With government efforts aimed at stemming the housing crisis in full gear, discussions are heating up regarding the Emergency Loan Modification Act of 2008, which would allow servicers the safe harbor to perform loan modifications. However, investors are up in arms because the safe harbor provision could mean potential losses for them.

George Miller, executive director of the American Securitization Forum, said that there is a flawed premise in the Emergency Loan Modification Act that investor interests are hindering servicers from performing loan modifications. One particular provision he pointed to in the bill is that which provides for a general standard of servicing and loss mitigation. The item said that a modification can be performed if the expected recovery from the loan is greater than that which could be achieved through a foreclosure. "The ASF feels that servicers are typically obligated to do more than this," Miller said. "They are called upon to select from a reasonable range of alternatives for loss mitigation with the ultimate goal of maximizing the net present value of the property."

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