Despite Incentives Offered to Servicers Foreclosures Continue
Despite incentives offered to servicers regarding modification, foreclosures that could have been avoided continue. According to recent reports the banks are not extending relief to the harassed borrowers.
According to National Consumer Law Center of NCLC, servicers of the mortgages comprising of many big banks, are opting for foreclosures because it is more profitable than going for loan modification. The latter however would benefit the investors and the house owners.
The report (Why Servicers Foreclose, When They Should Modify, and Other Puzzles of Servicer Behavior) exposes that unlike the investors and the house owners the servicers do not lose any money by opting for foreclosure. On the other hand they actually gain from doing so.
Diane E. Thompson an attorney o NCLC said, “The country is in the midst of a foreclosure crisis of unprecedented proportions. Millions of families have lost their homes and millions more are expected to lose their homes in the next few years. With home values plummeting and layoffs common, homeowners are crumbling under the weight of mortgages that were at best only marginally affordable when made. One common sense solution to the foreclosure crisis is to modify the loan terms in more instances. Foreclosures are a costly ordeal for the homeowner, the lender, and the community. Yet they continue to outstrip loan modifications because servicers have no incentive to help borrowers stay in their homes.”
The servicers are none other than important banks or financial firms that collect the mortgage payments and administer the loans. They played a vital role in the prevailing foreclosure mayhem since the original lenders resorted to selling the loans to various investors. The latter rely on the servicers to function with the day to day business of collecting dues and related matters.
The house owners who are trying to modify their unmanageable loans generally deal with these servicers. It is next to impossible to find out the last holder of the mortgage as the loans have been parceled and sliced before being sold to global investors. The servicers play hard to get because it goes against their financial interests to modify the loans.
These financial incentives tend to make the servicers overlook the interests of the house owner. For example the servicers do not want to reduce either the principal or the interest rate. For them repayment plans and forbearance settlements are more profitable. The net result of following such a line is disastrous for the house owners as well as the nation.
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