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Do Loan Servicers Really Want to Help Modify Your Mortgage Loan?

By John Rasor

Republish: EasyPublish™
Published: 04Sep2009
Word count: 431
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They say they do. The government has provided $75 billion in taxpayer money and told them to. But many of them are stalling because helping troubled homeowners is a financial conflict of interest for them.

When the "Making Home Affordable" program was announced, financially strapped homeowners expected to find some relief. And some did get relief in the form of a refinanced loan or a mortgage loan modification.

However, many others are finding that their mortgage loan servicer is putting them off.

Mortgage companies are paid to service mortgage loans and they collect a percentage of the value of the loans they service. They're paid the fee by the investor whether the homeowners make their payments or not.

Consumers who are delinquent on their loans are the least likely to find help, because mortgage loan servicers also collect fees of up to 6% of the payment amount each time a payment is late. Thus they aren't in any hurry to help get those loans current.

The consumers and the investors are the ones who suffer, while the loan servicers reap huge profits.

On the surface, the "Making Home Affordable" program seems to be an incentive for loan servicers to help consumers. They receive $1,000 at the time they modify a loan, and another $1,000 per year for the following 3 years.

However, when a home goes into foreclosure, the fees can far outweigh that paltry $4,000.

They've been collecting late fees from the consumer until the mortgage went into permanent default. Once it's in foreclosure, they begin collecting even better fees from the investors. Taking possession of a house, checking the title, arranging for maintenance, ordering appraisals, and other tasks all carry fees. Further, a mortgage servicer is free to use the suppliers of his or her choice for legal work, title reports, and insurance policies.

This work can be funneled to businesses that the loan servicer either owns or has an interest in. Once again, the profits grow.

The monthly management fees may be one reason why mortgage loan servicers reject offer so routinely, and why they often list foreclosed homes at prices higher than their real estate professionals suggest. The longer a house stays on the books the longer they collect from the investors.

So - while mortgage loan servicers are morally (and legally) obligated to do the best thing for the investors, and they claim to want to do the best thing for homeowners in trouble, they seem to be playing the "collect money game" from every angle.

When I was a kid they used to call that "Playing both sides against the middle."

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