Newsletter
Mortgage Service Providers Would Rather Take a Home than Work With Owner … But You Can Beat Them
Date: 10/22/2009By Grant Perry
October 22, 2009 -- According to the National Consumer Law Center, the rules of the game let mortgage service providers make more money foreclosing on a home than helping homeowners modify their loan terms.
If you were a mortgage service provider, which would you do?
In most foreclosures, it’s the homeowner, lender, or investor that takes, the hit, says Diane E. Thompson of the NCLC. But mortgage service companies who typically manage the mortgage and collect the payments, don’t lose at all.
Thompson says that modifying a loan usually costs the mortgage service provider something, but they can actually make money on a foreclosure.
According to Thompson, mortgage service providers recover all their expenses in the event of a foreclosure on a securitized mortgage. Because more than two-thirds of all mortgages since 2005 are securitized, mortgage services providers are first in line to collect, even ahead of investors.
On the other hand, the rules for recovery of expenses if a loan is modified or restructured aren’t so clear, so the incentive is to foreclose and take the sure money.
However, for most Americans buying real estate abroad, foreclosure never becomes an issue since most deals are cash.
Historically low prices for real estate in countries such as Ecuador, Argentina, Mexico, Belize and elsewhere make it possible to purchase a home for cash or to secure direct financing with sellers or developers.