On My Soap Box

Ordinarily I try not to choose sides in the mortgage crisis debate. Was it caused by irresponsible borrowers, unscrupulous lenders, greedy investors? Short answer, yes. There's more than enough blame to go around.

But when I read an article in the Times yesterday morning about mortgage service companies dragging their feet on loan modifications because they can make more money from delinquencies and foreclosures...well, my stomach turned.

As many of you know, many home loans are owned by investors, but serviced by mortgage servicing companies. These companies collect and disburse payments and, among other things, notify borrowers who are in default. They also are responsible for negotiating loan modifications and/or short sales for borrowers in distress. While the new Obama administration plan offers financial incentives for mortgage service companies to modify loans for borrowers in distress, the Times article reveals that they can make far more money by allowing borrowers to languish in default.

We happen to know people who are working to get their loans modified. While these people are not clients of ours, they have sought our advice as friends and professionals. I have been amazed (though not surprised) by the challenges they've faced. It is all but impossible even to get a mortgage service representative on the phone. I chalked this up to gross understaffing are mortgage service companies coupled with the backlog of borrowers seeking relief. It appears that the reasons may be far more insidious.