Missing the Mortgage-Mod Story

Still think The Huffington Post is just an aggregator of lefty opinion and tabloid fluff? Okay, it’s still that, but it’s doing real journalism, too.

You ought to check out HuffPost reporter Shahien Nasiripour, who has been doing lots of excellent work on the financial crisis recently—often surpassing the folks at the big papers. Tuesday is a good example.

The New York Times ran a B1 story on Wednesday reporting that “Banks Resist Plans to Reduce Mortgage Balances.” That was based off bank testimony on Tuesday before the House Financial Services Committee, and focused on JPMorgan Chase and Wells Fargo’s opposition, adding this:

Two other bankers who testified, from Bank of America and Citigroup, largely avoided the issue.

But that’s just wrong, according to Nasiripour. Here’s what he reported late Tuesday afternoon on an exchange with the head of Bank of America Home Loans (née Countrywide) “before a nearly-empty Congressional hearing room”:

Miller then asked a follow-up question.

“You would support a legislative change in the bankruptcy law to allow the modification of home mortgages in bankruptcy?” he asked Desoer.

“Yes,” she replied. “And I believe that there is a segment of borrowers for whom that is the appropriate alternative, subject to them having gone through qualification for HAMP, or something like that, and failed.” HAMP refers to the administration’s main foreclosure-prevention initiative, the Home Affordable Modification Program.

Cramdown is a “plan to reduce mortgage balances” if I’ve ever heard of one.

The Times article is also based almost entirely on a straw-man argument made by the banks:

“We are concerned about large-scale broad-based principal reduction programs,” Mr. Lowman, (JPMorgan’s) chief executive for home lending, testified during a hearing of the House Financial Services committee.

Mr. Lowman’s comments were briefly echoed in more restrained form by an executive from Wells Fargo. “Principal forgiveness is not an across-the-board solution,” said the executive, Mike Heid, co-president of Wells Fargo Home Mortgage.

The Washington Post used the same quote and it story was even less probing. How do we know this is a straw man? The Times tells us itself (emphasis mine):

Alan M. White, an assistant professor at Valparaiso University School of Law who has closely studied the various modification plans, said, “Chase and Wells are attacking a straw man. Nobody is arguing for across-the-board principal reduction. But I think that they feel a need to push back hard on any attempts to get them to write down the troubled second mortgages and home equity lines of credit in their portfolios.”

This story-killing quote is in the second-to-last paragraph of the piece. It should have been used to directly rebut the bankers’ spin immediately after quoting them (at least it bothered, unlike the Post).

But anyway, bankers pushing back against taking losses on loans isn’t much of a story, is it? The real story here is that Bank of America—or at least the president of its large mortgage division—now supports cramdown. That’s a big deal.

The Huffington Post, the Times, and the Post were all at the same hearing, and only the HuffPo came out with the news. And I don’t see any follow-ups today.

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Ryan Chittum is a former Wall Street Journal reporter, and deputy editor of The Audit, CJR's business section. If you see notable business journalism, give him a heads-up at rc2538@columbia.edu. Follow him on Twitter at @ryanchittum.