Banks That Reap Fees From Bad Loans Won't Want To Help Beleaguered Homeowners
The White House has asked mortgage executives to come up with the manpower to stop precarious loans from becoming foreclosures, but a New York Times story says finance experts say a lack of bodies isn't the problem. It's greed.
Mortgage companies collect fees for appraisals, insurance, legal services and other administrative busywork when homes go into foreclosure, and many make more on delinquent loans than they do on those in good standing. So unless homeowners' loans are through businesses that values their ability to keep roofs over their heads above the bottom line, they're out of luck:
"It frustrates me when I see the government looking to the servicer for the solution, because it will never ever happen," said Margery Golant, a Florida lawyer who defends homeowners against foreclosure and who worked in the law department of a major mortgage company, Ocwen Financial. "I don't think they're motivated to do modifications at all. They keep hitting the loan all the way through for junk fees. It's a license to do whatever they want."
Until legislators give mortgage servicers a reason to help those in trouble, expect the foreclosures to keep piling up.
Lucrative Fees May Deter Efforts to Alter Troubled Loans [New York Times]
(Photo: loreshdw)
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I guess one thing about having no faith in humanity is that shit like this doesn't even surprise me anymore. As long as they have the power, nothing will change. You shouldn't have to be motivated to help someone, it should be a natural instinct, but I guess thats too much to ask.
I'm glad you're motivated to help me. Please send me the contents of your checking account.
This is rather obvious. Even local banks have zero motivation to help people. When they can charge late fees on the late fees of course they will. Banks have no accountability to the people they serve and since most banks now do the same crap people can't just go somewhere else. It is all about how much money they can suck out of you through your checking account or a mortgage.
If the govt. wants to actually do something they need to reform banking and lending laws to force banks to quit doing insane things to people out of greed. Limit how many or how much for late fees, mandate certain work out options for mortgages. They also have to do something about overdraft charges.
@NeverLetMeDown Flawed premise. If the bank profits most from keeping a loan afloat, both the homeowner and the bank profit. If the bank profits more from letting the loan sink, the homeowner profits less or even loses out, and the bank profits more. Clearly the second option is a bad deal, and the potential homeowner shouldn't agree to that, but only after years of abuse does it become clear that the bank is acting like the second and not the first.
Motivated to help others or not, dishonesty and profit at the expense of others are not admirable qualities of self-motivated people. There's profiting from hard work and profiting from other's ignorance or lack of options. Both can make you rich, but one makes you a thief.
Banks exist to make money for their shareholders, not to help people.
Greed in the financial sector and the White House? Why I never!
Blaming this on greed is like blaming plane crashes on gravity. Wake up! Businesses are in business to make money, not help people out. It will make for smarter consumers the sooner everyone figures this out.
Shop wise, there is no such thing as a good sale/loan.
I love how the economists miss or gloss over this part of their recovering of the economy.
"Oh the housing market has increased in sales!" Ok and what is that to the ratio of people loosing homes to foreclosure? Lets not even talk about short sells which where the majority of homes I saw on the market when I was looking. (which they're not moving into a brand new home after selling).
It's gotta be almost equal so it's a wash no growth.
You can't look only at one number and say GROWTH.
@Esquire99: That's an argument for using a credit union, where the account holders are the shareholders.
@Charles Duffy:
exactly. If you don't like the way the banks do business, take your business elsewhere; don't ask the govt. to legislate to protect you from voluntary business transactions.
Ocwen financial....New Co. spelled backwards (same crappy service though)!
@PittDragon: Natural instinct is a matter of perspective. Some animals cannibalize each other when food is scarce... Male Kangaroos attempt to kick the genetalia off of rivals in fights... this seems to be a mixture of both.
What should a bank do if a homeowner is entering foreclosure?
Loan them more money on top of the money that's already not being repaid? That seems foolhardy.
Modify the loan to lower the payments and hope that the people will now pay the mortgage? The bank takes a partial loss (unless the term of the loan is lengthened to make up for the monthly reduction) and the homeowner may still not pay the mortgage.
Forgive the loan and give the house to the homeowner? Not a good business plan, surrendering both the loan and the securing asset.
What options does the bank have that doesn't expose them to more risk?
Like this is really a shock... It's all PR for the banks... they'll say that they'll help out, but to keep shareholders happy and profits up, they'll drag their feet all they can.
Sound like another topic we've talked about recently? Oh yeah, HEATHCARE! They're going to work to keep costs down too... Yeah, right. This will be the next headline - Heathcare costs still going up.
Unless businesses are forced to change their ways, they will never do anything to help the greater good at the expense of profits.
I still have faith in humanity...to do the most evil thins to fellow man. God bless america, land of predatory capitalism: it's our national religion.
BTW, are you a Pitt grad? '87 for me.
So how 'bout we use that same argument against private companies providing health insurance or even health care? I bet you are too much an inconsistent disingenuous FRAUD to use that well reasoned logic.
@Esquire99: Funny you mention that -- banks have long objected to credit unions as unfair competition, resulting in numerous regulations limiting the scope of the latter.
Consumers have limited ability to take their business elsewhere, because the values of "elsewhere" which don't have this conflict-of-interest are limited by regulatory forces in terms of the scope of the audiences they can serve. If banks don't want legislation to protect consumers, perhaps they shouldn't have sought legislation to protect themselves from needing to compete on level ground.
@Jaynor: Wow. I'm filing that one in the mental drawer with "cuddly pandas rip off genitalia of humans who try to hug them."
Frankly, this is basically the naivete of "Business knows best". A lot of people (with the most vitrolic individuals included) say that businesses are guided by the market to become more efficient. Thats wrong, because being inefficient racks up more fees. What the market is saying is this "Do what is needed to get more money". Often, what is needed is predatory loans, abstract securities and corruption.
Business ethics isnt a mandatory class for most business schools. Think about that and what the real effects of market based politics.
@Esquire99: Exactly, I guess some would rather the government have full control of the financial sector since they are soooooo great at managing OUR money lately.
@Badwe: dishonesty and profit at the expense of others are not admirable qualities of self-motivated people. There's profiting from hard work and profiting from other's ignorance or lack of options. Both can make you rich, but one makes you a thief.
True, taking advantage of consumers is pretty scummy, BUT (and that's a big ol'...) it doesn't make you a thief. It makes you a Shylock. Immoral business practices have been with us since time began (anyone remember the Manhattan deal?), but @$$hats who value cash over values usually get caught up in their own webs eventually.
Besides, look at all of the industries that we howl about day in and day out... Cell phones, cable companies, check cashers, most companies that require a service contract and any corporation with a ten-digit annual revenue stream... That's what happens when real capitalism dies and is subverted by monopolistic capitalism...
@Mecharine: (with the most vitrolic individuals included)
Yeah, that would be me.
being inefficient racks up more fees
I have to call BS on that one. Inefficiency near always costs more money, short-term and otherwise. Nay, the problem is that these folks are very efficient in tacking on additional fees. Remember hearing about those computer accounting programs some banks like to use to maximize overdraft fees?
"Do what is needed to get more money"
The real question here is, who is at fault? The "greeeedy" banks or the "greeeedy" shareholders?
Business ethics isn't a mandatory class for most business schools.
Oy. Don't get me started on America's collective MBA efforts. If any college departments needed a massive overhaul, it's our nation's business programs.
"I don't think they're motivated to do modifications at all. They keep hitting the loan all the way through for junk fees. It's a license to do whatever they want."
Wasn't there a law suit by some family which discovered that banks (and their hidden ownership subsidiaries) got more money from servicing defaulted loans with fees and penalties etc than by actually allowing the defaulted borrower to repay and get current?
@tailstoo: Just ask the healthcare industry about how profits, privacy, and shipping records back and forth to overseas transcription firms dovetails...
@Monkey_Business: Only when trying desperately to fix the craven, incompetent results of when Conservatives ran the government for the previous decade-ish.
Easiest, most profitable solution: never give Conservatives the car keys again. Fixed!
@PencilSharp: The better business schools emphasize long-term, sustainable value creation, FWIW. Sure, some greedy asshats get in, but as far as what they teach, they try to emphasize real growth. But there are a lot of crappier ones that don't do this, I'll give you that.
The problem is externalities: laws should ensure that firms have to eat what they kill, not shuffle them off on someone else's balance sheet. There wouldn't be this "irrationality" if banks' mortgages were, by law, kept on their books. Or, for that matter, would the Financiapocalypse have happened.
Sensible, alert regulation, in other words.
I do mortgage mods for a living. The company I work for (and its a big one, you definitely know the name) make basically nothing from these foreclosure legal fees. We're paying off the attorney, who is charging all these fees. In fact, we dont even know what the fees are until we call the attorney.
Thats not to say we eont want to make money. Sure we do. But with the new programs that came out in March, we're doing a TON of mods (i've got a bunch on my desk right now). As Obama has said, the help is going to take time. People need to be patient.
@Trai_Dep: Yes, it is so easy to blame the "conservatives" for all of the problems with this administration has spent more in the few months in office than the last administration did in the entire 2 terms of service. Dont get me wrong, I am a moderate liberal ... to an extent. However, you can't just spend tax payers money like this and escalte our national debt into numbers unimagineable without any consequences. I dont care WHO is president .... NOBODY is invincible to the public.
"this administration has spent more in the few months in office than the last administration did in the entire 2 terms of service."
In a word NO. Not even close. The shear amount of money spent during the Bush years is beyond pale. Government has never been bigger. The Katrina bailout made the new deal look conservative. The banking bailouts were a huge welfare project and Medicare reforms have pretty much put 1/2 the country on socialized medicine. This doesn't even take the defense and terror budgets into account.
@Techguy1138: Old artcile but facts are included ... see below then let me know how you came up with "not even close" as a response to my comment.
@Monkey_Business:
Wow. That was written over 5 months ago and at the time they were already saying that the Obama administration was spending more than the wars in Iraq and Afghanistan, the "war on terror" and Katrina in the last 7 years. The spending since then hasn't slowed one bit.
I have a feeling that the Obama administration will end up spending more by the end of his first year in office than any previous administration's entire combined spending in the country's entire history, even adjusting for inflation, except perhaps during WWII.
@WraithSama:
That made me a bit more curious, so I looked around and found this Bloomberg article. It's also a bit old (April), but not so much as the one Monkey_Business linked. In it, it states that the government has spent, loaned, and pledged over $12.8 trillion, only $1.4 trillion shy of the US' entire GDP of 2008. I wouldn't be surprised if that mark has been passed by now, 4 months later.
ready your bingo cards: credit union FTW!
i bought a house in june. i made the offer in mid may, the appraisal was in late may, the bank took the $350 appraisal fee out of my account as expected and agreed to.
and then:
6/3/2009 Credit Memo RE APPRAISAL FEE REFUND $75.00
i never would have known that i was due any back since the loan officer had called to tell me the appraisal was fine and i didn't make the payment to the appraiser directly or see a receipt.
so the credit union was honest about the overpayments associated with my mortgage on that and on another overestimated payment that got me a check $90 back at closing.
@Badwe:
When I enter a legal agreement with another party, I expect them to hold up their end of the agreement. I don't expect them to be my friend, nor should they expect me to be theirs. If Citi's having a bad quarter, no, they may NOT increase the interest rate on my fixed rate mortgage to help themselves out. By the same token, no, they do NOT need to renegotiate my mortgage instead of foreclosing, if they view it in their interest not to.
That would mostly be all the banks.
The US Government can stomp their feet all they want and say they are giving cash to banks, but they can't force the banks to give loans. What reason would they WANT to help people in a foreclosure state, they can make more money not helping.