Mortgage Servicing Industry subject of AP Investigation

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The federal government is providing billions of dollars to help struggling homeowners avoid foreclosure.  But did you know that much of that money is actually lining the pockets of the kinds of predators who create havoc--and sometimes cause foreclosures?  They're called "mortgage servicers."  But who are they really servicing?  Not consumers. 

According to a new investigation by the Associated Press, mortgage servicers have always taken a slice off the top of every payment they handle between the home owner (the loan payer) and the bank (or whoever owns the loan).  No one's disputing their right to do this.  But mortgage servicing companies are perfectly positioned to help work with lenders/borrowers to bring homeowners better loan terms under the government's $50 billion mortgage reduction program.  And what are they doing instead?  Apparently, they are either brushing off borrowers, giving them bad advice or continuing to give them the good old run-around

In its investigation, the AP found "at least 30 servicers have been accused in lawsuits of harassing borrowers, imposing illegal fees and charging for unnecessary insurance policies." And if that isn't bad enough -nobody seems to be addressing these complaints from struggling homeowners.  

Several homeowners have fought back, in the form of lawsuits against various mortgage servicing companies.  Thanks to their deep pockets, these companies are prone to settling instead of admitting any guilt as complaints continue to be swept under the proverbial rug.

Whatever money they're paying out, (if any at all) it appears is still less than the $660 million they are eligible to receive under the terms of Obama's Home Affordable Modification Program.

Under that plan, the government partners with mortgage servicers to help re-work existing loans, but of the 4 million foreclosures the program was intended to prevent, only about 200,000 loan modifications are in the works.  If you think about it, the reluctance of mortgage servicing companies to reduce their own income makes a kind of sense.  When a loan is modified to a lower rate and a more reasonable payment structure, the mortgage servicing company makes less money.   Where's the incentive to help facilitate loan modifications between lenders and borrowers? There is none. 

The total lack of regulations and oversight in the mortgage servicing industry breeds fraud and corruption.  It seems the companies that handle our mortgage payments have in many cases single-handedly turned the American dream of homeownership into a personal nightmare for many unsuspecting homeowners. 

Since fair play, economic recovery and the greater good aren't reasons enough to deter fraud or abusive practices within the mortgage servicing industry, it's time we implement rules, regulations and oversight that will.  

Here's a link to more of the AP's findings.

Here's a link to a petition containing comments and sound reasons why all borrowers should have a right -and access to a monthly mortgage statement -something the mortgage servicers continue to deny many of their customers.



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I originally posted this over on CreditSlips the day before this report came out.

Hmmm... Try comparing this list from WSJ:

To this list from ...hmm... oh, yes the U.S. Treasury:

Servicers have now sucked up $20 Billion in TARP funds. So how's it working so far?

SPS eats $660 million in TARP and only mods 1849 of the 57,450 loans deemed eligible from their portfolio? That's $356,949.70 per loan to date.

Green Tree needed $156 Million in TARP to mod 209 of the 5228 loans they claim eligible ??? $746411.48 per loan to date

Ocwen: $659 Million - 2,517 of 55,516 deemed eligible. $261,819.63 per loan to date.

National City: $294,980,000 Million - 4 out of 37,126 deemed eligible. 73,745,000.00 per loan to date.

Wilshire Credit: $453,130,000 - 20 out of 3411 deemed eligible. $22,656,500 per loan to date.

And those are only mods that have been STARTED.

I have to stop now. I'm laughing too hard to type....

The numbers are simply disgusting, especially given the fact that more and more evidence of servicers shorting the ABX index and investing in Credit Default Swaps and Net Interest Margin Securities (NIMS). Why would REOs need private mortgage insurance when there is no mortgage to insure?

I wonder what the daily interest rate is on $295 million when you just park it somewhere and let it accumulate for a few days... weeks... months...

As I have said on numerous occasions elsewhere in the past - until the phrase "without admitting any wrongdoing" is stricken from any and all legal settlements, servicers are going to continue to do what they want because any civil "penalty" that may be assessed against them is nothing more than the cost of doing business. It's a tax write off to them.

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