Aid on home loans sought

Lenders contend that the measure — which could be debated on the Senate floor as early as today — could force them to raise mortgage rates to cover the costs of loans that would not be fully repaid. They are backed by Republicans, who have proposed more modest changes.

“If this proposal becomes law, it will amount to a new tax on homeowners, costing them hundreds of dollars more per month and thousands of dollars more per year,” David Kittle, chairman-elect of the Mortgage Bankers Assn., said in a statement.

“The last thing potential homeowners, and those looking to refinance into new loans, need in this market is higher mortgage payments.” Supporters counter that the measure is needed, partly because lenders haven’t done a good enough job modifying loan terms so that borrowers can stay in their homes. Chapter 13 of the federal bankruptcy code allows bankruptcy court judges to reorganize an individual’s debt, but it does not give them authority to fundamentally alter a person’s primary home mortgage.

Although congressional proposals to change the code vary, they generally would give judges new, limited authority to reduce the size of a mortgage and freeze or even reduce interest rates. For example, the Senate proposal, first sponsored by Sen. Richard J. Durbin (D-Ill.) and embraced by Majority Leader Harry Reid (D-Nev.), would empower judges to reduce the mortgage debt to a home’s current, fair-market value.