NY Times- Fees deter loan modification effort

The New York Times reports on the impact that servicing fees have on a lender's willingness to modify a mortgage or otherwise assist a homeowner facing foreclosure.

Although the White House is calling on lenders to assist borrowers,

"industry insiders and legal experts say the limited capacity of mortgage companies is not the primary factor impeding the government’s $75 billion program to prevent foreclosures. Instead, it is that many mortgage companies are reluctant to give strapped homeowners a break because the companies collect lucrative fees on delinquent loans."

What's going on?

Legal experts say the opportunities for additional revenue in delinquency are considerable, confronting mortgage companies with a conflict between their own financial interest in collecting fees and their responsibility to recoup money for investors who own most mortgages.

“The rules by which servicers are reimbursed for expenses may provide a perverse incentive to foreclose rather than modify,” concluded a recent paper published by the Federal Reserve Bank of Boston.

It's not a pleasant self- portrait that the mortgage industry is painting. But it goes hand in hand with the comments we get from potential borrowers that they can't modify their loans or get a new mortgage to replace the old when market values have declined. No one ever accused the mortgage industry of being altruistic, but good business sometimes requires that you protect your customer base, too.

One thing seems to be clear-- until home values begin to rise and people go back to work, we're go to see more mortgage defaults.

Read the full article Lucrative Fees May Deter Efforts to Alter Loans

For your next title order
or if you have questions about what you see here, contact Stephen M. Flatow
Vested Title Inc.
648 Newark Avenue, P.O. Box 6453, Jersey City, NJ 07306
Tel 201-656-9220 - Fax 201-656-4506
E-mail vti@vested.com - www.vested.com

Sphere: Related Content