The news is inundated with talk of Federal bailouts of the housing market and reworking mortgages, but one of the real impediments is the second mortgage. You remember them, they are the 20 of the infamous 80–20 loans that were the rage a few years ago.

Well, the second mortgage holders have a stake in the homes that are now underwater, and they are trying to protect their assets. And you know what, I do not blame them.

But even when the second mortgage holder wants to deal, their offices are overworked and the time drain is being a huge hindrance to getting mortgages reworked. Fannie Mae and Freddie Mac have both been tasked with implementing Obama’s housing plan, but the banks that are holding the ND Mortgages have a seat at the table, and could slow down the process.

The law of unintended consequences strikes again.

Those relatively modest investments, or second liens, allow lenders to veto the refinancing plan and they might do so since those small stakes add up to big dollars.

Bank of America held $148 billion in second liens at the end of last year, while JPMorgan Chase held $131.4 billion and Wells Fargo & Co. held $129.9 billion, according to Inside Mortgage Finance.

Since Fannie Mae and Freddie Mac were effectively nationalized in September, the government has used the mortgage-finance companies to try and alleviate the housing crisis. Private banks, however, are more difficult to control.

Last week, the Treasury Department hosted a meeting of large mortgage servicers to discuss the question of second liens and the broader housing rescue. Reuters.

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2. Federal Reserve Initiates 9.9 Billion Dollar Loan Modification Plan
3. Mortgage Bankers Association Propose Dismantling of Freddie, Fannie
4. Fannie and Freddie Fail To Meet Low Income Lending Goals
5. Freddie, Fannie Give Christmas Present – No Foreclosures Till New Year