If you thought all the bank bailouts were over, take a look at what is happening with lenders’ holdings of junior, or “second-lien,” mortgages.
These loans stand behind the first mortgage and, in theory, should take a loss before first mortgages in any workout aimed at keeping a borrower in a house. However, government programs aimed at making first mortgages less burdensome have left the junior loans largely unmodified, meaning in some cases the junior lender is basically getting bailed out for free.
That appears to have caused an uneven playing field. When modifying a first mortgage, the financial pain isn’t just felt by banks.
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