An article in today’s Wall Street Journal, found here reports that Congress is getting real serious about forcing banks to work with homeowners (taxpayers) in foreclosure. They are so serious, that Rep. Barney Frank wrote a letter! He wrote a letter. See apparently, banks aren’t working with homeowners and the foreclosure problem continues to slog on. Not to worry though, once the lenders get THE LETTER things are bound to get better.
- Many second liens have little value because of the plunge in home prices, Rep. Frank wrote, adding: “Yet because accounting rules allow holders of these seconds to carry the loans at artificially high values, many refuse to acknowledge the losses and write down the loans.”
- Most first-lien home loans are held by the government-controlled mortgage companies Fannie Mae and Freddie Mac or by other investors in mortgage securities. By contrast, banks hold most of the seconds and other junior-lien mortgages.
- About $1.05 trillion of junior-lien home mortgages were outstanding as of Sept. 30, according to the Federal Reserve. Of those, $766.7 billion were held by commercial banks; most of the rest were owned by savings banks and credit unions.