More bad behavior by banks: Lucrative Fees May Deter Efforts to Alter Troubled Loans

[PA Democrat]

This week, the Obama administration summoned mortgage company executives to Washington to demand they move faster to lower payments for homeowners sliding toward foreclosure. Treasury officials called on the companies to hire and train more people quickly to field applications for relief.

But 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.

Even when borrowers stop paying, mortgage companies that service the loans collect fees out of the proceeds when homes are ultimately sold in foreclosure. So the longer borrowers remain delinquent, the greater the opportunities for these mortgage companies to extract revenue — fees for insurance, appraisals, title searches and legal services.

“It frustrates me when I see the government looking to the servicer for the solution, because it will never ever happen,” said Margery Golant, a Florida lawyer who defends homeowners against foreclosure and who worked in the law department of a major mortgage company, Ocwen Financial. “I don’t think they’re motivated to do modifications at all. They keep hitting the loan all the way through for junk fees. It’s a license to do whatever they want.”


http://www.nytimes.com/2009/07/30/business/30services.html?hp

[Skink]

1. How else are they going to keep up their 30 percent returns?

Why just keep raising the fees. Pile fees on more fees.

[flvegan]

2. Oh the stories I could tell about Ocwen's Premium Title Services offshoot.

The bad, ugly, sad stories.

[PA Democrat]

3. Did you happen to see the series the Miami Herald ran on mortgage fraud in Florida?

It was shocking to say the least. I get so sick of hearing people harp about "personal responsibility" while turning a blind eye to the corporate malfeasance and criminal activity. Link below to article.

http://www.miamiherald.com/multimedia/news/mortgage/brokers.html

[flvegan]

5. I hadn't seen that.

Bookmarked to read after work. Thanks!

[Fumesucker]

6. The only responsibility a corporation has it so the bottom line of the stockholders..

So of course pro corporate people (and I use the term advisedly) have to harp on personal responsibility..

[PA Democrat]

9. Yep, and that's why we consumers have to push for corporate responsibility

through regulation. The free market extremists (Greenspan's "invisible hand" theory was a classic example) claim that corporations will voluntarily police themselves. We all know how THAT theory worked out.

[SoCalDem]

4. My best friend is being scammed right now by her mortgage comapny

she "lost" her house back in November, when she walked away (loan of $330K, house "worth" 169K) She and her husband split up and she could not afford the mortgage, so it's been sitting there, and she's come to terms with it, and out of the blue, tnhey called her the other day wanting to "work with her".

Of course she was thrilled to think that she might get back into "her house".

The details they give her are so sketchy.. they say she's "pre-qualified" for the president's program, yet they want her to move back into the house for 90 days, when the loan details will be "finalized". They told her the new payment would be $1,079.00 (Piti). I asked if they were "cramming down" her loan to a new loan total, and she said they told her it was a "modification" of her existing loan. and it was for 5 years..

I hated to be the skunk at the picnic, but I finally convinced her that she would have to start all over in 5 years (she'll be 60), and that when 50% of her income comes from her 69yr old brother whom she cares for, she'd be setting herself up for a big crash, since that payment is NOT accurate for a $330K mortgage, and she's struggling with $995 RENT.

She has an emotional attachment to that house, but there's just no way she can afford it, and I wish they would leave her alone..She had finally come to terms with the whole thing, and now they are peddling false hope, when all they want is 3 month's rent from her, and then they will lower the hammer on her and she'll have to move again, and start the whole thing over again:(

[PA Democrat]

7. How sad. I'm sure the bank is preying on your friend's emotions in order

add to their bottom line. If they do nothing, they eat the difference in the loan balance and what they can resell the house for. If they "work with her" knowing that she will most likely STILL not be able to make the payments they are using taxpayer money dishonestly.

[SoCalDem]

8. I think I have her calmed down for now. The thing that bothers me is this

she COUNTS on her 69 yr old brother's SS check, and he won't live forever. If he had to be instututionalized,or if he died, there would be a loss of $1100.00 a month and without it, she'll be living with US :)

[Robb]

10. Kicking, I am furious about this.

I posted this earlier, but here's the short version. I am so mad about this.

After foreclosing on a family's home, the lender can come after them for the deficiency between the home value and what's owed, except in a handful of states (and believe me they're working to close this "loophole," I'm talking to you, Arizona!).

What does that mean? Zero risk for the mortgage lender. You borrow money, put house up for collateral, and it doesn't matter one bit what the market does.

Scenario: person buys $300,000 home with 15% down -- can't quite make the 20%, say -- puts down $45K, gets mortgage for $255,000.

Person loses job, gets sick, whatever -- say they've paid the principal down to $250K.

Buyer can't make payments, lender forecloses. Somehow, the "loan modification process" the buyer tried to go through didn't work, the lender didn't agree the person needed/deserved modification. What a surprise. ;)

Anyhow: market is in the tank, says lender -- although it doesn't matter, same method in a bull market -- so lender puts house up for public auction for $150K. It sells. Lender pockets money. Then lender files in court against the old buyer for a judgment for the remaining $100K -- and in most states, gets it.

Lender then sells right to collect said $100K to a collection agency for say $20K, or less. Collection agency hounds buyer, probably into bankruptcy.

But wait, you say, there's, finally, a place where the lender loses! $20K instead of $100K!!

Not quite. Remember that PMI/LMI you've been paying, since you didn't quite have 20% down to get started? Mortgage insurance. But despite the fact that you were paying it, the insurance wasn't for you. It was for the lender.

Who now collects on the mortgage insurance policy. And you better believe they're double-dipping if they possibly can, to cover fees they pretty much set for themselves.