Mortgage servicing is at the heart of the foreclosure crisis. Few people understand the role that servicers play as opposed to the institutions that provide loans (banks and lenders). When critical aspects of problems are not well understood the probability that problems will linger on increases exponentially.
Servicers do not merely accept payments from borrowers, they also play a major role in deciding when to foreclose on homes. As intermediaries between the borrower and the institutions that lend money, servicers clearly play a critical role in the solution to the ongoing crisis.
Far more foreclosures have taken place than loan modifications in the recent past. If servicers play the role of decision makers, then it should be clear that servicers are electing to foreclose more than they are willing to offer loan modifications. Servicers themselves will declare that they are “committed” to helping struggling homeowners but the data speaks for itself.
My opinion is based on a rather insightful, but simple assessment of the lending environment: the foreclosure crisis will get worse without strict accountability of the servicers and the implementation of policy to guide servicers to offer more loan modifications than they elect to foreclose on homes. As such, I can reach no other conclusion except that there is a crisis of mortgage servicing going on right now.
The servicing crisis, as I refer to it, is easily recognized by borrowers and industry experts. Call any mortgage servicer and you will have to wait for about 1-2 hours to get through to a decision maker if you are lucky. You will most likely need to make 3-7 such calls calls before you get a clear picture of your options as a borrower in distress. What does this tell me? Simple: there are major customer service problems in the mortgage servicing industry. When we think of customer service we typically think of how we are treated at restaurants and in department stores. But mortgage servicing is not a trivial matter; we are not calling to report on bad hamburgers or inappropriately fitting pants. People call mortgage servicers to save their most prized possession, their home.
Sure, the new housing plan offered by the Obama administration gives servicers golden carrots of $1,000 to work with homeowners. But who is governing the carrots and accounting for the loan modifications? They say they will do the right thing, but how can we make sure they are?
The bottom line is that there are simply not enough employees in servicing departments to handle the enormous amount of requests for loan modifications. This crisis is like a triage nurse dealing with multiple life threatening emergencies with a single doctor in the hospital. I dare ask, how will Obama’s plan work if there aren’t enough people to service struggling homeowners?
If we are going to throw taxpayer dollars at understaffed servicers I argue there needs to be accurate, 3rd party reporting on the quality of mortgage servicing. These 3rd parties could be modeled after the Office of Comptroller (OCC) or American Securitization Forum (ASC). If mortgage servicers cannot fulfill their obligations to their clients specialty mortgage servicing centers should be created to cover current operational holes to ameliorate the problem.
The government can work in concert with private business to open home saving centers that act as outsourced mortgage servicing centers. These outsourced servicing centers can also collect important data on loan modifications as well.
At present there is no way to properly monitor servicers to see if they are complying with any of the new regulations. Washington talks about accountability but I can’t seem to find “enough” accountability of mortgage servicers and lenders.
The only way to monitor Obama’s housing plan is through improved loan modification data reporting on a weekly, monthly and quarterly basis. The only way to evaluate if this new program will work is to closely analyze the behavior of servicers. I am sure servicers will be reluctant to comply with my suggestions. Washington owes it to the public to demand and implement better mortgage servicing reporting by disinterested third parties.
Resolving the mortgage servicing reporting problem is really straightforward and not rocket science.
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I have been a licensed Realtor for 19 years, and I attest that YES you are correct about the servicing companies. It is like Obama, even with good intentions, is yelling instructions from the moon, to the controllers of the banks residing on earth. There is NO quality control, NO implementation of presumed adjenda, and certainly NO accountability from lending/servicing companies. By the
time these banks are “thinking” of talking to the homeowners,…the homeowners have moved their families out of the home, and are in MAXIMUM distress. It just really p_____ me off. The banks are destroying the country… Not the homeowners that bought a home in “good faith”, from a lender that smiled and told them the minimum amount of information about their loan. (Realtors can no longer legally be a part of the lending process for a new buyer) Obama is not utilizing the right TOOLS (sledghammer?)to fix this gigantic problem,. He should set up a seperate institution to wade thru the problems, and then allow this seperate institution to dictate to the servicing/loan companies HOW they are going to proceed with each and every individual loan.
As Bill Hewlett of famed Hewlett-Packard Co once told me
“That which gets measured gets improved.” Amen to that!
Sometimes I really feel like this is a hopeless battle. All these banks, lenders, servicers are all crooks. We are throwing away our tax dollars towards this bailout without no real plan. I’m really starting to believe that this is all a game that our government and lenders are playing. First of all our Federal Reserve is not controlled by our government. It’s controlled by a cartel of private banks who’s principals aren’t even Us Citizens. And why does our government have to borrow money from these banks and pay interest when they can create all the money they want interest free? There’s a thought, huh? I’m really starting to think that these lenders don’t want to help any homeowners because the ones that control the banks are the same group of people who also want to reduce the population of this world. These are the same group of bankers who profit from war. Why the heck did congress spprove another 152.5 billion towards the war on Iraq? To give to the same contractors who’s owners are these same bankers and OUR very own leaders. It’s all about control. Our government and all these bankers want to control everything including where we live. It’s all about Agenda 21 and their Sustainable Growth. I highly recommend everyone to look it up and the so called new world order. See Rothschild family and their timeline and you will see that they have been in control of this world for a long time. You think Bill Gates is rich? Bill Gates is nothing compared to the Rothschild Bloodline. Bill Gates is worth about 87 Billion dollars.. The Rothschilds are worth 500 Trillion dollars. These bankers believe in their 3M rule. Control over Money, Media and Military. They are definitely controlling where we live. Something has to be done. If. All lenders just decides to help each homeowner, can you imagine how much our economy will pick up. Geez… We are in a housing crisis. It’s the root of the problem to our economy. These bankers and servicing companies are all CROOKS!!!
the service vacume created by the mortgage crises caused the creation of a large volume of mortgage modification companies. home owners have no place to turn. the non profits are deluged the servicers and lenders are unresponsive and many home owners do not possess the understanding of finacial matters to navigate the process leading to a meaninful modification.This vacume is being filled by mortgage modification companies some good , some incompetent and some just plain dishonest. i believe the private sector could help this process but a realistic compensation structure is needed. there are plenty of honest mortgage brokers, attorneys, accountants, and financial planners that would welcome the opportunity to help facilitate the mitigation process for a reasonable fee. the current system ends up with the distressed home owner paying as much as a 1% fee for a private company to negotiate with thier lender.there has to be a better way to handle this.
Servicers are just not equipped to deal with the onslaught of non-performing loans that are stacking up, and many of these servicers don’t have an origination arm anymore, so you don’t even have the expertise to modify loans in some cases. Oh, boy. Saxon is the worst in my opinion. The Obama plan will at least allow servicers to hire some people. However, I don’t think the modification rules are based on risk and loss, which I think it should be. It’s based more on hardship regardless of how ‘underwater’ the borrower is. I haven’t had an instance where we could have gotten a better modification using the Obama rules than the rules we have now, so people that do their own modifications based on his streamlined rules probably won’t get anything like what I’m seeing based on no real rules. Shame.
The problem is that the loan servicers don’t lose with foreclosures. It’s the investors who lose, but the TARP money is given back to the biggest losing investors; which minimizes their losses. Loan servicers actually win with foreclosures because it’s a way to get the bad assets off their books. The problem is that the politicians main concern is to help Wall Street and not Main Street. Their only real concern is to get the bad assets or toxic assets off the banks books, so the banks will lend again and they’ve chosen to do this by helping the biggest losing investors(Fannie, Freddie, Goldman, Morgan, Citi and others); instead of helping Main Street and the people. Both Bush and Obama could have chosen to buy the bad mortgages(as Paulsen first planned) and work with the homeowners but both chose not to. So the net result of both Bush-Paulsen and Obama-Gaethners bail out plans are the loan servicers clean up their books by foreclosing, the investors recoup some of their losses and it’s all at the expense of the American taxpayer and the struggling homeowner. I hope I’m wrong, but I think only mandatory loan mods for people paying over 7% or bankruptcy judges being allowed to modify loans are the only real solutions.
Thanks for the great and thoughtful comments from everyone. Your words are read by thousands of people who visit my blog. I love having an open forum for Americans to exercise their 1st Amendment rights to speak their minds!