FORECLOSURES 1 - MODIFICATIONS 0

If you have your home sold at a foreclosure sale and you have not taken all possible steps to stop the sale, shame on you. If you never knew what options were available, shame on the attorneys and the mortgage industry. Keep in mind that a MORTGAGE SERVICER would rather foreclose than modify despite HAMP. The why is simple!

Servicers are paid a fee to handle the payments and billing on a monthly basis, of all loans in the portfolio. If a percentage of those loans get delinquent enough to warrant legal action the servicer wants no part of the process. They are paid for collecting money and sending bills, and referring mortgages to legal firms for foreclosure. THEY ARE NOT PAID FOR MODIFICATIONS! Yes, there is a provision in the Making Home Affordable package that theoretically pays $1,500 to a servicer for each modification, but that only applies to FannieMae and FreddieMac loans.

MOST IMPORTANT, A SERVICER LOSES NOTHING IF A HOUSE IS FORECLOSED AT A HUGE LOSS. The owner of the loan losses but the Servicer does not care. It gets paid for servicing the loan and gets paid for taking it to foreclosure. For example,there is no loss TO THE SERVICER because the loan was for $200,000 and the foreclosure sale resulted in the mortgagee (lender) buying the house back and then selling it for $100,000. No one has any risk of loss except the HOMEOWNER

So, we are left with the problem of a company spending money (salaries) to try to work on a modification by contacting the owner(s) of the loan and asking for permission and not getting paid for the work. Now, most servicing agreements (the contract between the owner of the loan, or the Trustee of the Mortgage Backed Security that actually owns the loan) grant a certain amount of leeway for the servicing company (A.S.C., AHMSI (old Option One), Ocwen, HomeEq, CitiMortgage etc, Chase Mortgage etc., ETC.). This flexibility is very limited. What is not limited is foreclosing, and each foreclosure gets money to the servicer for finalizing the loan.

If this all reads like "Lost in the Fun House" or "One Flew Over the Cuckoo's Nest" or the housing equivalent of FEMA during Katrina in Louisiana, that is because it is counter-intuitive and counter-productive, and costly. The monetary costs can be calculated and written-off as a "cost of doing business". The Servicer or owner of the loan, the Mortgage Backed Security or the Bank, may even receive money from the bail-out programs for foreclosing and "taking a loss"

The good news - It is possible, sometimes, to reverse a foreclosure. I know this because I have done FIVE (5). There are no tricks, no easy ways to do it, and no lender will want to cooperate AT FIRST. Details in the next installment

Author's Copyright by Richard I. Isacoff, Esq, April, 2010

[email protected]
http://www.isacofflaw.com/