A Perspective On The Mortgage Loan Servicing Business

A blogger on the Finance Blog at Conde Nast Portfolio.com offers this perspective on the mortgage servicing business:

• If you simply have a lender and a borrower, then often the servicing arm of the lender can be incredibly valuable to both sides: a good loan servicer will find a way to keep the borrower in their house, and maximize the value of the loan for the lender, which otherwise might have to write it off or go through a painful, expensive, and protracted foreclosure process.

• What happens, however, when the servicer is a for-profit entity not connected with the lender? Suddenly, there's a conflict between saving money for the lender, on the one hand, and making money for itself, on the other. A simple mortgage renegotiation is not very lucrative for a servicer; a fully-blown foreclosure, on the other hand, provides much more in the way of opportunities to profit.

(If true, this adds support to the proposition that a for-profit mortgage servicing company with no connection with the institutions and trusts that actually own the homeowners' mortgages, would be financially better off driving a homeowner into foreclosure than trying to arrange a loan modification or some other type of mortgage payment workout.)

For more, see Worrying About Mortgage Servicers' Fate.

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