Lucrative Fees May Deter Efforts to Alter Troubled Loans

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

My comment:

This an an old story, from several perspectives. First, during the last subprime mortgage crisis circa 2000 I would say that there were rogue servicers who sought to profit from egregious fees of all sorts. Over the last half decade or so a combination of predatory lending and servicing laws have combined with better business practices to greatly reduce the collection of uncalled for fees. Second, what the article completely ignores is that a mortgage servicing company lives and dies by the size of its servicing loan portfolio. When a loan goes delinquent and into foreclosure, the servicing company not only incurs costs (some of which were mentioned in the article) but stops receiving its servicing fee for that loan. It is simply not in the best interest of a mortgage loan servicing company to allow loans to languish in delinquency or foreclosure since that shrinks its servicing portfolio. While it is true that the servicing company has the right to attempt to recover those costs upon the sale of a property post foreclosure, the lack of cash flow during that period is far more damaging to the servicer than any potential “profit” from assorted fees.

I am not saying that servicers act out of the goodness of their own hearts when collecting mortgage payments and managing delinquent loans, just that in the vast majority of cases the interests of the loan servicer and the home “owner” are actually much more aligned than not. (The potential conflicting interests of an investor in the loans and the homeowner are another story altogether.)

As you can imagine, most other readers’ comments are a bit less informed. This is what the industry has to deal with. How can we improve public relations?