“I AGREE WITH Senator Elizabeth Warren!!! HUD and FHFA are nuts to allow FHA, Fannie and Freddie to auction off their distressed loans at big discounts to private equity firms and hedge funds…
…Look, these government mortgage entities are “experts” in housing and mortgage finance and because they are all part of the government (Fannie and Freddie are still in government conservatorship), they can easily fund these distressed loans at “near-zero” interest rates, far lower than any “Wall Street speculator” can. So its dumb financially for them to sell these loans to ANYONE and realize 30% or so losses today, especially when housing prices are stable and rising. That’s what should matter, because taxpayers absorb any losses (at least they could). (If they need help working through these distressed loans, they can hire folks on the ground that can do this as a “fee-for-service” far cheaper.) This is the same issue with big banks….selling distressed loans at big discounts is bad for bank shareholders and bad for borrowers (because the big banks who made the loan would behave more responsibly)….it’s just uneconomic window-dressing to sell in bulk. P.S. But if they ignore my comment above and continue to sell distressed loan pools into the marketplace, I absolutely DISAGREE with Senator Warren that nonprofits should get some advantage. The distressed loan pools should go to the highest bidder…period! Anything else is taking funds from the American taxpayer and that’s wrong. ”, Mike Perry, former Chairman and CEO, IndyMac Bank
SEPT. 30, 2015 MATTHEW GOLDSTEIN
September 30, 2015, Matthew Goldstein, The New York Times
Senator Elizabeth Warren to Join Call to Alter Sales of Distressed Loans
Senator Elizabeth Warren, Democrat of Massachusetts. Credit Susan Walsh/Associated Press
Housing advocates have attracted a prominent ally in their push to change the federal government’s policy of selling distressed mortgages at a discount toprivate equity firms and hedge funds.
Senator Elizabeth Warren, Democrat of Massachusetts, joined other lawmakers, advocates and community activists on Wednesday in a Washington rally to oppose the loan sale program.
The senator called on the Department of Housing and Urban Development and the Federal Housing Fianance Agency, the overseer of Freddie Mac and Fannie Mae, to make it easier for nonprofit organizations to bid for the bundles of distressed mortgages put up for auction.
The sale of distressed mortgages by HUD and the government-sponsored mortgage finance firms has been drawing growing criticism from housing advocates and lawyers in recent months. The critics are concerned that private buyers of distressed mortgages are moving too quickly to put borrowers into foreclosureinstead of modifying the loan terms as housing officials had hoped.
The investors are buying loans at a discount, often as much as 30 percent.
In a statement, Ms. Warren accused HUD and the F.H.F.A of “lining up with the Wall Street speculators.”
“Wall Street is interested in profits, not in working out a way for people to stay in their homes,” she said.
One of the biggest buyers of distressed mortgages is Lone Star Funds, a $60 billion private equity firm based in Dallas. The firm, which is also buying soured mortgages directly from banks, has raised billions of dollars from investors, including public pensions, to invest in distressed home loans.
The private equity firm’s practices in dealing with delinquent borrowers was the subject of a front-page article in The New York Times this week.
The housing advocates said that in addition to the rally with elected officials, they intended to protest outside Lone Star’s offices in Washington.
HUD officials said on Wednesday that they had a meeting with a group of community-based leaders on foreclosure issues.
“We will continue to explore all responsible options to avoid unnecessary foreclosures while keeping F.H.A. healthy and available for future generations of homeowners,” Edward L. Golding, HUD’s principal deputy assistant secretary for the office of housing, said in a statement, referring to the Federal Housing Administration.
A version of this article appears in print on October 1, 2015, on page B7 of the New York edition with the headline: Senator Joins in Protest of Distressed Loan Sales.