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first?
Fannie Mae loss of 2.19 billion, plans to cut dividend and raise $6 billion.
There will be a massive equity rally on the back of this.
Open letter to Barney Frank
Varones, I like the way you think.
Ah, good ol' Barney issuing threats from his perch of unaccountability. He's a crook of the highest order who ought to be sent to prison - though he might enjoy that.
Don't feed the trolls.
I guess 'doing more to avert foreclosures' sounds better than 'doing more to let deadbeats keep the houses they aren't paying for', or something like that.
Moin from Germany,
more comedy from Phony Mae...
Fannie Mae's federal regulator said on Tuesday it will reduce the company's capital-surplus requirement to 15% from 20% when Fannie Mae completes a new capital-raising plan
On top of this Fannie is hinting that another 5 percentage point reduction to 10% will be in place in September 2008....
Party on....
How does renegotiation of a mortgage's terms cross the securitization barrier? Magic? Slight of hand?
The new industry guidelines, if adopted, wouldn't be binding and couldn't be enforced by the government. But, if effective, they could help forestall aggressive action from congressional Democrats, who have lashed out at loan servicers for acting too slowly and threatened to push tougher oversight of the banking industry if results don't improve.
i'm not sure i've ever seen such an open partisian snark.
i'm not sure i've ever seen such an open partisian snark.
You must not read the WSJ much.
You must not read the WSJ much.
no ways, i get filtering from the best blog in biz.
How does renegotiation of a mortgage's terms cross the securitization barrier? Magic? Slight of hand?
As far as I'm concerned, that particular issue is dead.
It has been clear to everyone paying attention for some time now that security servicers have full rights to modify loans to mitigate loss to the deal. There are probably about two weirdo deals with badly-written docs that don't allow any kind of loss mit, but who cares? They're just going to lose their shirts in FCs unless they amend their PSAs.
The issue is that there is no way to do loss-mit mods for securities without doing it case-by-case. The whole goddam idea of "loss mitigation" is "case by case."
It isn't going to help anybody to go back to debates we had last summer about that subject.
We have to talk about second liens.
"It isn't going to help anybody to go back to debates we had last summer about that subject.
We have to talk about second liens."
You truly missed a calling as a great middle school teacher
You truly missed a calling as a great middle school teacher
I have recurring nightmares in which that is, in fact, the the only job I could get.
No thanks, I'll stick to blogging.
Al Gore says that second liens are an inconvenient truth.
Tanta,
The implication that Second-Lien servcies don't have loss-mit folks is that these were specialist whose line of business was second-liens (not diversified)...we're these heavily securitized and no longer on their books as well? or are we about to have a wave of second-lien lenders go under...? both?
It seems to me that this would be a great time for a company or two that's a big holder of second liens to launch a "charm offensive".
You know, do something like Buffett did in mid-March with his "generous" proposal to buy the reinsurers' muni businesses ... hold a press conference, appear on CNBC, make a big splashy proposal to immediately write down 50% of the principal balance of every "in distress" second lien in return for a Treasury guarantee on the remainder.
Or something similarly outrageous. Something that would make absolutely no economic sense to the 2% of people who understand the business (since a lot of these "in distress" loans are worth, to two decimal places, zero - and will continue to be, no matter what the outcome of the first liens) but that would prove irresistibly catchy, light the ol' populist spark, and have the phones in Washington ringing off the hook with calls of support from Joe Middle Class Constituent.
I mean, what other options do these guys have at this point? They're really between a rock and a hard place.
"One possible industry "best practice" would have lenders acknowledge..."
Man, these guys are behind the times. That's now "Leading Practices". If I used "Best Practices", I'd have a lower bill rate.
The MBA has to know about the second liens. Right? And that given the lack of acknowledgment about their (seconds') position, any posturing by whomever is just so much blather.
Does it have to come from an ignorant peon that the only way to unclog this mess is to share the losses equally (I think "pro rata" is the term I'm looking for,) across the board?
Lama,
Try "Best of Breed", that'll get your bill-rate back up.
Also, "Baked in the Box".
Socialization here we come. If your smart and you can be responsible and save, then you will be punished. I wonder if the next generation of home buyers will see whats going on and all default at the same time. After all, the system seems very easy to manipulate.
You truly missed a calling as a great middle school teacher
that would be something. the students would have a swear jar for the teacher!
I'm a little skeptical of the "socialization" here-we-come-crowd...It's not socializing the losses, it's targeting the losses to the least powerful constituency. Very little socialization, very much more creamy fudge with peanuts...yummy.
tanta, thank you for pointing out how useless the latest rash of "principal forgiveness" bailout plans are.
You should point that out in the lead-in...
"Stop!" or I'll say "Stop!" again...
Does anyone have data on the % of juniors that are with a subsidiary of the primary mortgage holder? And of those, the % that were 'piggyback' loans?
I have a feeling that the majority of the problem loans (80/20 stacked bullcrap), it's just a matter of getting the right hand to communicate with the left.
Not alot of love lost between the Shnapster and junior lien piggybacks, but if them getting their heads out of their siloed arses would save a couple 'preventable foreclosures', more power to them.
Does anyone have data on the % of juniors that are with a subsidiary of the primary mortgage holder? And of those, the % that were 'piggyback' loans?
You mean does anyone have any statistics on how many lenders went to all the trouble to write two separate loans just so their exposure could be 100%, because they own both liens?
If anyone does, please don't share it with me.
I suspect that a fair number are serviced by the same servicer, but owned, in essence, by the same investor?
"I suspect that a fair number are serviced by the same servicer, but owned, in essence, by the same investor?"
If the same entity services both loans, but sold both, does the servicer have fiduciary responsibility to both investors?
and if the mortgages can be written down, will they still be low enough to be afforable?
bottom line: prices are too high and/or wages are too low
does the servicer have fiduciary responsibility to both investors?
Yup.
That's the thing. There would be two different servicing agreements in place. And two different servicing fees. And two different sets of instructions regarding how much money the investor is willing to lose in "loss mit" efforts.
Let's take the example of a $200K first and a $50K second. The total indebtedness has to get written down to $190K to make it work for the borrower.
The servicer can't just say, well, the easiest thing to do is write off the $50K second and reduce the first lien by $10K. That's loss mitigation for the first but not the second. The second lien investor will, rationally, say no, just foreclose, unless you're willing to share the loss with me. And the first lien investor will say something like, hey, you're supposed to be the first loss position. Deal with it.
And so nothing happens, because nobody wants to give in.
It's even worse if it's two different servicers, because the servicer of the second lien doesn't want to spend all the time and effort to process and analyze the "borrower" redundantly with the first lien servicer, only to discover that its only choice is total loss plus expenses.
Tanta, is there any kind of feasibility to a previous commenter's suggestion that the first- and second-lien holders work out some kind of loss-sharing deal that makes workouts possible? Or is that fantasy?
A year ago, we had HOPE, now we have HOP, sometime in the future look for the "HO, NOW" program... I guess that's what Paulsen/Banks will say to Bernanke... "HO, NOW!" and the bailout rolls on!
"does the servicer have fiduciary responsibility to both investors?
Yup."
That's a pretty hideous conflict of interest, isn't it? If so, would there be formal waivers of conflict in place, or is this one more thing that nobody could have foreseen?
At some point, don't the lenders manage to get their heads around the fact that THEY are the ones ultimately being rescued when the bleeding stops and the wave of foreclosures is contained?
And so nothing happens, because nobody wants to give in.
Well put. That's why I saw some merit in that OTS idea with the negative equity certificates. Whatever happened to that, anyway?
Can the Feds write a law requiring 2nd lien holders to accede to a loan mit within certain parameters? (for example under Frank/Dodd) Or is that governed by state law? That might be the only way out given the scope of the problem.
RE chart porn:
Real Estate Market Reports - Zillow Local Info
oops ...sorry...wrong thread
Tanta, is there any kind of feasibility to a previous commenter's suggestion that the first- and second-lien holders work out some kind of loss-sharing deal that makes workouts possible? Or is that fantasy?
The trouble is convincing the first lien lenders that they should share any loss of the second lien lender.
I mean, go back to the whole idea of writing these loans in the first place: the first lien lender isn't supposed to take any loss at all until the second lien is a complete loss. That's how it would work in a foreclosure.
So there's no way that a "loss mit" model a first lien servicer is using is going to do anything but assume 100% loss to the junior liens. You can't calculate "least loss" of FC versus workout unless the FC modeling assumes wiping out the second.
You can imagine some situations in which "least loss" to the first lien lender would be foreclosure, if in a workout it had to take part of the second lien lender's loss.
At some level I can see the first lien lender's position here: the second lien lender volunteered originally to be the first loss, but now doesn't want to.
The second lien lender's position is it volunteered to risk getting wiped out in a foreclosure, but it didn't volunteer to get more than wiped out. At the very least the first lien holders should be compensating the second lienholders for any expenses accrued in the workout process.
This is why principal reduction mods are such an evil can of worms. And, by the way, why Fannie and Freddie are insisting that those are case-by-case only and nothing they're going to agree to do "across the board."
Boy, when I was young, I thought giving a 2nd mortgage was a high-risk strategy, an admission of "if my cash flow goes South, I lose the house." Speculators, if you will. Now people want to talk about fixing problems in situations with twice the bureaucracy and (usually) two parties with no equity left?
The depth of the problem is evidenced by some of the ideas in the comments section. "Can't first and second lienholders work out a loss-sharing deal?" Sure, but if there's N firsts and M seconds, that's NxM deals. Could cause a lawyer shortage. "Can't the gubmint legislate automatic cramdowns for seconds?" Sure, but the interest rate on seconds will shoot up to credit card rates for at least a few years.
Am I missing something? This conversation seems like the economist's classic "assume a can opener" gambit. Just because the current situation is well-nigh intolerable doesn't mean there's a tractable solution.
It seems to me the second lien should take an 80% hit, and the first lien whatever they decide or "negotiate" with the borrower.
The only solution is to give the 2nd lien holder a crumb, so they get out of the way.
Or so it seems to this ignoramus.
If one was William Smith at Berkeley, computing the closed form solution to the stochastic economic matrix, then one might say:
"There is a Jensen's inequality that continues to keep the secondary lien holds in aggregation. These holders see a better advantage to holding the current levels of home refinance aggregation."
The second level lien holders will not break ranks until the potential losses exceed the Jensen energy of aggregation, a measure we have not yet invented. But when that level of volatility is reached, then the secondary holders will "flock", "stampede" toward the new solution, which is, presumedly, the combining of first and second loans to remove the extra level of aggregation.
Ralph says:
Am I missing something? This conversation seems like the economist's classic "assume a can opener" gambit. Just because the current situation is well-nigh intolerable doesn't mean there's a tractable solution.
Well-said. If we call something a problem, we're saying there should be a solution. But a tsunami is not a problem, it's an event or a crisis or a situation. We are at the point where the housing downturn isn't a problem--it's a catastrophe that has already happened and is continuing to happen.
At some point, don't the lenders need to stop focusing on their loss percentage on this loan or that loan, and recognize that it's in their own best interests to help stop the chain reaction of foreclosures and continuing declines in prices that touch off more foreclosures? Doing that is complicated and hard, sure. Insolvency will be even more complicated and hard for these lenders, and a lot of other people.
Sure, but the interest rate on seconds will shoot up to credit card rates for at least a few years.
Yeah, well, they should have been there in the first place.
If you will remember, the whole piggyback thing got "sold" to people as cheaper than mortgage insurance on a high-LTV single lien deal. Part of "cheaper" is the tax writeoff on interest cost but not (at the time) on MI premiums, so it was cheaper to (some) borrowers. But a lot of it was just that second lien lenders underpriced the MIs.
Well, ask the MIs these days if they're sorry that they didn't reduce their premiums to compete with the piggybacks.
The other reason why second lien rates were so low is that servicers didn't all demand 250 bps servicing fees on them (which is what it would take to make the income off a second lien equivalent to the 50bps servicing you get on a subprime first lien, given average loan balances). That's a big reason why second lien servicers don't want to spend all this time and money on loss mit: you can't make it just as expensive to service second liens if they don't produce the same revenue.
If we had truly priced subordinate liens at their actual risk several years ago, a lot of people would never have gotten into these idiotic loans to start with, because mortgage insurance would have been cheaper.
jus me - giving the 2nd lienholder a crumb is about the only cooperation that happens in practice. It only occurs in a scenario where a borrower is willing to do a D-I-L (ahem, a deed-in-lieu), and the second lienholder is in a easily identifiable zero-equity position, and has skilled loss-mit staff, and there are no other liens or tax issues.
It doesn't happen a lot.
If one was the other William Smith one might conclude:
Securitization: old and busted.
Portfolio Lending: the new hotness.
2nd liens should die a quick and painful death on all these loans. Someone's gotta pay and the piggy backers seem like a good candidate.
OK - I know - the reality is that no one will take the hit until foreclosure so all these threats from the politicians about force modifications are smoke screen. LEt's stop pretending we can make it go away and just take the medicine.
Schnaps-
Thanks
second lienholder is in a easily identifiable zero-equity position Couldn't this be identified using online appraisal (zillow-like)
has skilled loss-mit staff with a washington-meeting consensus, it seems that the size and skill of the staff can go down
there are no other liens or tax issues gulp, I guess this does take staff with skill to pin down. But perhaps the job could be pinned on the 1st lienholder, since they have the most at stake?
I actually think the washington-meeting could accomplish something, assuming the problem is what-to-do-about-second liens. As I understand it, from Tanta remarks, a major issue is the 2nd lienholders have to commit resources to do a workout, but have nothing to gain. THAT PART should be automated/streamilined, so the 2nd lienholder commits minimal resources, and gets a guaranteed, small payoff.
For a zero-equity second lien position, it would be efficient to determine ONCE whether the payoff is 10% or 20% or 30%, or on what condition it varies (say 30% if barely below 0 equity, no other liens, or 10% if far below 0 equity, lotsa other liens).
Superficially, it seems that guidelines covering most cases could be written in one big washington-meeting-negotiation, instead of 5 million negotiations covering 5 million homes....
(ducks)
Superficially, it seems that guidelines covering most cases could be written in one big washington-meeting-negotiation
Yes, and then we'll take a break to celebrate the next Winter Olympics in Egypt. How long to you think they'll be arguing about it? My guess is forever,...
(gooses)
The 'job' is pinned on the 1st lienholder. They have to prepare and lay out the whole case to Mr. Segundo
To convince him, essentially: "your boy's got no equity [don't take my word for it - look at this here BPO/AVM!]. So, since J6P doesn't have enough equity to make me whole (let alone you!), and now he lost his job as a cobbler thanks to those effin' Chinese, he's turning in the keys."
"So here's teh dealio, Segundo -you can either take this $2000 crumb I'm offering today to get your lien outta my way and go about your biznitch, or process a bunch of paperwork over the next 3-6 months just to see your lien foreclosed out anyway and get nothing in the process. Whaddya say?"
So, Mr. Segundo McLossMitD00d, Jr. says "Sounds like a great offer, except that my PSA won't let me do that. If it makes you feel any better, I think the investors on the ABS security that this loan is in are a bunch of effin' Chinese."
How long to you think they'll be arguing about it? My guess is forever
If both 1st lienholders & 2nd lienholders need an agreement to minimize billion$ in losses, resolution is possible.
If they meet to make politicians look like they are "doing something," then there will be no resolution.
In late 2006 and early 2007 I can remember seeing a lot of epds on 2nd liens where the first remained current. After talking with people at other lenders I got the impression that this wasn't an anamoly. It got to the point that I was convinced that brokers/LOs were coaching their customers not to worry about the 2nd liens since a default on the 2nd wouldn't result in foreclosure. My guess is the 2nd lien debt is so devalued that the 2nd lien lenders can't negotiate right now because they can't afford to write the debt down.
Tanta
amazingly it appears country wide is still up to their old shenanigans.
so like others here i am skeptical about any notion those concerned will voluntarily adopt "best Practices"
just listen to the story of countrywide trying to get this woman who is an economist and business woman to go for a liar loan.
the NPR intervie was aired this morning and her account is detailed and credible!!!
Woman: Countrywide Proposed Fibbing to Get Loan : NPR
Shnaps - thanks again
Mr. Segundo McLossMitD00d, Jr. says "Sounds like a great offer, except that my PSA won't let me do that.
That's what I would have thought, but what about Tanta @ 8:39 ?
It has been clear to everyone paying attention for some time now that security servicers have full rights to modify loans to mitigate loss to the deal.
So I am puzzled.
In late 2006 and early 2007 I can remember seeing a lot of epds on 2nd liens where the first remained current.
That's just another reason these things have to be processed and approved case-by-case.
No sane first lien lender would do a principal reduction mod for a borrower who had already did his own "principal reduction" by borrowing 100% of the sales price and then making payments only on 80% of the debt. You cannot take the threat of foreclosure away from these people. Not if you want to ever get a payment out of them.
i assume the appraiser will be chosen by the 1st lienholder.
i further assume the 2nd is good with that proposition.
jus me: the key phrase is "to mitigate loss."
If the servicer of the second lien in Shnaps's example passed the whole $2000 to the investor (investor loses $48K principal on a $50K loan) and the servicer eats its own expenses, then that would be "less loss" to the second lien security than a foreclosure, in which the investor would lose the whole $50K.
But those PSAs probably say the servicer can recover expenses. So if the servicer keeps the $2000, it isn't a "mitigated loss" to the security. It'd probably take the servicer keeping $1000 and the investor getting $1000. Which may not be enough to get them willing to meet some five-day turnaround time.
Thing is, Shnaps is talking about a deed-in-lieu scenario (the borrower is "turning in the keys"). Not a modification.
In the modification scenario, the first lien lender is going to continue to get payments. This makes the second lien lender interested in also continuing to get payments.
i further assume the 2nd is good with that proposition.
The second lienholder is getting what it pays for in that case. Nothing stops the second lienholder from paying for its own appraisal . . .
Tanta,
Youre a gem. Thanks for all of your efforts.
There is a recurring theme in the preponderance of articles that you post: poor, pitiful borrowers who cant pay their mortgage due to extenuating circumstances. Who later in the article turn out to have either a) bought a property they cannot afford under any reasonable circumstances or b) bought with the expectation that they would sell in 2 years or c) refinanced / HELOCed the property to, pay a few bills and make a few repairs or d) some or all of the above.
The reason we never hear about the 2nd lien or the HELOC is that the government institutions are looking at the problem through the Its a Wonderful Life (IAWL) lens: someone bought 7 (or 10 or 15) years ago, put down a substantial down payment, dutifully paid the mortgage, and now due to lost job/divorced/death/illness has fallen behind and needs some breathing room. By looking at the problem through the IAWL lens, government never sees past the 1st lien and the innocent mortgagee.
Its convenient for everyone involved to go alone with the IAWL view; government can threaten the mortgagors to not take away the family house, be more responsive, work with mortgagees, etc. But the IAWL view isnt reality; the money has been borrowed and spent (frequently in the all too familiar lather, rinse, repeat cycle). The borrowers cant pay it back based on cash flow and liquidating the underlying asset will not settle the debt (or all too frequently, debts).
Ultimately, what the entire issue comes down to is this: who gets the loss? The borrower, through FC, the lender(s) either through FC, principal write down, interest rate reduction, or the government? But in any scenario, the proceeds of the loan have gone to heaven.
Unfortunately, it looks as if some sort of principal reduction is going to be imposed from above rather than letting the market work out the value of these properties. As always the devil is in the details. Here's a couple of issues that might be worth considering.
1. How do appraisers value properties when banks are cutting deals that essentially revalue the property. Since this won't be public information and is probably not in the best interest of the lender or borrower to have it be public information, then a serious issue of valuation arises.
2. The long term solution is to work off the inventory of houses through new purchasers. This will happen as affordability improves, and there is at least anecdotal evidence that's happening. To what extent will principal reductions impede the process of increasing affordability.
As an investor I recently saw the following occur on an 80/20 piggyback situation where both loans are in the same securitization: the 20% second lien was written off (charged off) and the servicer modified the senior lien by adding the delinquent balance back to principal and reducing the interest rate. So now the borrower has just a 1st lien for $400,000 at a reduced interest rate on a CA home that was appraised for $415,000. The $90,000 second lien was written off as bad debt (ding to credit I guess). So this is basically a principal reduction by the lender. It is easier to do when the same lender is on both loans and they are the same investor. So now, just suppose the borrower goes and sells the house for $415,000 or more... does any profit go back to the lender that reduced the principal by writing off the second lien? Or does the borrower who overextended themselves by buying a $500,000 CA property in 2005 with an 80/20 ARM get to keep the change?
Possibly only because I'm naive, there may be a way ...
Let's assume housing prices sink enough and there's a home owner with 2 loans going into default. The second lien holder for this home owner faces a near certain 100% loss nothing left to lose).
The first lien holder is facing a partial loss that insurance might cover to a degree.
The first lien holder has no incentive to help out the second lien holder unless his/her own loss is somewhat alleviated thereby.
The second lien holder's best chance of highest recovery is to keep their lien intact -- except for a percentage decrease in the principal. His/her only bargaining chip is to hold up the refi for the first lien holder. He holds hostage the difference between re-fi and foreclosure for the first lien holder. But he can also make re-fi more attractive to the first lien holder by taking some principal loss from him. The old first lien holder (and his insurer) might find this attractive if it means less write-off on his/her part.
The new first lien holder might find this acceptable providing he is guaranteed first status and the new 2nd lien payments are less than the old 2nd lien payments -- so the homeowner's payments are reduced. More importantly, the old 2nd lien has to stay subordinate to the new financing.
If this kind of deal can be struct, the math is probably do-able. That is, the 2nd lien survives the re-fi and both liens give up principal. The subordinate loan gives up a slightly greater percentage of its principal due.
Tanta - thanks.
Are there statistics on the percentage of foreclosures initiated by second lien holders?
It would be very useful to look at the situation from the perspective of the second lienholder. As I understand the second lienholder's
position, it is subordinate to the first lienholder. I have no idea how the cross default provisions work. In a declining market, the economics of its security interest are deteriorating with a negative leverage, but unless it was a purchase money second, the lender has personal recourse against the borrower. Or am I wrong about that?
If that's the case, it seems to me the second lienholders ought to be intransigient, not accomodative, and begin looking at their alternatives in terms of personal remedies against defaulting borrowers.
There just might be a business opportunity in buying up underwater paper and pursuing the borrowers. Shylock Partners, LLC, anyone?
Does anyone have data on the % of juniors that are with a subsidiary of the primary mortgage holder? And of those, the % that were 'piggyback' loans?
Here is some data that might give you insight into a single lender, circa Nov. 2007. This is the breakdown of the Wells Fargo $83.4 billion National Home Equity Group portfolio that I got from the 8-K that Wells filed.
$83.4 billion WF National Home Equity Group portfolio =
$11.9 billion liquidating portfolio ($1 bil to go bad in 2008-2009) +
$70.2 billion WF retail +
$ 2.7 billion Other (not bad enough for liquidating, but mortgage brokers were involved)
$70.2 billion WF retail =
$11.5 billion retail first liens +
$58.7 billion retail second liens
$58.7 billion WF retail second liens =
$36.8 billion 2nd backed by a WF first mortgage (No CLTV specified, uh-oh?! Dont worry, we own the whole enchilada.) +
$21.9 billion 2nd (other bank on the first mortgage)
$21.9 billion WF retail 2nd (other bank on the first mortgage) =
$17.5 billon 2nds with less than 90% CLTV +
$ 4.3 billon 2nds with greater than 90% CLTV (I bet some of these stinkers go bad. Geez, hope those appraisals were accurate!)
Are there statistics on the percentage of foreclosures initiated by second lien holders?
In today's environment? I'm guessing it's getting close to "zero-point-zero, Mr. Blutoski."
Even back when I did junior lien foreclosures (late 90's), IIRC it was like maybe 1 in 40, the other 39 just charged off, and the lien would sit out there, eventually forcing the issue when they wanted to sell the place. We could still pursue a garnishment or whatever, but it just wasn't worth the expense of buying out the first to foreclose from our position.
EBGuy - thanks!
75% - 25% 1st and 2nd lien holders.
Something is better than nothing for the second, and the first holders need to understand that this will be in litigation by the second holders, so no money until it's resolved. Sometimes simple is better.
As they say, get over it and move on.
[It's even worse if it's two different servicers, because the servicer of the second lien doesn't want to spend all the time and effort to process and analyze the "borrower" redundantly with the first lien servicer, only to discover that its only choice is total loss plus expenses.]
And here lies the value of third-party companies. Problem is, HOPE NOW and the HUD-approved agencies aren't willing/able to coordinate these kinds of things.
This kind of thing can be done, I do it regularly... but someone's gotta get paid to do it, because the servicers don't give a crap about doing anything but getting the files off their desks. I understand this.
Furthermore, if left to their own devices, most servicers can scarcely pull off a successful loss mitigation effort on ONE loan, let alone juggling two.
Oh yeah, and forget about getting two servicers to work with each other. IME, the first would rather slap together a mod on the first, ignoring the fact that the surplus doesn't fly if the second doesn't come down.
[does the servicer have fiduciary responsibility to both investors?
Yup.]
They may "have" it, but in most cases they aren't delivering it.
If you had a chance to see, up close and personal, how they're "servicing" their investors [see George Carlin for official definition of "servicing the customer"], you'd find that the only fiduciary duty they're honoring is to themselves.
The "I Love Lucy" candy factory scene is the only way to describe current ops at the major servicers. The "technique du jour" seems to be throw the borrower on a special and if they survive, hopefully we'll have the troops to do the heavy lifting when the real work has to begin.
TAT's are at an all-time high. It's gotten so long at some lenders that we have files from DECEMBER, waiting to be reviewed for a workout. The borowers are asking, "What the hell is going on?"
I wonder... do the investors know that they could be receiving payments on these loans right now?
Hmmm....