Mortgage bankruptcy reform is officially reclaiming the congressional stage this week-Sen. Richard Durbin re-introduced his bill in the House Judiciary Committee to bring more regulation as a growing number of companies file Chapter 11.

The Illinois Democrat, who has long tried to let judges restructure primary mortgages in bankruptcy, broadened his bill to mandate loan modifications and limit dividend payments by banks receiving capital from the government.

The measure is unlikely to pass this year but has a good chance of enactment next year as the Democrats widen their majorities in the House and Senate and reclaim the White House. President-elect Barack Obama has said he supports the general idea.

In recent weeks other Senate and House leaders have made it clear that the issue remains a top priority, including Senate Banking Committee Chairman Chris Dodd, Sen. Charles Schumer and House Speaker Nancy Pelosi.

"The entire financial-services community will rally once again against this legislation," said Francis Creighton, the chief lobbyist for the Mortgage Bankers Association.

Financial-services executives have argued that it would drive up the cost of credit for consumers, making it less available as lenders price in additional risk.

Credit unions broke ranks with bankers this year when the National Association of Federal Credit Unions supported a narrower bill approved by House Judiciary that targets subprime and nontraditional loans originated during the height of the housing boom. Some in the industry fear even these limits would set a bad precedent and could easily be expanded or made permanent.

"I'm leery of sunsets on temporary bankruptcies," said Phil Corwin, a partner at the law firm Butera & Andrews. He cited a break for agricultural loans under Chapter 12 of the Bankruptcy Code that was supposed to be a temporary measure to deal with a farming crisis and wound up becoming permanent. "I don't really believe that any sunset is going to stick."

Banking lobbyists plan to focus on killing the bill but will likely have to settle for trying to contain its impact.

"We're certainly interested in limiting the damage of this legislation," Creighton said. "We don't anticipate any scenario where we'd be able to support the legislation."

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