Loan Servicers and "Mods"

Typically when a loan is financed it is done through a matrix of solutions; however the outcome is the same - you end up making your payments to a "servicer". This servicer maintains your loan, accepts and posts your payments, handles your escrow account (if applicable) and finally fowards monies to the person or persons who actually own the loan.

There has been a lot of talk lately about servicers not being flexible with borrowers in trouble. This is actually the case however the reason is that the borrower ends up talking with a front line collector. If the servicer doesn't perform they simply will lose an entire portfolio of servicing agreements which equates to one thing - money.

Being in the industry we know that in more cases than not the loan owner has no clue what the servicer is doing to try and mitigate a possible foreclosure. And when they find out that the servicer is not working with the borrower they are livid.

For instance, if a borrower falls behind on payments and calls the servicer they will be offered a "Mod" or a Loan Modification. The caveat though, is that the servicer will ask for a lump sum of money up front and then put the borrower through a "trial" period to make suer payments are being made on time. If the borrower is already in trouble how can they come up with a lump sum of money? It's foolish.

Estimates for forclosing on a property are roughly $60,000. Why wouldn't the loan owner want to avoid this expense? Loan owners aren't in the business of owning and selling real estate, they are in the business of making money.

The process is time consuming but never fall for the lump-sum loan modification. And never, ever talk to anyone but the supervisors' supervisor.

With professional help you can avoid the mine field and get right to whom you need to deal with.