DJ US Reps Send Scathing Letter To Hedge Funds, Call Hearing
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By Jessica Holzer
Of DOW JONES NEWSWIRES .
WASHINGTON (Dow Jones)--Six U.S. House lawmakers sent letters to two hedge funds lambasting them for warning mortgage servicers against participating in government programs to modify delinquent loans.
The lawmakers, who included Financial Services Chairman Barney Frank, D-Mass. and five other members of his committee, said they were "outraged" by a New York Times report describing efforts by Greenwich Financial Services and Braddock Financial Corporation to steer mortgage servicers away from such programs.
According to the report, the hedge funds sent letters to banks and other mortgage servicers threatening to sue them if they participated in federal programs that renegotiated loans in a way that triggered losses for investors. Both funds have holdings of mortgage-backed securities that could be damaged by such loan modification.
In a statement, the lawmakers called the funds' reported actions "irresponsible, antisocial behavior" that had prompted them to set a Nov. 12 hearing on hedge fund compliance with government efforts to prevent foreclosures.
In scathing letters to the hedge funds, the lawmakers sent a clear warning for them to reverse course.
"For the hedge fund industry, which has flourished so much in the past decade, to take steps so actively in opposition to what is currently in the national economic interest is deeply troubling and will clearly have serious implications for the rules by which we operate in the future if this posture of obstruction is maintained," they wrote.
One of the hedge funds reportedly singled out the recently-launched Hope for Homeowners program in his letter to banks as having potential to cause harm to investors. The program, which was passed into law in July, is Frank's brainchild.
It aims to allow strapped homeowners to refinance into more stable loans backed by the government - but only after mortgage servicers write them down to make them substantially more affordable.
The lawmakers invited the two hedge funds to attend the hearing. In a separate letter, they also asked the industry's trade group, the Managed Funds Association, to attend the hearing and to report on other hedge funds who were engaged in similar efforts.
"If we are not able to get voluntary attendance, then we will pursue steps to compel them," the lawmaker
.
By Jessica Holzer
Of DOW JONES NEWSWIRES .
WASHINGTON (Dow Jones)--Six U.S. House lawmakers sent letters to two hedge funds lambasting them for warning mortgage servicers against participating in government programs to modify delinquent loans.
The lawmakers, who included Financial Services Chairman Barney Frank, D-Mass. and five other members of his committee, said they were "outraged" by a New York Times report describing efforts by Greenwich Financial Services and Braddock Financial Corporation to steer mortgage servicers away from such programs.
According to the report, the hedge funds sent letters to banks and other mortgage servicers threatening to sue them if they participated in federal programs that renegotiated loans in a way that triggered losses for investors. Both funds have holdings of mortgage-backed securities that could be damaged by such loan modification.
In a statement, the lawmakers called the funds' reported actions "irresponsible, antisocial behavior" that had prompted them to set a Nov. 12 hearing on hedge fund compliance with government efforts to prevent foreclosures.
In scathing letters to the hedge funds, the lawmakers sent a clear warning for them to reverse course.
"For the hedge fund industry, which has flourished so much in the past decade, to take steps so actively in opposition to what is currently in the national economic interest is deeply troubling and will clearly have serious implications for the rules by which we operate in the future if this posture of obstruction is maintained," they wrote.
One of the hedge funds reportedly singled out the recently-launched Hope for Homeowners program in his letter to banks as having potential to cause harm to investors. The program, which was passed into law in July, is Frank's brainchild.
It aims to allow strapped homeowners to refinance into more stable loans backed by the government - but only after mortgage servicers write them down to make them substantially more affordable.
The lawmakers invited the two hedge funds to attend the hearing. In a separate letter, they also asked the industry's trade group, the Managed Funds Association, to attend the hearing and to report on other hedge funds who were engaged in similar efforts.
"If we are not able to get voluntary attendance, then we will pursue steps to compel them," the lawmaker
