Is this why Bank of America will not modify my home loan and is instead foreclosing?

By | July 30, 2009

http://xenophilia.com/wp-content/uploads/2009/07/US-Foreclosure-Heat-Map.jpgThis week, the Obama administration summoned mortgage company executives to Washington to demand they move faster to lower payments for homeowners sliding toward foreclosure. Treasury officials called on the companies to hire and train more people quickly to field applications for relief.But industry insiders and legal experts say the limited capacity of mortgage companies is not the primary factor impeding the government’s $75 billion program to prevent foreclosures. Instead, it is that many mortgage companies are reluctant to give strapped homeowners a break because the companies collect lucrative fees on delinquent loans.

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. …

Legal experts say the opportunities for additional revenue in delinquency are considerable, confronting mortgage companies with a conflict between their own financial interest in collecting fees and their responsibility to recoup money for investors who own most mortgages.“The rules by which servicers are reimbursed for expenses may provide a perverse incentive to foreclose rather than modify,” concluded a recent paper published by the Federal Reserve Bank of Boston. …

“If they do a loan modification, they get a few shekels from the government,” said David Dickey, who led a mortgage sales team at Countrywide and Bank of America, leaving in March to start his own mortgage advisory firm, National Home Loan Advocates. By contrast, he said, the road to foreclosure is lined with fees, especially if it is prolonged. “There’s all sorts of things behind the scenes,” he said.When borrowers fall behind, mortgage companies typically collect late fees reaching 6 percent of the monthly payments.

“For many subprime servicers, late fees alone constitute a significant fraction of their total income and profit,” said Diane E. Thompson, a lawyer for the National Consumer Law Center, in testimony to the Senate Banking Committee this month. “Servicers thus have an incentive to push homeowners into late payments and keep them there: if the loan pays late, the servicer is more likely to profit.” …

Data on delinquencies reinforces the notion that servicers are inclined to let problem loans float in purgatory — neither taking control of houses and selling them, nor modifying loans to give homeowners a break.From June 2008 to June 2009, the number of American mortgages that were 90 days or more delinquent soared from 1.8 million to nearly 3 million, according to the realty research company First American Core Logic. During that period, the number of loans that resulted in the bank taking ownership of the home declined to 245,000, from 333,000.

As a home slides toward foreclosure, mortgage companies pay for many services required to take control of the property and resell it. They typically funnel orders for title searches, insurance policies, appraisals and legal filings to companies they own or share revenue with. …

Ultimately, the benefits of delinquency erode incentives for mortgage companies to dispose of troubled loans quickly, say experts, allowing distressed houses to decay and fall in value — a fact of little interest to the servicer.“At the end of the day, it doesn’t matter what the house sells for, because they don’t take that loss,” said Ms. Golant. “Meanwhile, they are collecting all these fees.”

– via MSNBC

5 thoughts on “Is this why Bank of America will not modify my home loan and is instead foreclosing?

    1. Xeno Post author

      Your point may be that they collected no fees in a foreclosure in my case. That is true. The shenanigans (bad luck?) which pushed toward a foreclosure instead of a short sale, however, were off the chart. I could hardly believe it when my short sale was a success, after many unpleasant surprises, just days before the foreclosure sale date. B of A never did modify my loan. Because they refused to modify, they ended up getting much less money than if they’d worked with me. Live and learn. I’ll insist on the 30 year fixed and not an adjustable rate next time. The lesson: If I can’t afford the fixed rate, I simply can not afford the home.

  1. art trujillo

    I HAVE BEEN TRYING TO MODIFY MY HOME LOAN WITH BANK OF AMERIA
    SINCE JUN OF 2009. PER BANK OF AMERIA I HAS DENIED FOR THIS
    PROGRAM.
    WHY IS BANK OF AMERICA NOT SENDING ANY DENIAL LETTER TO HOMEOWNERS?

  2. John Wright

    WHERE IS MY LOAN MODIFICATION BANK OF AMERICA?

    If it walks like a piggy, talks like a piggy, by golly it’s a PIGGY!

    BofA and it’s CEO Brian Moynihan reminds me of that song by John Lennon and George Harrison titled “Piggies” I invite you to listen to this song on youtube and see if it appropriately fits.

    Have you seen the little piggies
    Crawling in the dirt
    And for all the little piggies
    Life is getting worse
    Always having dirt to play around in.

    Have you seen the bigger piggies
    In their starched white shirts
    You will find the bigger piggies
    Stirring up the dirt
    Always have clean shirts to play around in.

    In their ties with all their backing
    They don’t care what goes on around
    In their eyes there’s something lacking
    What they need’s a damn good whacking.

    Everywhere there’s lots of piggies
    Living piggy lives
    You can see them out for dinner
    With their piggy wives
    Clutching forks and knives to eat their bacon.

    John Wright vs. Bank of America Lawsuit at:
    http://news.yahoo.com/s/prweb/20100323/bs_prweb/prweb3766544_1

    When I filed my lawsuit against Bank of America, myself and United Law Group thought of the many others out there in the same situation. It was then that we decided to educate the public on what these piggy banks are doing, as well as unite us all together as one voice. Please help me turn this David vs. Goliath modification process, into a Goliath vs. Goliath.

    Please stand with me and United Law Group and send an email to Bank of America that states that we will no longer tolerate their potentially illegal, fraudulent, irregular and abusive business methods.

    Divided we might have fell America, but united we must stand!

    Please send your email directly to Bank of America and include the following:

    1. Your name
    2. Your complaint concerning your experience with Bank of America.
    3. Please end your email “I support John Wright vs. BofA Lawsuit!”
    4. Please send a copy of your email to johns-wright@hotmail.com
    5. Please send your email to both BofA link below and the CEO email

    BofA Linked Email:
    https://www3.bankofamerica.com/contact/?lob=general&contact_returnto=&state=VA

    CEO Brian Moynihan:
    brian.t.moynihan@bankofamerica.com

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