Alert August 11, 2009

FFIEC Issues Statement on Loan Modifications

The FFIEC issued a statement reminding mortgage servicers of their obligation to obtain the greatest recovery possible for a loan’s owner when considering loan modifications. The FFIEC recognizes that institutions servicing first and subordinate liens on the same mortgaged property may be faced with potential conflicts of interest. But, according to the FFIEC, a servicer’s decision “to modify the first-lien mortgage should not be influenced by the potential impact of the modification on the subordinate lien loan and vice versa. Any ownership interest in the subordinate lien cannot be a consideration.” Click here for the statement.