Not All Banks Are Equal!

New Report Indicates Servicers have Incentive to Foreclose!

A report just released from the National Consumer Law Center indicates Mortgage servicers have found it beneficial to foreclose on homeowners rather than offer loan modifications.

In the NCLC report author Diane E. Thompson, an attorney with NCLC, said, "The country is in the midst of a foreclosure crisis of nprecedented proportions. Millions of families have lost their homes and millions more are expected to lose their homes in the next few years. With home values plummeting and layoffs common, homeowners are crumbling under the weight of mortgages that were at best only marginally affordable when made. One common sense solution to the foreclosure crisis is to modify the loan terms in more instances. Foreclosures are a costly ordeal for the homeowner, the lender, and the community. Yet they continue to outstrip loan modifications because servicers have no incentive to help borrowers stay in their homes."

Loan servicers collect payments and "service" mortgages on behalf of Banks and Lenders. The servicers are also in charge of modifying distressed loans or processing a foreclosure. Homeowners seeking to "save" their homes via loan modification or sell via a short sale usually deal with the Bank's loan servicer.

It has been discovered that these servicers have financial incentives which encourage them to ignore interests of the homeowner and deny principal reductions or interest rate adjustments because it's more profitable to offer repayment options or forbearance agreements (which just moves the unpaid balance to the end of the loan) and fails to ease a homeowner's debt.

The NCLC report also states, As the NCLC report notes: "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."

In closing the Report provided for Reforms and Actions steps. In the following excerpt, the report stated, recommended reforms: Thompson said: "The people who could change the way servicers are doing business - Congress, the Administration, and the Securities and Exchange Commission, and the market participants who set the terms of engagement, i.e. the credit rating agencies and bond insurers, have failed to provide servicers with the necessary incentives to reduce foreclosures and increase loan modifications."

Basically, until "true reforms" are made to the system, Mortgage Servicers will continue to be profit motivated and unwitting homeowners will pay the price!

If you face foreclosure and have exhausted other options a short sale may be the best avenue to minimize the financial damage to your credit and allow you to begin to rebuild from a more solid foundation. A short sale is when the lender approves the sale of the home for less than what the debtor owes on the loan. Short Sales can be a complex transaction and homeowners should always seek the advice of a professional competent in this area of real estate transactions.

CORE1, LLC provides short sale assistance to qualified homeowners at no cost or obligation. For more information feel free to visit their site at TheShortSaleKey.com

ABOUT NCLC: The National Consumer Law Center is a non-profit organization that seeks marketplace justice on behalf of low-income and vulnerable Americans. NCLC works with, and offers training to, thousands of legal-service, government and private attorneys, as well as community groups and organizations representing low-income families. Their legal manuals and consumer guides are standards of the field.

Learn more on their Web site: www.consumerlaw.org.

NOTE: A copy of the new NCLC report is available for download at

http://www.consumerlaw.org.

Steve Townsend

Managing Principal, TWI, LLC