- American Home Mortgage Servicing, one of the largest servicers of subprime mortgages, is urging the U.S. Treasury to organize a plan to boost principal reductions for up to one million homeowners by unlocking loans from securities.The servicer is asking for amendments to contracts that govern treatment of delinquent loans in mortgage securities. Currently, most contracts dont allow sales of loans prior to foreclosure, and in many cases dont permit a servicer to lower principal when a loan is modified.
American Home contends its proposal could provide a boost to the Obama administrations Home Affordable Modification Program, in which many borrowers failed to qualify for lower mortgage payments because a principal reduction would be needed, but not possible if a loan was tied up in a bond.
The plans authors include James Lockhart, a former top U.S. housing finance regulator and currently vice chairman at WL Ross & Co, the owner of American Home Mortgage.
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