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Thursday, March 4, 2010

Foreclosure More Profitable than Loan Modifications for Servicers

Report:

As if we didn't know. And the federal government's programs don't even address the issue below.

The incentives mortgage servicers receive for managing a home loan are a significant obstacle to loan modification that would help financially troubled borrowers avoid foreclosure, according to a new report from the National Consumer Law Center.
In fact, the way servers are compensated actually makes it more profitable for them to foreclose on delinquent loans rather than modify them, the report found, even though loan modifications might be more profitable for the investors who actually hold the mortgages.
In fact, the report found that servicers typically face a near-certain loss if they do a loan modification, but can actually make money on a foreclosure.
"Foreclosures are a costly ordeal for the homeowner, the lender, and the community," said the report's author, Diane Thompson, an attorney with the NCLC. "Yet they continue to outstrip loan modifications because servicers have no incentive to help borrowers stay in their homes."

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