Mortgage lenders will NEVER help solve this problem.

In fact they will do everything they can to keep the status quo. Because they are not in a crisis, we are.

Here's why:

After foreclosing on a family's home, the lender can come after them for the deficiency between the home value and what's owed, except in a handful of states (and believe me they're working to close this "loophole," I'm talking to you, Arizona!).

What does that mean? Zero risk for the mortgage lender. You borrow money, put house up for collateral, and it doesn't matter one bit what the market does.

Scenario: person buys $300,000 home with 15% down -- can't quite make the 20%, say -- puts down $45K, gets mortgage for $255,000.

Person loses job, gets sick, whatever -- say they've paid the principal down to $250K.

Buyer can't make payments, lender forecloses. Somehow, the "loan modification process" the buyer tried to go through didn't work, the lender didn't agree the person needed/deserved modification. What a surprise. ;)

Anyhow: market is in the tank, says lender -- although it doesn't matter, same method in a bull market -- so lender puts house up for public auction for $150K. It sells. Lender pockets money. Then lender files in court against the old buyer for a judgment for the remaining $100K -- and in most states, gets it.

Lender then sells right to collect said $100K to a collection agency for say $20K, or less. Collection agency hounds buyer, probably into bankruptcy.

But wait, you say, there's, finally, a place where the lender loses! $20K instead of $100K!!

Not quite. Remember that PMI/LMI you've been paying, since you didn't quite have 20% down to get started? Mortgage insurance. But despite the fact that you were paying it, the insurance wasn't for you. It was for the lender.

Who now collects on the mortgage insurance policy. And you better believe they're double-dipping if they possibly can, to cover fees they pretty much set for themselves.

This is the story I have read again and again in the growing number of discussion boards out there -- and they are growing exponentially, ask any of the board admins -- "HOW CAN I SAVE MY HOME???" they type. "HAS ANYONE GOTTEN A LOAN MOD FROM BANK XXX?" "THEY LOST MY 50 PAGES OF FAXED DOCUMENTS AGAIN!!" and so on.

"WHY ARE THEY TAKING SO LONG??"

...Because there's no advantage in doing otherwise. :(

do it.. Remember, most of these lenders did get Bailout money as well.

This is not something that can "police itself." There is *zero* incentive for them to change. Less than zero, even.

And people are getting put out on the street. And yet legislatures continue to pass laws that favor banks.

Edited to add: We need federal anti-deficiency laws, now. :grr:

lender. And most mortgages will be sold after a certain number of months, as pools of securities to investors. However, this is a streamlined model.

The original complaint involved much more, including force-placed insurance, even though you had insurance, not crediting payments, mysterious accounting, illegal foreclosures etc.

On October 26, 2005, customers of Litton Loan Servicing, LP ("Litton") filed a class action complaint charging the company with violations of federal and state law. The named Plaintiffs filed the class action lawsuit on behalf of a Nationwide Class and a California Subclass of Litton customers. The Nationwide Class alleged claims based on violations of the Real Estate Settlement Procedures Act ("RESPA") relating to Litton's improper actions in imposing late fees or treating payments as late during the 60-day grace period following the effective date of loan transfer if a borrower sends a payment to his or her old servicer on time. The California Subclass alleged claims based on violations of California law relating to Litton's unfair business acts and practices with respect to the servicing of loans.

The case is currently pending before Judge Margaret M. Morrow of the United States District Court for the Central District of California in Los Angeles, California. Lieff Cabraser Heimann & Bernstein, LLP and co-counsel represent Plaintiffs and the Nationwide Class.
Nationwide Class Certified

On July 30, 2007, Judge Morrow issued a 56-page order granting Plaintiffs' Motion for Certification of a Nationwide RESPA Class. Read a copy of the Court's Order. (Note: the Order is not a determination of the merits of case.)
http://www.lieffcabraser.com/loan-servicing.htm

Download and read the order if you would like to see how they operate. Read the deposition of employees in the order. Also try to find the Standard & Poor assessment of the business for investors and you can find the business model they operate under.

And then read what happened to the case.
The laws are written with and for the financial institutions. The settlement distribution of $60 is an insult to all those who have been wronged and no longer have a home.

And this is only one such company.

Also, on NY Times a couple of days ago:
Lucrative Fees May Deter Efforts to Alter Loans

snip

Even when borrowers stop paying, mortgage companies that service the loans collect fees out of the proceeds when homes are ultimately sold in foreclosure. So the longer borrowers remain delinquent, the greater the opportunities for these mortgage companies to extract revenue — fees for insurance, appraisals, title searches and legal services.


http://www.nytimes.com/2009/07/30/business/30services.html?_r=1&scp=4&sq=mortgage&st=cse

as for Litton, in the Standard & Poor investor assessment:

Additionally, though not an originator, the company established a business relationship in August 2005 with two Dallas-based firms for portfolio retention efforts. Litton provides these firms with a list of borrowers who contacted the company about payoff information, who, in turn, contact the customer in an attempt to refinance the loan. If successful, Litton has the first right of purchase. In the second phase of the initiative, Litton will directly contact the borrower based on current credit information to actively solicit the account for a refinance.
http://www2.standardandpoors.com/servlet/Satellite?pagename=sp/sp_article/ArticleTemplate&c=sp_article&cid=1143850904292&s=&ig=&b=2&dct=30


On edit: I just wanted to be clear. People who were fed up with the servicer's "errors" and tried to go elsewhere by refinancing, this is where you ended up - right back with them. In fact they would not cooperate and provide the payoff amount to a new lender in a timely fashion. (just speaking from experience) It is by design.

and

The 31-person REO team averages 14 years experience and three years' company tenure. Management introduced a new, enhanced REO Web site in August 2005 to monitor property-marketing efforts. The site allows for tracking of expected and actual completion dates, with recalculation of timeframes based on changes to the data. Brokers may also view any exceptions that require timely resolution as well as obtain the company's policies regarding REO marketing, inclusive of frequently used forms. A key enhancement includes account assignment by team/asset manager, and it also incorporates investor guidelines regarding notification/processing timelines. The sound REO methodology and controls are as follows:
• Brokers have delegated authority to offer limited financial incentives to encourage borrowers to vacate premises. This reduces the likelihood of commencing a costly and time-consuming eviction action;
• Cash for keys program resulted in vacancies on 34% of formerly occupied REOs;
• Database of approved Realtors for easier selection;
• Additional marketing mechanism of listing properties online through a separate vendor;
• Valuations online via the proprietary PEARL system, which has numerous reporting capabilities and an online risk grading and quality score system to judge properties and broker's value assessments;
• Authorize repairs only when calculations reflect at least a 125% return on the investment;
• List price generally established at 108% of market value;
• Delegated price reductions after 45 days and 75 days on the market;
• Brokers must submit monthly status reports detailing marketing activity;
• Separate group files insurance claims on damaged properties;
• Listing agreements and submission of offers and counter-offers completed online help expedite marketing activity; and
• Average marketing time is excellent, at 81 days, with a commendable 92% net proceeds to market value.

http://www2.standardandpoors.com/servlet/Satellite?pagename=sp/sp_article/ArticleTemplate&c=sp_article&cid=1143850904292&s=&ig=&b=2&dct=30


Mind you, it is: 108% of market value and not the outstanding amount of the loan.

Unless Congress and each State stops catering to industry - the consumer only exists to be exploited.

While the lender/servicer can only seek the amounts they had foreclosed on at a foreclosure sale, i.e loan amount plus delinquent amounts & costs, in my case: on the day of the sale, the sale amount increased by $33,000 from the announced and posted amount.

As I understand it, buyers come prepared with pretty much the amount they see posted and are prepared to bid in $100 increments. Since this is pretty much an all cash deal, potential buyers will not bid on such an increased amount.
The trustee's recorded announcement on the property the next day said it "reverted back to lender". Meaning it was not sold, and now belongs to the lender/servicer. It is now an REO.

So the sale price of a 108% market value can be achieved.

However, now that the scheme imploded, I guess they shot themselves in the foot with their greed. Only those, with a low LTV property will bring "lucrative investment returns now."

:(