The cram-down measure failed in the Senate on a 45-51 vote.

The chamber voted 234-191 to approve legislation that would allow borrowers to have their mortgages restructured through a Chapter 13 filing (subscription).

House Democratic leaders held off voting on legislation (subscription) that would allow bankruptcy judges to modify home loans. The legislation did not find fans among Blue Dog Democrats and the New Democrat Coalition (subscription).

Obama has included a "cram-down" provision in his $75 billion Homeowner Affordability and Stability Plan. Speaking in Phoenix, Obama said his plan would "allow judges to reduce home mortgages on primary residences to their fair market value -- as long as borrowers pay their debts under a court-ordered plan."

By a vote of 21-15, the House Judiciary Committee passed the "cram-down" provision, which will likely be included in the upcoming omnibus spending bill.

Democratic leaders and the administration agreed to exclude the "cram-down" provision -- which allows bankruptcy judges to reduce the principal of home mortgages -- from the House version of the stimulus package, on the theory that it would provoke opposition from Republicans.

Lawrence Summers, Obama's nominee to head the National Economic Council, confirmed in a Jan. 15 letter to congressional leaders that bankruptcy reform would be part of the administration's Emergency Economic Stablilization plan.