, the White House’s $75 billion mortgage modification program, says it will prevent 3 to 4 million Americans from losing their homes.
A new study puts more weight behind the idea that a contributing factor to the crisis is also what’s holding back the solution: mortgage-backed securities.
Investigative journalism shop ProPublica and NPR’s Marketplace explain that modifying a mortgage is especially difficult when there are several layers of ownership, including agreements with investors who bar modifications.
“For two years, the Harrises have been trying to get Wells Fargo to modify their mortgage to something they can afford. But they face one big catch: Though Wells Fargo services their mortgage and is participating in the federal modification program, it doesn’t actually own their loan. And the investors that do own the loan, Wells Fargo told the Harrises, won’t allow the modification.
Like one in eight homeowners, the Harrises’ loan is part of a mortgage-backed security, a bundle of loans packaged together and sold off to investors. Ambiguous rules and the dispersed web of interests involved in securitized mortgages have created little accountability, leaving homeowners trapped. For homeowners with securitized mortgages, once they’re told an investor says no, there is little recourse.”
That means the group most likely to need help and benefit from Washington’s modification program — subprime borrowers — are also the most likely to have their mortgage securitized and owned by an investor that won’t let them. Sorry!
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