Foreclosures

Congress is poised to give bankruptcy judges more power to modify primary home mortgages in an attempt to halt the foreclosure crisis, a move Democrats and housing advocates have been pushing for two years in the face of stiff opposition from Republicans and the mortgage industry. The House is expected to pass the legislation today, and supporters are optimistic that the Senate will follow next month.

Michael B. Bennett used to own his home in Chesapeake, Va. Now he rents it, which is taking some getting used to. There are advantages. "If something goes bad -- the hot water heater or the air conditioner -- the people that own the house pay for it," said Bennett, who lost the home to foreclosure. On the other hand, "I don't like saying I'm renting." Bennett and his wife, Candace, are among millions of Americans who have become renters again after foreclosure.

In an attempt to ease the foreclosure crisis, the House on Thursday approved a major change to bankruptcy law that would give judges new powers to modify home mortgages. The revision, which was approved 234 to 191 as part of a broader housing bill, would allow bankruptcy judges to reduce, or "cram down," the principal owed on an existing mortgage for a primary residence.

Amid concern that many Californians would not qualify for assistance from the federal anti-foreclosure plan, a powerful state legislator called on the Obama administration to make more homeowners eligible. The plan limits federal refinancing assistance to people who owe just a small amount, 5% or less, over what their homes are worth.

For years, Daniel Lubiano tended the roses in his front yard while watching the home across 82nd Street in South Los Angeles fall apart. In foreclosure for nearly a year, the house had been neglected by tenants who refused to pay their rent. The stucco was chipped and dirty, and the yard was covered in weeds. The empty carport behind the house became a favorite spot for teenagers trying to hang pairs of tennis shoes from electrical wires overhead. In all, there were 28 pairs dangling there.

Policies aimed at easing home loan terms for troubled borrowers may not be as effective in preventing foreclosures as more direct aid to homeowners, Federal Reserve economists have found.

The financial services industry is in trouble over its role in crashing the world economy, but that doesn't mean its lobbyists have lost all their muscle on Capitol Hill. Exhibit A: The Senate delivered a stinging rebuff to President Obama and consumer advocates Thursday by rejecting a measure to help homeowners facing foreclosure.

The Los Angeles City Council is poised to vote today on a plan to help distressed homeowners in the northeast San Fernando Valley by putting up city money for "silent second mortgages" that could encourage financial institutions to modify home loans. The pilot program would make available $1 million from the Community Redevelopment Agency to help 20 to 30 homeowners in Pacoima and neighboring communities who are in foreclosure. "If we can make this work . . .

Banks could get incentive payments for allowing borrowers to sell their homes at a loss rather than go through foreclosure under new guidelines issued Thursday for the Obama administration's $75-billion housing plan. The program, known as Making Home Affordable, focuses on paying lenders to modify distressed borrowers' loans so that payments are cheaper. But under this expansion of the program, lenders can also receive incentive payments if the homeowner's loan is not modified.

For 20 years, Renee Duncan has lived happily on a shady 12-acre ranch perched at the intersection of a paved street and a dirt road where cookie-cutter houses give way to rural homesteads. "You hit that dirt road and it's like taking a Valium," she says with a weary smile. But Duncan's life could be about to change.