Banks May Reluctantly Back Bankruptcy Bill

"When you really look at it, probably not a lot is going to change," Everett says. Given today's housing environment, most banks are already modifying loans to stem the losses, she says.

"I don't see how a lender making a reasonable business decision wouldn't make the same decision that the bankruptcy court [would] on a borrower [with] a residential mortgage that went into bankruptcy," Everett says. "The economics are just not there today for foreclosures."

Richard Bove, an analyst at Ladenburg Thalmann, also questions whether the legislation is needed. The Federal Reserve's willingness to buy $3 billion to $4 billion in mortgage-backed paper a day and mortgage rates that have fallen to record lows are helping create "a mortgage refinance boom," he writes in a note.

Bove chalks up Citi's support of the legislation to the $45 billion preferred equity stake the government took in Citi late last year. The Treasury in November invested another $20 billion in the bank and guaranteed $306 billion in illiquid assets against further losses, after the stock plummeted amid a crisis of confidence. The aid came on top of a $25 billion Treasury had made through the Troubled Assets Relief Program in October.

"My view is that when the government buys $52 billion in preferreds and helps guarantee a bank against losses on approximately $300 billion in loans it is going to get something in return. It is going to get a compliant bank," he writes. "Hopefully, Citigroup is not going to drag the industry along on other bad pieces of legislation."