With Few Other Takers, The Government has to Sell its Distressed Mortgages to Wall Street

Nearly a decade after the housing bubble burst, one grim legacy endures.

Far too many homeowners are still struggling to make mortgage payments, or have quit paying altogether. But one of the most robust attempts to address the overhang of delinquent loans is bumping up against an uncomfortable reality.

Since 2010, government entities like the Department for Housing and Urban Development, Fannie Mae and Freddie Mac have auctioned off thousands of delinquent mortgages. The auctions should be a win-win: they take those problem loans off the government’s books so taxpayer dollars aren’t strained. They also offer homeowners the possibility of a fresh start: investors who pay far less than the loan is worth are able to cut the borrowers a better deal than the government can.

But there’s been some pushback. Groups like the Center for Popular Democracy and progressives like Massachusetts Senator Elizabeth Warren criticized the government for enabling what they called a “land grab” by the same Wall Street investors whom many saw as responsible for faulty lending in the first place.

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With Few Other Takers, The Government has to Sell its Distressed Mortgages to Wall Street