The US Senate on Tuesday rejected a measure that would have narrowed the scope of a housing rescue bill and discouraged mortgage servicers from retooling problem home loans. A bill now being considered by the Senate aims to protect mortgage service companies from lawsuits, or give them 'safe harbour', if they ease the terms of problem loans.
The defeated amendment would have given some mortgage investors the right to sue mortgage servicers if they lowered a borrower's monthly payments. While most home loans are in the hands of investors, mortgage service companies collect monthly payments and are responsible for maintaining the loan. The amendment to narrow 'safe harbor' was defeated by a vote of 63 to 31.
Lawmakers and officials have conceived several plans to help lower the costs of homeownership to reverse a tide of foreclosures. In many cases that has included subsidies to mortgage service companies.
Mortgage investors, though, generally lose money when the terms of a home loan are modified and these investors warned that mortgage service companies would modify loans with abandon if they won a 'safe harbor' clause. Many large banks are also the largest mortgage servicers.
"Now we're going to pay, in large portion, the four largest banks in the country. We're going to be paying them with our money to do things that are in many, many cases in their best interest," said Senator Bob Corker, the Tennessee Republican who authored the amendment.
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