An article in today's Wall Street Journal reports that, in an attempt to win voters in Ohio, is spouting future policy which would include preventing or delaying foreclosures and freezing the interest rates of adjustable-rate mortgages. This played well with Mrs. Clinton's working class audience, but is it legal to alter the terms of mortgages by presidential or even congressional fiat?
The average person must be thinking: Banks are regulated by the Fed and are influenced by the Treasury, force policy upon the banks. The problem is that, in moist cases, the banks are not the lender of record, they are merely the servicers. The lenders are investors who own mortgage-backed securities. In order to change the terms of mortgages, investors need to approve. Binds are legally-binding agreements. Wouldn't it be to investors advantage to permit changes which would avert defaults? Maybe, but it is their decisions to make.
Think that most of the investors are independently wealthy? Guess again. Many MBS investors are surprisingly middle class. In fact, many funds found in 401Ks own MBS. How would you like the government changing the terms of your investments?
The bottom line is that all the talk of changing mortgage terms for borrowers who made poor decisions is a load of election year crap. The only mortgages which may be changed are ones where fraud can be proved and then the loans in question will probably be refinanced at the expense of the original lender or mortgage broker with investors receiving their principal.
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