Repairing the shattered subprime mortgage market is shaping up to be a contentious matter as politicians begin to collide with capitalism. While lawmakers step up pressure for reforms, a complicated debate has begun about what government's proper role should be in the recovery.

The philosophical divide on this issue will grow only more intense as Congress begins considering legislation that could lead to significant changes in the industry, say sources. Reps. Brad Miller (D-N.C.) and Linda Sanchez (D-Calif.) introduced a bill in the House on Sept. 21 that would amend the bankruptcy law, allowing courts to restructure a loan by altering the interest rates and reducing the outstanding principal. The goal of the bill -- called the Emergency Home Ownership and Mortgage Equity Protection Act -- is to stave off foreclosure for borrowers who filed for Chapter 13 bankruptcy protection.

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