Senate Democrats think bankruptcy judges are the perfect fit for the job of overseeing negotiations between troubled borrowers and lenders.

Senate Democrats are asking Congress to encourage the development of state-level programs that would put bankruptcy judges in charge of the negotiations.

Sen. Sheldon Whitehouse (D-R.I.) introduced a bill that would give courts the authority to establish such programs, but would not make it a requirement to do so.

The mere act of sitting the home owner down with someone who has the authority to modify the mortgage or agree to another commonsense settlement often is enough to avoid a costly and painful foreclosure, Whitehouse said at a Senate Judiciary Committee hearing. It is often the first time the home owner gets that chance.

About 20 states already have some type of foreclosure mediation program for borrowers and lenders in reaching a settlement. Three states--New York, Connecticut, and Florida--make mediation mandatory.

Source: “Senate Democrats Back Bankruptcy Mediation for Homeowners,” Dow Jones International News (Feb. 1, 2011) (log in required)