Homeowners will pay if federal law increases bankruptcy protections, according to the Mortgage Bankers Association.

A proposed change in the bankruptcy law would allow courts to write down the value of a mortgage, should the homeowner face bankruptcy. It comes as many borrowers with poor credit are having trouble making payments now that rates on their mortgages have reset.

The MBA says the change would drive up interest rates on mortgages by 1.5 to 2.0 percentage points because lenders would face new uncertainty as to the value of homes they finance.

The costs, says MBA, would be transferred to homeowners. For example, it estimates that in New York the average mortgage payments would have been $249 higher per month if the bill had become a law in 2006.

The House Judiciary Committee passed the Emergency Home Ownership and Mortgage Equity Protection act of 2007 last month.

"Congress is, quite laudably, attempting to help consumers who face difficulties paying their mortgages," MBA Chairman-Elect David Kittle said in a release. "But this law will, ironically, create future difficulties by increasing mortgage costs."

But some say the MBA's analysis is flawed. The House bill, which passed the Judiciary Committee last month, shouldn't affect a lender's valuations of future loans, since it would apply only to subprime and nontraditional mortgages taken out between 2000 and the bill's enactment, says Ellen Harnick, Senior Policy Counsel for the Center for Responsible Lending.

Further, she says, the bill is specifically targeted at loans that would otherwise end in foreclosure. Lenders already consider the risk of foreclosure when determining rates, and the write downs will often be less costly for lenders than a foreclosed property would be. "This is just a scare tactic," she said.