Report; Why Mortgage Servicers Foreclose when they Should Modify

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Sign of the times - Foreclosure

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Foreclosures vs loan modifications: Which costs mortgage servicers more? That question is answered in this below eye-opening report authored by Diane E. Thompson of Counsel, at the National Consumer Law Center .

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

Stay informed of the latest news on issues surrounding mortgage servicing.  

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This is a story about the out of control greed of this industry. Don't get me wrong, the mortgage companies, investors and servicers all have the right to make money, but do they have the right to take a home from a property owner when there is a viable alternative? It seems that some profit is never enough. They have to make more and more and more. If they make $10 today - tomorrow, they have to make $20. That formula results in ever more creative thoughts by these companies as to how they can seperate the property owner from their money and then their property. In my case, a mortgage company misapplied some payments.

Was this intentional?

I didn't think so at first. But as days, months and years went buy with added fees that just balloned out of control, I can't help but think now that it was all an orchestrated plan to take as much money and then our home from us. Most people don't fight, they can get really tired, believe me, after 2 years, I was too. These companies also have deep pockets and can wait you out, all the while adding more and more unscrupulous fees to your loan. There is NO way for the average homeowner to get from under this. We had a large amount of equity in our property, so there was incentive for them to try to take our home, but equity isn't the only driving force at work with this industry.

Fortunately for us, we had the financial ability to hire an attorney, but not everyone has $5K+ for fighting these companies through the courts. It could have cost us much more too. Our case was resolved in our favor, but it took years, alot of money, the ability to deal with high levels of stress and diligence. Most people do not have the ability to hold out like we did. This industry is poised to do much harm to many, many consumers and something must be done. Right now the whole game is stacked in their favor.

There is no reason for this. These companies can serve a useful purpose and make money, but they should not be allowed to hold all the cards in this game. Consumer protections are a must at this point because this industry has shown loud and clear that if there is any way- legal or not, that they can take from you, they will. It is up to you to stop them in a court of law, if you don't they will take everything they can and then move along to the next person. Believe me, I have seen it happen. Yesterday they tried it with me, when will it be your turn to be in the grinder?

Fantastic! I just started reading this report this very morning! So far, I have read the information before in Diane E. Thompson's testimony to the Senate Banking Committee. I said that for a reason, this means that our politicians know about this situation with mortgage servicers. It remains to be seen if Congress ever does anything about it. I am skeptical since my house lost the battle and foreclosed in August 2009.

If you don't feel like reading the entire document, I will provide summaries on my blog in the coming days.

The most common mortgage modifications are listed below:

lowering the mortgage interest rate
reducing the mortgage principal balance
fixing adjustable interest rates within the mortgage
increasing the loan term throughout the mortgage
forgiveness of payment defaults and fees
or any combination of the above

Check out this public service site:

Last week, my husband and I were approved for a loan modification that has taken 7 months. We thought our foreclosure nightmare was over since we signed, notarized, and mailed the approved modification package back on time. Boy were we wrong! Our house is still being advertised online and in the newspaper for auction!

I spoke with a supervisor this morning at my mortgage company in the loss mitigation department and was told that they cannot submit a request to postpone or even stop the foreclosure. Even though we fulfilled our obligation by signing, notarizing the loan modification and mailing the certified check back on time.

He said they plan to send in a postponement to their attorney, the state and the investor ** 2 business days before the auction and at that time it still may not be approved by the state and investors. And this is not a stop foreclosure but a request to postpone.

What was the point of sending in the approved loan modification to the mortgage company if the state and the investor may not honor it?

The manager also said I was 5 months behind on my mortgage. I was 2 months and they held my partial payment for 15 days demanded two payments and mailed the Foreclosure Notice the same week. When I got the partial payment back, I mailed in payment and they did not cash the check. They will not take my payments...what am I suppose to do? Yea, it looks like I have not paid my mortgage in 5 months.
On November 3 - We could be forced to move. We have lived in this house for 13 years! We have investors driving by our house while I am outside waiting for the school bus with my kids.

We can afford the house with the new monthly payments and terms they promised.

Be proactive against these sharks in suits! They are not your friends! We have a lawyer and he is ready to push the red button if forced, we will file for bankruptcy. If you are going to go down, go down fighting!

You are right on! That is how we prevailed, and we had made the payments! They lost/misapplied/stole/whatever the payments and then added thousands on to the balance due to try and force us from our home. We fought hard, called the state Attorney General's office, hired an attorney, made videos and posted the link on any media site I could. We called everyday, sometimes 3 times a day. The stress was almost overwhelming, but it paid off in the end. The one thing that I must stress is to NOT give in and walk away. Force the mortgage company to produce the note. File in court against them, just do not give up. They definitely want people to just go away quietly. Don't do it!

I have the payments to catch up but they to take my payment they have one payment in supense because of 2 late fees out of the payment making it short. I tried to pay it but they said the computer won't take my payment. I don't know what to do we have the money for the two payments and can pay here after don't know what to do need help.

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A memoir exposing the steep price consumers pay when facing mortgage servicing errors, inaccurate credit reporting, illegal debt collection practices, identity theft and weak consumer protection laws. THE BOOK » DENISE'S STORY »