Servicers Do Not Have Much Power To Avert Foreclosure

Legally the servicers do not have much power to avert foreclosure. This is because of the complication of securitized loans. A pool of mortgages was created, parceled and sliced off to various investors across the world. The servicers were collecting agents and communicated with the lenders.

At the most they could modify loans by reducing the interest but has no say in the matter of waiving parts of the principal. If they did so there Legally the servicers do not have much power to avert foreclosure. This is because of the complication of securitized loans. A pool of mortgages was created, parceled and sliced off to various investors across the world. The servicers were collecting agents and communicated with the lenders.

At the most they could modify loans by reducing the interest but has no say in the matter of waiving parts of the principal. If they did so there was the danger of the servicers being sued by investors. But without slicing off a part of the principal effective modification is not possible. And without that foreclosures cannot be avoided in good numbers.

Even if some servicers entertained the idea of modifying loans there was another danger that they might please some investors at the cost of others. This will make them reluctant to take action. They could fear of being charged of lining their own nests.

To get over the impasse a suggestion has been made by eminent pundits that interest rates as well as principal could be slashed with the government agreeing to bear part of the writing down costs. Considering the expenses connected with foreclosure the lenders and investors should accept this as a better option.

The FDIC help schemes runs along similar lines. But the borrower has to be defaulting for at least 60 days. This is being criticized because it will tempt those not defaulting to do so!

All the foreclosure remedies put forward are unjust on those who have been responsible, taken proper loans and been regular in their payments. The rescue schemes seem to be helping those who helped create the foreclosure crisis and those who failed to keep their commitments. The borrowers of California, Florida and Nevada will particularly benefit at the cost of others.

Professor Jeremy J. Siegal warns against focusing too much on foreclosure. The real big issues are the financial and economic conditions of today. He suggests the introduction of a major package to stimulate the sluggish economy by encouraging banks to lend. He said, “It seems to me these (mortgage) workouts are going to take a number of months. The (federal government) has got to take measures now.”

Everybody is at sea and suggesting one solution after another. Meanwhile the country falls deeper and deeper into recession. The indications are that this recession is going to be the longest in the history of America was the danger of the servicers being sued by investors. But without slicing off a part of the principal effective modification is not possible. And without that foreclosures cannot be avoided in good numbers.

Even if some servicers entertained the idea of modifying loans there was another danger that they might please some investors at the cost of others. This will make them reluctant to take action. They could fear of being charged of lining their own nests.

To get over the impasse a suggestion has been made by eminent pundits that interest rates as well as principal could be slashed with the government agreeing to bear part of the writing down costs. Considering the expenses connected with foreclosure the lenders and investors should accept this as a better option. The FDIC help schemes runs along similar lines. But the borrower has to be defaulting for at least 60 days. This is being criticized because it will tempt those not defaulting to do so!

All the foreclosure remedies put forward are unjust on those who have been responsible, taken proper loans and been regular in their payments. The rescue schemes seem to be helping those who helped create the foreclosure crisis and those who failed to keep their commitments. The borrowers of California, Florida and Nevada will particularly benefit at the cost of others.

Professor Jeremy J. Siegal warns against focusing too much on foreclosure. The real big issues are the financial and economic conditions of today.

He suggests the introduction of a major package to stimulate the sluggish economy by encouraging banks to lend. He said, “It seems to me these (mortgage) workouts are going to take a number of months. The (federal government) has got to take measures now.”

Everybody is at sea and suggesting one solution after another. Meanwhile the country falls deeper and deeper into recession. The indications are that this recession is going to be the longest in the history of America.