Lawmakers Debate Mortgages

November 12 2008 - It sounds simple in principle: find troubled homeowners, change their mortgages and help them keep their houses.

But behind many mortgages sits a complex chain of parties that service mortgages or invest in them amid an array of complicated legal agreements.

At a hearing of the House Financial Services Committee on Wednesday, legislators concerned about the rising tide of foreclosures encouraged the financial industry to alter the terms of more mortgages to keep people in their homes. They focused on mortgages that were sold in packages to outside investors like pension funds, hedge funds and insurance companies.

The problem is that financial executives have competing views on whether mortgages that were packaged — or securitized, in industry parlance — can be modified or not. These mortgages are no longer owned by the banks that service them; they are instead owned by numerous investors, and some in the industry think the investors might sue banks that modify mortgages.

Lawmakers Debate Loan Modification
by LOUISE STORY | New York Times