A new package of mortgage legislation was voted on today by the Senate after debate in Congress for new urgency to aide millions of mortgage holders at risk for foreclosure. The vote was an overwhelming 94-1 to move ahead with the package of housing legislation. The legislation includes more mortgage counseling, money to local governments to buy properties in foreclosure, and a provision to allow bankruptcy judges to alter the terms of mortgage loans on primary residences only. The purpose is to stem the tide of increasing foreclosure rates and hopefully it is a beginning to turning around the economy.

By noon Wednesday, April 2nd, the two ranking Senators of the Senate Banking Committee, Christopher J. Dodd, and Richard Shelby, will “consult and report back by noon with the core of legislation to which amendments can be offered.”

Lawmakers are saying that the bill will call on mortgage lenders and loan-servicing firms to trim down loan balances on a voluntary basis even though doing so will cause lenders to take huge losses. But in return, those loans will be refinanced taking the pressure off of homeowners while those lenders’ receive government guarantees for those loans. The bill could help 1.5 million homeowners who took on the risky adjustable-rate mortgages and turn them into traditional 30-year loans.

The package is expected to include $200 million for the expansion of counseling programs for mortgage holders in danger of foreclosure, $4 billion in grants for local governments, $15,000 in tax credits for those who purchase foreclosed homes or newly constructed homes that sit vacant, and $10 billion in tax-exempt bonds for local housing authorities to refinance subprime loans.

Other aid packages are in development, which includes adds $300 billion to $400 billion in federal loan guarantees for mortgage holders at risk of default.

Since this bill is asking for volunteer cooperation from mortgage lenders and servicers, banking trade groups are being cautious about the outcome of the bill until they see the final draft.

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