Where Servicers Make Their Money

You may have seen in the headlines yesterday that Countrywide Home Loans and its mortgage servicing unit, which are now part of Bank of America, agreed on Monday to pay $108 million to settle federal charges that the company overcharged customers who were struggling to hang onto their homes.

The New York Times published an article yesterday and quoted Max at the end of the piece.

I would say this was standard operating procedure and still is,” said O. Max Gardner III, a lawyer in Shelby, N.C., whose practice is focused on homeowner bankruptcies. “The real problem is that this is an epidemic in the loan servicing industry. These companies make more income by servicing loans in default than in servicing those that are being paid on time.

When you compare how much money a loan servicer makes when a loan is in default to how much their regular fee is, it’s not hard to see how tempting it is for the servicers to tack on more and more fees.   A great deal of time at Max’s Bankruptcy Boot Camp is to teach lawyers how to spot these bogus fees, and just as important, how to prove it in court.

Max has been pursuing these types of issues for years and it’s good to see some of them are finally getting some much deserved press.

Bob Godnik