REALTOR® Magazine-Daily News-Skeptics Say Lenders Ignore Loan Mods

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Daily Real Estate News | July 30, 2009 | Skeptics Say Lenders Ignore Loan Mods
Even as government officials are pressuring mortgage companies to expedite their efforts to renegotiate home loans for troubled borrowers, industry insiders are scoffing.

They say the delays mostly can be attributed to the reluctance of mortgage companies and servicers to give up revenue from late payments, including on 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 is a former employee of 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.''

Even the government recognizes the problem. ''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.

Bank of America disputes that characterization vociferously. ''To think that somehow or other we would jeopardize investor relationships and customer relationships for the very small incremental income we would receive by delaying seems ludicrous,'' said Robert V. James, the bank's senior vice president for mortgage operations and insurance. ''It's not the right thing to do.''

Source: The New York Times, Peter S. Goodman (07/30/2009)