Servicer-Created Defaults

Naked Capitalism presents a clear and concise overview of how mortgage servicers and their bogus fees drive homeowners into default and foreclosure in How Servicer Junk Fees Push Borrowers into Foreclosure.

Yves Smith explains why servicer abuse problems don’t get the same level of attention as less-sympathetic defenses based on missing paper and bad transfers:

This problem is very much underdiagnosed because the servicer is judge, jury, and executioner as far as its charges are concerned. Borrowers find it a pitched battle to get the detailed payment records from servicers, even with a lawyer’s help. Even then, the statements are usually incomprehensible. Attorneys have told me they typically have to hire a forensic accountant both to get to the bottom of the mess and to serve as an expert witness.

The post also spotlights a Huffington Post article about a couple who says they were pushed into foreclosure by the HAMP program.  Servicers reportedly demanded thousands of dollars in fees from the Michigan couple after they failed to qualify for a long-term modification at the end of their trial period.  According to that article, more than 800,000 homeowners have entered the HAMP program and then been unable to obtain long-term modifications, while only about 522,000 have gone on to successfully secure modifications.