The Obama administration lost a bid to add a powerful weapon in its fight against foreclosure on Thursday, April 30th, 2009 after the Senate voted down a proposal to allow bankruptcy judges to modify mortgages. The defeat left many housing advocates questioning the effectiveness of the president's loan modification plan. The so-called cramdown provision, which would allow judges to reduce mortgage principal, would have put pressure on servicers to modify loans before borrowers file for bankruptcy.

The financial industry lobbied hard against the bill, arguing that letting judges change mortgage contracts would add instability to the market and raise interest rates. Senate Republicans and some moderate Democrats were concerned about the bill's impact and about the growing resentment among homeowners in good standing.

The bill was defeated by a 51-45 vote. The House had passed similar legislation last month.