As the number of properties going into foreclosure rise there are calls for the law to be changed to give judges the power to cut mortgage debts to help bankrupt property owners.
The move, put forward by a group of Senators is supported by financial giant Citigroup, one of the country's largest mortgage lenders, and the Center for Responsible Lending. Supporters claim it would help millions of families save their homes and they want it to become part of Barack Obama's economic stimulus plan which will be introduced soon once he takes over as US president next week.
'If enacted, this legislation would represent an important step forward,' said Citigroup Chief Executive Vikram Pandit.
A spokesman for the Center for Responsible Lending described it as 'responsible and urgently needed legislation'.
But not everyone supports the move. The Financial Services Rountable is opposed and spokesman Scott Talbott said it was 'too broad' and described it as a 'risk to the mortgage markets'.
Other opponents include banking and housing industry lobbyists who also claim that the proposal would raise costs for future homeowners.
But others are considering supporting a change including the National Association of Home Builders and the National Association of Realtors. They have been encouraged by a pledge that only mortgages entered into prior to its enactment would be eligible and property owners would have to certify that they have tried to contact their lender before filing for bankruptcy.
The US government has injected billions of dollars in taxpayer funds into Citigroup since October, making the nation's third-largest bank a top recipient of federal bailout money.