Specifically, he and other top House Democrats are “outraged” that some hedge funds are telling mortgage service companies NOT to modify distressed mortgages with the help of the government program Frank helped craft.
The New York Times reports that at least two hedge funds told servicers they might take action against them if the servicers participated in the government program to help homeowners avoid foreclosure. The program, which became law in July, just took effect at the beginning of October.
Frank (D-Mass.) and four other Democratic members of his Financial Services Committee wrote an angry letter to the CEO of the hedge fund companies named in the article, Braddock Financial Corporation and Greenwich Financial Services.
The lawmakers wrote that they “strongly urge” the companies to reverse their position on the modification issue and informed each CEO that they’re scheduling a Nov. 12 hearing at which he will be asked to testify. They also threatened to “pursue futher steps” if he chose not to voluntarily comply with this request.
Perhaps the scariest threat for the wider financial services industry came in the press release issued by Frank’s office. The lawmakers noted that many in the industry objected to Democratic proposals to allow bankruptcy judges to modify mortgage terms as a way to prevent foreclosures. Industry lobbyists unleashed an all-out blitz against the measure, coordinating its demise several times.
Well, they may not be done fighting.
“The argument in the financial community has been not only would this be damaging, but that it would not be necessary to achieve the economically desirable result of reduced foreclosures. But the decision of these two companies actively to oppose our efforts to achieve voluntary compliance quickly undercut that argument, and people in the financial community should not be surprised if this sort of blatant refusal to show any cooperation whatsoever with our efforts leads to an increased demand for much tougher legislation,” the lawmakers said in the release.
And with Democrats expected to gain seats in both chambers, the industry already expects a much tougher time defending against the bankruptcy change next year. An Obama administration would further lower their chances of success, too, since Barack Obama strongly supports changing the bankruptcy law to help homeowners this way.
Full release and copy of the letter after the jump.
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