... EARN LESS WHEN MORTGAGORS PAY ON TIME.
There is no longer a mystery about why Mortgage Service Companies are not interested in modifying loans taken out by people who mortgaged their houses and now find it difficult to repay on the existing terms. Although Mortgage Servicers have a Contract with the investors who now hold the Mortgage Note (much as Insurance Companies have Insurance Contracts with their Policyholders), they make more money if they can charge late fees, title search fees, and such like when the Mortgagors-Homeowners are actually late making their payments.
The Mortgage Servicers make more money and their claim to being paid comes off the top out of the proceeds of any resale of the property. Even if the resale is for a price below the sale price when the mortgage was originally taken out for that home. See Peter S. Goodman, "Late-Fee Profits May Trump Plan to Modify Loans/'A Perverse Incentive'" p. A1, col. 1 (New York Times Nat'l ed., Thursday, July 30, 2009), published online under the headline, "Lucrative Fees May Deter Efforts to Alter Loans".
Is this in conflict with their Fiduciary Duties to the investors? Is it ripe with the potential for a breach of any duties they may owe to the Mortgagors? Is it in the best interests of the U.S. economy, or of U.S. society?
Is it right?
Depending on the answers to these and similar questions, here is another question: Why are they getting away with it? There are causes of action and penalties against Insurance Companies for breaching their alleged duties of Good Faith and Fair Dealing. Are Insurance Companies the only object of attention in this arena?
At least, now it is much clearer why there are so few loan modifications even when it seems in the best interest of investors to modify home loans. At least, we now have the answer to that question.
Please Read The Disclaimer.
Comments