Most first mortgages, like Mr. Trujillo’s, are guaranteed by government-controlled mortgage giants Fannie Mae and Freddie Mac or held by other investors in mortgage securities. Second mortgages and other junior liens are typically owned by banks and credit unions. Banks are reluctant to write down second mortgages because many are still current, even if the borrowers owe more than the value of their homes. They may also be able to pursue borrowers’ assets after foreclosure."If I’m the second-lien holder, I may say, ‘You know what, I want to see if I can hold out for a better deal,’ " said Greg Hebner, president of MOS Group Inc., an Irvine, Calif., company that contacts troubled borrowers on behalf of lenders and servicers.The result is a "chicken game" between investors that leads to unnecessary foreclosures, said Jon Goodman, a real-estate lawyer and investor in Boulder, Colo…."This is an all-parties-lose scenario," said Brian Flock, a real-estate agent. "There is no housing recovery when this happens."
By Nick Timiraos, Nov. 27, 2010 WSJ

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11/27/10 wsj