House Leaders Demand Hedge Funds Drop Opposition to Foreclosure Prevention

In a letter to two hedge funds and the Managed Funds Association, House Financial Services Committee leaders, led by Chairman Barney Frank, expressed their outrage at a report that at least two hedge funds have warned companies servicing mortgages that they should not take advantage of the American Housing Rescue and Foreclosure Prevention Act. In the letter to the MFA, the House leaders asked the association to let them know if any other hedge funds are taking a similar position.

Congress passed overwhelmingly provisions providing for a reasonable modification of mortgages that clearly never should have been granted in the first place to avoid foreclosure and thus lessen the economic damage that a cascade of foreclosures has been doing to the economy, said the leaders. Congress has been criticized by some in the consumer community for not doing more to pressure institutions to avoid foreclosure while minimizing their losses.

In light of this, the House leaders were outraged to read that two hedge funds were instructing the servicers of their mortgages to defy this national program and insist on further socially and economically damaging foreclosures. The Act clearly allows for modification where such changes would involve a lesser loss than foreclosure. It is intolerable for hedge funds, which have been the beneficiary of a lack of regulation, to impede this important national policy. The letters urge the funds to reverse this policy.