US securitisation: first lien “held hostage” by second lien

Author: Danielle Myles | Published: 6 Jul 2011

Securitisation participants are demanding limits be placed on the rights of second lien holders to stop them interfering in workouts.

First lien investors and servicers’ attempts at short sales and modifications are now facing stronger resistance from junior lien holders. They are blocking offers for principal forbearance or earned forgiveness in situations where defaults could be avoided.

"That materially impacts the interest of my trust, it’s held hostage by a second lien holder," said Redwood Trust managing director William Moliski speaking at the American Securitization Forum’s...