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Why Servicers foreclose when they should modify and other puzzles of the servicer behavior: Servicer Compensation and its consequences paints a picture of how the current mortgage servicing industry has little to no incentive to work with borrowers.
One commonsense solution to the foreclosure crisis would seem to be offering borrowers loan modifications. But as countless borrowers continue to point out -all they continue to get is a loan modification run-around that further ruins their credit and pushes them into unfair or illegal foreclosures.
The financial industry has responded to media questions as to why borrowers complain of mortgage servicers losing documents and slow -to no- responses on their loan applications indicating the problem is a result of too many applications for their staff to handle the load.
But this report takes us down a different path. Turns out there may be a good reason borrowers are getting the run-around pointing out that servicers may have a reason not want to help their customers modify their loan at all; "Even if the investor takes a hit on the post-foreclosure fire sale, the servicers have stopped its bleeding and recovered any fees, costs, and advances...".
According to this report, servicers unlike investors or homeowners, do not generally lose money on a foreclosure. In fact, loan modifications can be costly to the mortgage servicers;
"A servicer deciding between a foreclosure and a loan modification faces the prospect of near certain loss if the loan is modified and no penalty, but potential profit, if the home is foreclosed." And it turns out -the quicker the foreclosure -the more money they could potentially make.
"Servicing companies get repaid all advances when a foreclosure is concluded. They can also recognize as revenue on their books, after foreclosure, all previously unpaid charges, such as late fees, and collect the costs of those unpaid charges from the foreclosure. By moving to foreclose quickly and to sell the properties after foreclosures it can actually help servicers offset the costs of interest advances..."
Read and download this 60 page in-depth report on the mortgage servicing industry -and it may provide the answer that many homeowners have been repeatedly asking; "Why won't my moretgage servicing company work with me?"
The truth is, as things stand now, unless legislative regulatory actions are taken and homeowner complaints are taken seriously - the economy will continue spiral downward as homeowners continue to lose their homes.
NCLC Report on Mortgage Servicers -
Also, see a few earlier blogs; Mortgage Servicing Industry Subject of AP investigation
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