Congress is currently debating laws that would give bankruptcy court judges the authority to reduce mortgage debt with an idea that to help thousands of borrowers prevent foreclosure. But, lenders are furious at the prospect of having judges seize control of their mortgage portfolios. Community and consumer advocates argue that such a move makes sense amid the current mortgage crisis.

Titled “The Emergency Home Ownership and Mortgage Equity Protection Act of 2007″ and “The Foreclosure Prevention Act of 2008″, the proposed legislation is being drafted to provide relief for some home owners in bankruptcy. Only borrowers who live in their homes and hold subprime loans or non-traditional mortgages, like interest-only loans, would be eligible.

These bills are one of many efforts by government and consumer groups to encourage lenders and mortgage servicers to restructure loans to more affordable terms for home owners in danger of default.

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