Why Servicers Foreclose when they should modify loans....?

[StartingOver08]

I found a very interesting, but long, report on why your mortgage servicer would rather foreclose than modify your loan. This report is published by National Consumer Law Center and is interesting reading, especially if you are attempting the modification process.

http://www.consumerlaw.org/issues/mortgage_servicing/content/Servicer-Report1009.pdf

It confirms what we have been experiencing as homeowners (and real estate agents) that the servicers are doing whatever it takes to NOT cooperate with principal reductions or short sales, but to push consumer homeowners into short term repayment plans, forbearance agreements (but they don't call them that to our face) and foreclosures. Your comments are welcome!

[wingedwheel]

I'm interested,but the link is broken.

[StartingOver08]

oops
Try this one http://www.consumerlaw.org/issues/mo...Report1009.pdf

Or if that does not work, go directly to the site consumerlaw.org http://www.consumerlaw.org/ and look on page one for the report

[DownNotOut]

I found this quite enlightening. Our mortgage servicer filed foreclosure on us while we were in the process of sending in our modification paperwork. Their attorney told us things like, "They really don't want your house." and "They really want to work with you." I always wondered if that were really true, why they filed foreclosure knowing that we had been trying to work something out for 5 months. I guess now I know why. We submitted the paperwork AND hired a foreclosure attorney to answer the summons because I'm not so sure the mod will actually work out.

[bkresearch]

We submitted the paperwork AND hired a foreclosure attorney to answer the summons because I'm not so sure the mod will actually work out.

How much does a foreclosure attorney cost? How long do you think they can stall the foreclosure?

[justbroke]

It's all about the Benjamins.

[DownNotOut]

How much does a foreclosure attorney cost?

Our foreclosure attorney charged us $600, but there were some around here who wanted $2000 just to answer the summons!

How long do you think they can stall the foreclosure?

It all depends on how fast the courts are moving and how many foreclosures the servicer's attorney has on their plate. We were served October 16 and our attorney has given us an estimated timeline of "stalling" until around August 2010. And that's if everything progresses on time. I suppose it could be longer. I believe there are some people on this forum that have been in foreclosure for almost three years, but that's no guarantee that everyone's takes that long.

[Flamingo]

It's all about the Benjamins.

It's also about actually qualifying...with so many job losses and drops in income, many folks just do not qualify for a modification or meet other criteria necessary to qualify.

[StartingOver08]

Flamingo read the report. The system is designed that the fox is in charge of the hen house!

The servicers make more money when the borrower is in default! The serviers are the ones that the borrower must go thru to get approved for the modification. The servicers make more money when they foreclose on a property rather than modifiy a mortgage AND the servicers get paid before the investor gets paid in a foreclosure BUT not in a modification! This is a receipe for lengthly, costly, and largely unnecessary foreclosures.

I am not saying that every borrower qualifies for a modification, but if you read that report you see exactly why the servicer is paid to push thru the foreclosure process and hamper the modification process.

[DeadManCrawling]

This is a fascinating, but long read.

I point out this quote from the paper:

Late fees alone constitute a significant fraction
of many subprime servicers’ total income and
profit.115 For example, late fees and loan collection
fees made up almost 18% of Ocwen’s 2008
servicing income.116 Thus, servicers have an incentive
to push borrowers into late payments and
keep them there: if the loan pays late, the servicer
is more likely to profit than if the loan is brought
and maintained current. The very presence of
these fees may later make a modification unaffordable
to the homeowner.117

This sort of sums up the approaching disaster. Ocwen, at least in one year, made 18 PERCENT!! of its profit off of keeping homeowners delinquent or in default, or by collecting fees during foreclosure.

This atrocity is HUGE. The trend seems to be this: Neither investor or borrower has any real control. It is the servicers in between who, really, hold the cards.

For those not willing to read the whole thing here is a nutshell:

Your interest payment goes to one tier of investors.

Your principal payment goes to another tier.

Your interest while payments are "in transit" (ever wonder why it takes checks 3 weeks to clear?) goes to another.

And so on.

But the BIGGEST chunk, if your loan is in foreclosure, late, or default, goes to the SERVICER. They make a fortune if you are late on an ongoing basis. Across thousands or millions of loans, that number is gigantic.

They are intentionally doing all they can to keep you in default, lose paperwork, offer you agreements they later rescind and so on.

The longer they drag your carcass through the mud, the more money the servicer makes. Not the investors. Not you. The SERVICER.

I know many of us alreadyknew the basics, but this paper is a wealth of information on how the PSA's and mortgage backed securities really work.

And there is almost NO regulation. Not by the government anyway.

[DownNotOut]

We just found out our payoff has gone from 241K to 258k in just 6 months and we have no idea what is constituting these kinds of fees. No breakdown or any explanation. Seems IndyMac/OneWest is setting themselves up to make a pretty penny - not including the hundreds of millions of tax dollars they've already taken in bailout money. Maybe they need to make up that 525K that was just forgiven by that judge in New York?