MIAMI — In Judge A. Jay Cristol’s bankruptcy court, the bench shakes and a deep thud reverberates throughout the room as he stamps one of many documents that mark the steady progress of a case.
It’s a sound that is sure to be heard more often if Congress gives him and judges around the country the power to renegotiate a homeowner’s mortgage. The process, known as a “cram-down,” is part of President Barack Obama’s $75 billion plan to stem the soaring rate of foreclosures that helped ignite the recession.
The proposal, which could be voted on by Congress in a month or two, is already drawing fire from the mortgage industry. The move would force lenders to the negotiating table and could hurt the coffers of banks and investors holding mortgages.
But a growing number of people — from housing advocates to bankruptcy attorneys to judges like Cristol — believe it may be the best hope to keep people in their homes.
“We can’t help them all, but we can help a lot of them ameliorate the situation somewhat,” Cristol said.
Obama’s plan is part of a carrot-and-stick approach to dealing with a crisis in which 2.3 million households received foreclosure filings last year.
About one in four with a mortgage owes more to the bank than their properties are worth, according to Mark Zandi, chief economist at economic forecasting firm Moody’s .
Congress is already being lobbied heavily on both sides of the issue.
Ten groups in the lending industry oppose the legislation.
The Mortgage Bankers Association has said new homebuyers will pay higher interest rates and down payments if lenders face the risk that a judge could change mortgage terms.
Meanwhile, homeowners who have kept up with mortgage payments in a recession have balked at attempts by the government to use time and money to help people who, for whatever reason, have wound up in default.
