Article by: Patrick Rucker and David LawderPosted by: Kaitlin Lanier
WASHINGTON (Reuters) - The U.S. Treasury Department's effort to help 5 million homeowners win reworked mortgages, part of a plan to stabilize housing, could fall flat if Wall Street does not relax its interest in the properties.
While the initiative empowers Fannie Mae and Freddie Mac to refinance borrowers whose homes have lost value in recent years, big banks own a small stake in many of those loans and could effectively block the plan.
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.
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