According to te NY Post the Obama administration will let some of the country’s largest banks protect about $308 billion in profitable second mortgages on their books by laying off some of the losses incurred in modifying mortgages onto the pension funds and mutual funds that own the homes’ first mortgages.
The tidy present from Washington — which could allow the banks to avoid additional billions of dollars in write-downs — runs against normal loan-restructuring procedures, which hold that second liens get wiped out before first liens feel any pain.
The banks — Bank of America, Well Fargo, JPMorgan Chase, Citigroup and Ally — will also, under the massive $25 billion foreclosure robo-signing settlement with federal and state authorities, be allowed to get credit toward the cash they promised to spend on the mortgage-modification problem.
“Why should [the banks] share losses at all anyway?” Scott Simon, a money manager at Pimco, which owns first-lien mortgage debt, told The Post. The protection provision is contained in the foreclosure settlement, which has been agreed to but not yet made public.
An Obama administration official told Bloomberg, which first reported on the protection, that the settlement may be made public this week...
Find out more at http://www.nypost.com/p/news/business/bank_gift_nXODW8x7H5c2iQKAzISOwN
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