Those Facing Foreclosure Looking For Help
As foreclosures rise, thousands of Americans at risk of losing their home are trying to work out new loans. In Washington, Congress is debating a massive rescue aimed at 500,000 people. And all of the efforts to keep people in their homes run through the mortgage servicers, who are responsible for deciding which troubled borrowers will get more affordable mortgages.
Servicers are being overrun by the foreclosure crisis. These firms were set up to prrocess payments, not do loan workouts on a massive scale. As such, they lack the financial incentive to help homeowners workout new loans.
Servicers are required to act in the best interests of the investors, and how to define “best interests” is often fuzzy. Writing down loans that would go bad might maximize return to investors, but the investors may object anyway as they see the values of their investments diminish. Servicers don’t want to face lawsuits.
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