Home > Blogs > Barbara S. Duncan > Barbara Duncan's blog

A different perspective on why so many mortgages don't get saved.....New York Times Article

By Barbara S. Duncan

Real Estate Agent with RE/MAX Advantage

August 02, 2009 03:26 AM

The business section of our state newspaper, Arkansas Democrat-Gazette, had an article that proved to be quite interesting to me. It says the fees that are charged on delinquent mortgages are lucrative and keep the companies that service the loan in great shape.

Even when the borrowers stop paying, the companies that service the loan collect fees out of the proceeds when homes are ultimately sold in foreclosure. The longer borrowers remain delinquent, the greater opportunities exist for their collecting fees for insurance, appraisals, title searches and legal services. They keep hitting the loan all the way through for junk fees and essentially have a license to do whatever they want.

It is actually to their benefit to keep the house in this state of limbo while the distressed house continues to decay and fall in value.

I'd never thought of this.....but.....we drive by houses all the time that we know are in some danger and the house continues to look worse and worse. We wonder why the bank hasn't taken it yet so that it can be resold.

Then we also get all these orders for $50 bpos. Are the servicers charging the company for a full appraisal and letting the real estate agents do it "cheap" and keeping the rest?

Go here and read the whole article and see what you think. The article is actually from The New York Times.

Re-Blog

Comments(13)

Comment

Show All Comments

Sort:

David L. Montgomery

MULAMONT REALTY, LLC - Pontiac, MI

There are laws governing when the bank can formally take possession but in the meantime they have to "preserve and keep the property secure".

I do BPOs for some providers and I had the opportunity to see a balance and fees statement sent to a client I had. The $50 BPO had been upcharged to $145

Aug 02, 2009 03:43 AM

Wayne Johnson

Coldwell Banker D'Ann Harper REALTORS® - San Antonio, TX

San Antonio REALTOR, San Antonio Homes For Sale

The article clearly outlines one of the major reasons that loan modifications and other work-out solutions are not being pursued vigorously. As investigative reporters always say, "follow the money". As long as incentives exist for stringing borrowers along, expect more of the same.

Aug 02, 2009 03:47 AM

John Mulkey

TheHousingGuru.com - Waleska, GA

Housing Guru

Barbara, yes, there are several reasons mortgages don't get saved, and most relate to money for the mortgage company or servicer.

Aug 02, 2009 03:50 AM

Lenn Harley

Lenn Harley, Homefinders.com, MD & VA Homes and Real Estate - Leesburg, VA

Real Estate Broker - Virginia & Maryland

Which, of course, is why I've been saying for several years that banks often make out better with a foreclosure than a short sale.

In a past life, I was a bankruptcy trustee and reviewed numerous Complaint for Foreclosure docs. The arrearage and fees begin accumulating and compounding after the first 30 days.

All of that becomes part of the money the mortgage company collects from the insuring or guarantee source for which the buyer paid.

Plus, they have tax advantages.

Not to worry, the bank will not be put out of business by a few foreclosures. They have all the laws in place to protect themselves.

Sadly, no one protects the American home owner.

Aug 02, 2009 03:57 AM

Tina Merritt

Nest Realty - Blacksburg, VA

Virginia Real Estate

While this is an interesting theory, that's all it is, a theory. There is no proof in the story that this really is happening. Too bad they couldn't research the story better to support their statements.

Tina in Virginia

Aug 02, 2009 04:00 AM

Steven L. Smith

King of the House Home Inspection, Inc. - Bellingham, WA

Bellingham WA Home Inspector

Barbara,

That is interesting. It would explain the way the banks act so often, where they let something fall apart as they smile from afar.

Aug 02, 2009 04:11 AM

Patricia Kennedy

RLAH@properties - Washington, DC

Home in the Capital

Barbara, thanks so much for the link the the NY Times article. What a read!

And Tina, I don't know what more the Times could have done - I think the quoted sourses who are named, close to the subject, and support totally the thesis of the article.

Aug 02, 2009 04:38 AM

Amanda Wilson

EWM International Realtors, Inc. - Fort Lauderdale, FL

Real Estate Advisor

The banks also have the American taxpayer to bail them out!

Aug 02, 2009 04:54 AM

Barbara S. Duncan

RE/MAX Advantage - Searcy, AR

GRI, e-PRO, Executive Broker, Searcy AR

David, I'll bet that happens often! I've always felt the bpo payment was too low and that they really should be paying for a full fledged appraisal. I can see doing a driveby and seeing if it is occupied but too often they want fully filled out forms with adjustments!!

Aug 02, 2009 05:37 AM

Wayne, I'd never looked at it from this view but it makes sense to me. I drive by a house everyday that was in foreclosure awhile back and the roof gets worse and worse. By the time it comes on the market it will probably be leaking.

Aug 02, 2009 05:38 AM

John, it looks that way.

Lenn, you are saying very aptly what the article was saying. If you worked in that position a long time ago when foreclosures were few, just imagine how much money is rolling in now. It's like bank charges on a hot check. They probably love for their good customers with money in the bank to have a few hot checks. At $35 to $45 per check, they make money!

Tina, sounded pretty accurate to me. But that's why I said it is a different way of viewing foreclosures.

Steven, I think there's room for investigation in this. Call in the supreme investigator, Nutsy!

Patricia, thanks for reading it as I did. Sorta shocking.

Amanda, there's lots to think about.

Aug 02, 2009 05:43 AM

Bob & Carolin Benjamin

Benjamin Realty LLC - Gold Canyon, AZ

East Phoenix Arizona Homes

Thanks for sharing-- sounds pretty accurate to me as to why we see things happening to the home owner that are happening.

Aug 02, 2009 07:00 AM

Bob and Carolin, thanks for stopping by my blog.

Aug 03, 2009 12:30 AM