Mortgage Servicing Companies Reluctant To Work Out Loans With Financially Distressed Homeowners

ABC World News Tonight ran a story last Friday regarding the reluctance of mortgage loan servicing companies to work out home loans for homeowners in financial trouble.

The reason: According to the ABC story, mortgage loan servicers are not set up as a customer service business. The personnel is both overwhelmed with the number of cases of homeowners in financial trouble and they are under-trained for working out the loans. The servicing companies also have no financial incentive to work out the loans. In fact, the loan servicing business actually becomes more profitable for the companies when home loans go into default, allowing them to clip homeowners in trouble with late fees and other default-related charges. In addition, the mortgages are turned into securities bought by investors around the world who do not negotiate with individual homeowners.

For more, watch Demystifying the Mortgage Mess.

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