Strapped borrowers would have to provide mortgage servicers some basic financial information before having their mortgage debts reduced by a bankruptcy judge, under an amendment to so-called "cram-down" legislation offered by its chief U.S. House sponsor.

The amendment could dampen slightly the impact of the legislation, by ensuring that fewer people qualify to have the principal balance of their mortgage loan reduced by a judge - known as a cram down.

Proponents say the bill will act like a stick, spurring mortgage servicers to modify more loans voluntarily, particularly once the newly announced Obama administration incentives for such modifications are in place.

The financial industry contends that it will raise mortgage rates for all borrowers. Current law allows mortgages backed by vacation properties to be crammed down in bankruptcy, but not primary residences.

The legislation, which could hit the floor as soon as Thursday, would also erect a safe harbor against investor lawsuits for servicers that modify loans. And it would revamp the Hope for Homeowners program, initiated last fall to allow troubled borrowers to refinance into more affordable loans backed by the government.

Allowing bankruptcy judges to cram down mortgages is by far the most controversial measure, attracting the ire of Republicans who proposed changes Wednesday to gut or sharply limit its scope.

In a bid to assuage critics, the measure's author, House Judiciary Chairman John Conyers, D-Mich., proposed tightening eligibility standards for borrowers.

Under his amendment, borrowers would have to supply servicers a written statement of current income and expenses at least 15 days prior to seeking a mortgage cram down, according to a text of the amendment.

Currently, the legislation would only require borrowers to prove they have contacted their mortgage servicer about receiving a voluntary loan modification before seeking a court-ordered modification. They would not have to provide any information, in writing or over the phone.

The Conyers amendment would also require that eligible borrowers not have a lack of good faith, meaning they don't need relief because they can meet all the payments on their debts without difficulty.

The Obama administration, which has supported the cram-down legislation as a plank of its housing plan, has proposed that borrowers prove they cooperated with requests for basic information from mortgage servicers before filing for bankruptcy.

It also said cram downs should be limited to mortgages no bigger than those that Fannie Mae (FNM) and Freddie Mac (FRE) buy or guarantee. No such restrictions are included in the House bill.

Conyers' amendment would allow mortgage investors to recoup a slightly higher share of any proceeds from the sale of a property within five years after a court-ordered modification.

It also specifies that monthly payments after a judge modifies a mortgage be in equal amounts and requires judges to follow Federal Housing Administration guidelines for appraisals.

And the amendment would direct the Government Accountability Office to conduct a study about the impact of the legislation, including on the number of loans restructured by judges.

-By Jessica Holzer, Dow Jones Newswires; 202-862-9228; jessica.holzer@dowjones.com