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Loan servicers face fire

Email|Link|Comments (3) Posted by Binyamin Appelbaum February 21, 2008 11:16 AM

The role of mortgage servicers -- companies that collect payments from borrowers -- is starting to receive more attention. These companies don't make loans, and they don't own properties, but they generally are responsible for deciding who will be foreclosed, and for reselling foreclosed properties.

Maryland has just become the second state, after California, to require loan servicers to provide the state with lists of home owners who may face foreclosure. The emergency regulation is intended to help the state contact those borrowers before they fall so far behind on payments they can't be helped.

The state also announced an investigation of Ocwen Financial, one of the largest servicing companies. Ocwen has been in the news in Boston as it attempts to evict a woman from a Dorchester home.

Mayor Thomas Menino has also singled out servicers as the group most crucial to the city's efforts to prevent foreclosures. The mayor has said some companies are working with the city while others are not.

Meanwhile, as you've probably seen, local foreclosures keep piling up.

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3 comments so far...

Politicians have to jawbone to please the crowds. Fact is, there's only so much servicers can do right now. Their hands are somewhat tied by the servicing agreements, so they can only act when foreclosure seems "reasonably likely." Plus, they've replaced most of their intelligent and experienced agents with massive phone banks staffed by barely-trained sales associates and supported by cookie-cutter software platforms. They no longer have the capacity to handle large-scale modifications even if they wanted to.

Posted by Marcus February 21, 08 11:03 PM

Servicers are the face and voice of the companies that made, sold and invested in these ill-conceived loans. We cannot allow those companies to avoid responsibility and financial accountability for creating this train wreck by accepting the defense that servicers can't do anything because of their servicing agreements. Homeowners are already suffering the pain and paying the price for trusting the lenders or exercising poor judgment in assessing the risks of the loan they were getting. The innocent neighbors and communities affected by foreclosures are also becoming victims of a mortgage system gone terribly bad. Everyone in the process needs to be held accountable and that includes the servicers.

Posted by Peg February 22, 08 08:23 AM

Peg,
Servicers are hired by "the companies that made, sold and invested in these ill-conceived loans".

Basically, the way it works is a Broker matches up a lender(bank) and a borrower(homeowner)

The Lender then sells the loan to an Investment bank which packages it up into bonds and sells thes bonds to Investors.

When the Investment Bank creates the Bonds, they hire a servicer to be responsible for collecting the money from the borrower and distributing it to the investors. The servicer has nothing to do with the loan or the investment, they were just hired to "service" the loan.

Posted by ChiliPepr February 22, 08 09:22 AM