Big Four Urged To Write Down Seconds

House Financial Services Committee Chairman Barney Frank, D-Mass., has resumed his push for financial institutions to write down the second mortgages they hold.

In a letter to the CEOs of Bank of America, Citi, JPMorgan Chase and Wells Fargo, Frank wrote that holders of second-lien mortgages are now a principal obstacle to many loan modifications. First-lien mortgage investors have indicated a willingness to accept significant losses on their investments, seemingly paving the way for principal-reduction modifications, according to the letter, which has been published on the Wall Street Journal's Web site.

‘With the interests of homeowners and investors aligned in this way, it should follow that large numbers of principal-reduction modifications could be made relatively quickly," Frank wrote. "That is not happening."

‘The problem of second-lien mortgages standing in the way of successful principal-reduction modifications has reached a critical stage and requires immediate attention from your institutions," the letter continues, observing that many seconds have "no real economic value."

The federal Home Affordable Modification Program does include a voluntary subprogram designed to encourage second-lien modifications. So far, only Bank of America has publicly committed to the program.

‘I urge you in the strongest possible terms to take immediate steps to write down these second mortgages and allow principal-reduction modifications of the underlying first liens to take place," Frank also wrote in his letter, adding that he would work with institutions to remove legal obstacles to writing down seconds, if necessary.


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