Seconds prove a stumbling block to housing plan
Remember when the housing stimulus plan was announced and there were those ambiguous references to "second liens" in the fine print? The issue is still unresolved. From the Wall St. Journal:
The Obama administration's $75 billion effort to help troubled homeowners avoid foreclosure has hit a stumbling block: a fight over how to aid borrowers who have more than one home loan.
The Treasury Department, scrambling to address the problem, is trying to persuade lenders to forgive or greatly reduce so-called second liens. But that effort has sparked a fight between investors who own securities backed by first mortgages and banks that hold second mortgages over how losses should be shared.
A failure to resolve the impasse could blunt the impact of President Barack Obama's housing plan, which is designed to tackle one source of the financial crisis -- the spiral of foreclosures and falling home prices. About half of seriously delinquent borrowers have a second mortgage debt, according to Credit Suisse.
I wondered about this at the time because so many "creatively financed" home purchases involved seconds. As for who gets stuck with the tab, I'm hoping different rules will apply to institutional lenders and sellers who took a second to cinch the deal.
-- Lauren Beale