Bootcamper Tom Cox on Mortgage Servicing Games

Bootcamper Tom Cox published his three-part series on how the foreclosure plays the system at the expense of homeowners (The three-part series is no longer available online from

Homeowners Get Screwed, Lawyers Get Played, Banks Make Profit: Where’s the Outrage?

Two recent reports, read together, should spark outrage in the country at large and among our political leadership. But no one seems to care anymore. JPMorgan Chase, the country’s third largest mortgage lender, confessed that it has overcharged over 4,000 active duty troops on their mortgages and improperly foreclosed upon 14 military families. Only three days before that, reports came out that JPMorgan had just experienced a 47% jump in profits for the previous quarter and 2010 profits reached a record level of $17.4 billion.

How Banks and Servicers Play Hide the Ball

Logic suggests that in foreclosure, the homeowner should be able to know who owns his loan. In the rare circumstance where the homeowner wants to pay off the loan rather than lose his or her house, he needs to know who is entitled to receive that payment so that the wrong party is not paid and so that he is protected against any other party ever claiming a right to payment. Where a homeowner cannot actually pay off his loan, he still has a real interest in knowing who claims ownership of it because only that party can respond to requests to work out a rational loan modification.

Logic does not control the foreclosure industry’s practices.

Detours, Diversions and Delays: Servicers Obstruct Foreclosure Cases

While the lawyers for servicers are usually graded and paid for how fast they can rush a foreclosure case through the legal system, the rules change in that very small percentage of cases where lawyers show up to represent homeowners. At that point, the servicer is likely to remove the case from the grading system. The servicer’s lawyer is also likely to start billing the servicer at an hourly rate. When a case finally gets to a trial list, there are repeated requests from the servicer’s lawyer for continuances and delays so that the servicer can put off sending a witness to testify at trial.