Junior lenders to blame for re-defaults?

TRD New York /
Feb.February 04, 2010 04:13 PM

The culprit behind the limited success of loan modifications may have nothing to do with complex paperwork, after all. Instead, many housing experts say, second mortgages — like home equity loans and lines of credit — are largely to blame. The Wall Street Journal reported that commercial banks, savings institutions and credit unions hold $963 billion in second mortgages with $442 billion of that on the balance sheets of the nation’s four largest banks. Because second mortgages are supposed to take the first loss on a property in the event of a modification or short sale, many are essentially worthless at a time when so many American homeowners are underwater and banks are, unsurprisingly, reluctant to write them down. If second mortgages were modified, too, the threat of re-default might loom less large, said Laurie Goodman, a mortgage analyst at Amherst Securities. Second mortgages have also been slowing the success of short sales, brokers have reported, as banks holding the second lien on a property often refuse to approve the deal. [WSJ]


Related Articles

arrow_forward_ios
(Image by Wolfgang & Hite via Dezeen)

Hudson Yards megadevelopment inspires a new line of sex toys

Cammeby's International Group founder Rubin Schron and, from top: 194-05 67th Avenue, 189-15 73rd Avenue and 64-05 186th Lane (Credit: Google Maps)

Ruby Schron lands $500M refi for sprawling Queens apartment portfolio

Wendy Silverstein (Credit: Getty Images)

Wendy Silverstein, co-head of WeWork’s real-estate fund, is out

(Credit: SimsWiki, Unsplash)

Welcome to affordable San Francisco! Here is your $1,000-a-month basement “sleeping pod”

Daniel Daggers is out at Knight Frank (Credit: Getty Images)

One of the UK’s top agents marketed a mansion like a US broker. He was fired

Microsoft CEO Satya Nadella (Credit: Getty Images and Microsoft)

Microsoft’s carbon negative goals could push other tech companies to catch up

Harvey HHernandez (Credit: Airbnb)

Airbnb sues Miami partner in branded apartments concept

From left: Authentic Brands Group CEO Jamie Salter, Simon Property Group CEO David Simon, and Forever 21 CEO Do Won Chang (Credit: Getty Images)

Forever 21’s biggest landlord could become its new owner

arrow_forward_ios
Loading...