A new NCLC report, authored by Diane E. Thompson, finds that mortgage servicers—including many large banks—have found it cheaper to foreclose on homeowners than to offer loan modifications that would benefit homeowners and investors. Americans who might be able to stay in their homes under a loan modification plan are being moved right past that option and on to foreclosure.
“Why Servicers Foreclose, When They Should Modify, and Other Puzzles of Servicer Behavior,” (Oct. 2009) (50 pp.) includes a detailed examination of loans in foreclosure from 1995-2009 and how components of servicer compensation affected the likelihood and speed of foreclosure. It also looks at oversight of servicers by credit rating agencies and bond insurers, and how that oversight too often encourages servicers to foreclose.
Among the report’s findings are that “Loan modifications inevitably cost the servicer something. A servicer deciding between a foreclosure and a loan modification faces the prospect of near certain loss if the loan is modified, and no penalty, but potential profit, if the home is foreclosed.” The report also found that servicers often deny homeowners principal and interest rate reductions because as servicers they find it profitable to offer repayment plans or forbearance agreements that do little to reduce homeowners’ debt burdens.
The report is found on NCLC's website and by clicking here.
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Posted by: storesonline033 | Tuesday, November 10, 2009 at 06:05 AM
Great article, Thanks , but the Obama loan modification is the federal government’s answer to the rising need of preventing foreclosures for American homeowners.
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