Thread: Lenders Reject Obama Mortgage Plan

Lenders Reject Obama Mortgage Plan

Monday, March 16, 2009 3:24 PM

By: Julie Crawshaw

Lenders are actively resisting President Obama’s mortgage rescue plan, saying it creates a conflict of interest because many loans are serviced by big banks that also hold second mortgages.

Investors holding residential mortgage-backed securities aren’t too happy about that, either, or about the measures the plan contains that would prevent lawsuits against mortgage servicers.

"Investors are given rights through the contracts in the securities, and we expect those rights to be honored," Jeffrey Gundlach, chief investment officer of TCW Group, which manages roughly $52 billion in residential mortgage-backed securities, told The Wall Street Journal.

About half of all subprime mortgage borrowers have a second mortgage on the same property.

Government officials say they are working on a plan that would provide incentives for servicers to extinguish these second mortgages. Modifying a first mortgage without touching the second one helps the holder of the second mortgage, since it keeps the borrower paying yet doesn’t require sacrifice on the second mortgage’s terms.

About $1.9 trillion worth of mortgages outstanding as of the end of last year were packaged as securities that are not backed by the government. Thus far, servicers have been more reluctant to modify those loans than mortgages they own.

Treasury officials say they believe servicers can modify the vast majority of investor-owned loans with no problem and that the plan allows investors to participation in loan modifications and doesn't mandate that investor loans are reworked.

Experts estimate that only about half of the 9 million American homeowners targeted by the Obama plan will actually receive relief, the Mortgage Foundation reports.

http://moneynews.newsmax.com/streettalk ... 92454.html

Lenders are actively resisting President Obama’s mortgage rescue plan, saying it creates a conflict of interest because many loans are serviced by big banks that also hold second mortgages.

Sorry, quit whining. The federal government, ala the IRS trumps any debt by the mortgagee. Next come state and local governments for unpaid taxes who can lien the property, the the first mortgage holder and finally the second mortgage holder.
Sorry, but it is time to let "investors" take their lumps, not the taxpayer whose money is unknowingly swept into this mess. This is as insane as bailing out Chysler, when it is a privately owned company of Cerberus investment group, whose chief these days happens to be Baby Bush's former Treasury Secy. John Snow. There was an old joke about not eating yellow snow, but I think we have just eaten it, under the first bailout, courtesty GWB and Paulson.