Obama Mortgage Plan Lacks Safe Harbor Against Investor Suits
Mar 5th, 2009 by Vinny
This is the first article I have seen that talks about a real problem people are going to face. Many of the mortgages are owned by investors, they are not going to like the fact that their “paper” is going to be re-negotiated without their consent..
“The program does nothing to address what has been one of the biggest impediments to loan modifications during the housing crisis – the misalignment of the interests of mortgage servicers and mortgage investors in private-label securities.
Companies servicing pools of mortgages packaged as private-label securities are bound by contracts with investors in the securities. The contracts vary, but typically require servicers to act in the best interest of the investors. That is often not a simple calculation. For example, a loss modification action by a servicer could potentially benefit some investors of the pool at the expense of others.”
