Mortgage servicers are more responsible for the persistently high foreclosure rates than either home owners or mortgage owners are, a new report from the National Consumer Law Center argues.
The report, Why Servicers Foreclose When They Should Modify and Other Puzzles of Servicer Behavior, contends that servicers find foreclosing on a delinquent mortgage loan makes them more money than modifying it.
"Loan modifications inevitably cost the servicer something. A servicer deciding between a foreclosure and a loan modification faces the prospect of near certain loss if the loan is modified, and no penalty, but potential profit, if the home is foreclosed," the report said.
Report author Diane Thompson explained that servicers have a great deal of power in these situations because ownership of the mortgages are frequently so fractured among different parties with different interests that the owners are frequently not able to exercise control over how these mortgages are handled.
The report offered eight recommendations for how the situation might be improved, but Thompson said the most important one may be requiring servicers to make modifications to loans rather than simply suggesting it or asking them to, even with incentives meant to get them offer modifications.
© 2025 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
