Obama programs hurting recovery, helping banks
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Blackrock Inc. Chairman Laurence Fink claims that Obama administration programs to help homeowners stave off foreclosure may hinder the recovery of the mortgage market while benefiting banks that own second loans on the properties. Fink said policies introduced this year to reduce foreclosures are flawed because they don’t require home-equity loans to be wiped out before the mortgage is modified. Instead, in a break with the intentions of contracts, he says the second loan’s terms may also be revised, spreading the financial loss among lenders. Fink is the highest-profile investor to call attention to potential conflicts when banks that service mortgages handle loan modifications. One concern is that many servicers, which handle billing and collection for mortgage owners, also hold home-equity loans that would lose all value in a foreclosure. JPMorgan Chase & Co, Bank of America Corp, Wells Fargo & Co and Citigroup Inc, the four largest servicers, own almost $450 billion
of home-equity loans, according to Laurie Goodman, an analyst at Amherst Securities Group in New York.
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