Skyrocketing U.S. home foreclosures have saddled banks worldwide with bad debts, clogging the financial system and threatening economies with deep recession.

The House bill would permit bankruptcy judges to erase some principal from troubled home loans, just as they are able to adjust other consumer debt. President Barack Obama called for such a measure in a housing rescue plan he released last week.

The so-called mortgage "cramdown" provisions should prod mortgage companies to loosen home loan terms on a scale that they have not done before, House Financial Services Committee

member Rep. Brad Miller told Reuters.

"We have provided carrot after carrot to encourage them to modify loans," the North Carolina Democrat said. "With the possibility of facing losses in bankruptcy, the mortgage servicers should have a justification for easing some terms."