U.S. real estate rescue threatened by second liens on homes

March 23, 2009 by · Leave a Comment
Filed under: Real Estate News 

Duh, did we forget where the appreciation went while the home prices were going through the roof?  Oh yeah, the homeowners used their house like a ATM, pulling cash out to finance all kinds of other purchases.  They really need to address this issue, personally I would want to make sure the 2nd got paid off no matter what because the borrower pulled cash out with that, at least with the 1st you have the house that is the collateral for the loan.  

It will be very frustrating if we bail out all these homeowners and they got to make these choices to get extra consumption and the U.S. taxpayers has to foot the bill for that as well.  With taxes on the rise, makes me wonder why should everyone work so hard with these lessons being taught.

News:

The U.S. Treasury Department’s effort to help 5 million homeowners win reworked mortgages, part of a plan to stabilize housing, could fall flat if Wall Street does not relax its interest in the properties.

While the initiative empowers Fannie Mae and Freddie Mac to refinance borrowers whose homes have lost value in recent years, big banks own a small stake in many of those loans and could effectively block the plan.

Those relatively modest investments, or second liens, allow lenders to veto the refinancing plan and they might do so since those small stakes add up to big dollars.

Bank of America held $148 billion in second liens at the end of last year, while JPMorgan Chase held $131.4 billion and Wells Fargo & Co. held $129.9 billion, according to Inside Mortgage Finance.

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