The Obama administration's $75 billion effort to help troubled homeowners avoid foreclosure has hit a stumbling block: a fight over how to aid borrowers who have more than one home loan.
The Treasury Department, scrambling to address the problem, is trying to persuade lenders to forgive or greatly reduce so-called second liens. But that effort has sparked a fight between investors who own securities backed by first mortgages and banks that hold second mortgages over how losses should be shared.
In other words, they're trying to figure out how to split the losses on home equity loans, not on the actual mortgage that pays for their housing. Why this is even an option is beyond me. If you have a second mortgage, and can't even pay your first mortgage, you need to find cheaper housing, simple as that. If that means defaulting or doing a BK, that's sad, but that's life. Instead, the gov't seems intent on propping up the most profligate and imprudent among us.
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