U.S. Senate rejects easing mortgages in bankruptcy

By Patrick Rucker

WASHINGTON (Reuters) - The U.S. Senate on Thursday rejected an amendment that would have given bankruptcy judges the power to ease a homeowner's monthly payments and prevent foreclosure.

Supporters of what was known as the 'cramdown' provision argued that it would serve as a useful tool to help repair the housing market and keep millions of troubled borrowers in their homes.

Opponents of the plan have said its arbitrary rules would scare investors away from the housing market and prolong the current slump.

Twelve Democrats joined all Senate Republicans in voting against the measure, which failed on a vote of 45 to 51. That was well short of the 60 votes needed to get it past Senate procedural roadblocks.

"There will come a time when this bankruptcy will pass," Senate Majority Leader Harry Reid told reporters before the vote, vowing that the measure would be reconsidered in time.

While bankruptcy courts may rewrite the terms of most consumer debt, they may not ease the terms of many home mortgages.

LONG TALKS END QUIETLY

Senator Richard Durbin, an Illinois Democrat, has for weeks tried to reach a compromise with leading banks like Bank of America, JPMorgan Chase and Wells Fargo & Co, but those talks collapsed in recent days, said sources close to the discussions.