Mortgage servicer

A mortgage servicer is the company that borrowers pay their mortgage loan payments to. Mortgage servicers either purchase or retain mortgage servicing rights that allow them to collect payments from borrowers in return for a servicing fee. The duty of a mortgage servicer varies, but typically includes the acceptance and recording of mortgage payments; calculating variable interest rates on adjustable rate loans; payment of taxes and insurance from borrower escrow accounts; negotiations of workouts and modifications of mortgage upon default; and conducting or supervising the foreclosure process when necessary.^[1]

Many borrowers confuse mortgage servicers with their lender. A mortgage servicer may be a borrower's lender, but often the beneficial rights to the payment of principal and interest on mortgages are sold to investors such as Fannie Mae, Freddie Mac, Ginnie Mae, FHA, and private investors in mortgage securitization transactions.

Controversies

Reluctance to modify mortgages, prevent foreclosures

In July 2009, the mortgage servicing industry received criticism for many servicers' apparent unwillingness to modify adjustable rate mortgages held by homeowners on the verge of foreclosure in the United States. Despite pressure from President Barack Obama's Administration on mortgage servicers to permanently modify thousands of loans to make them more affordable and prevent foreclosures, allegations arose that the servicers had an apparent conflict of interest which led them to stop or slow the modification process in many cases. Industry insiders and legal experts cited the lucrative fees which mortgage servicers charge to delinquent homeowners as the main reason behind the slow and difficult process of modifying a mortgage.^[2]

Accusations of "robo-signing," foreclosure document fraud

In October 2010, many major mortgage servicers in the United States came under intense media and government scrutiny for their alleged mishandling of the large amount of foreclosures moving through the court system. Allegations included foreclosures being processed with missing or questionable paperwork (including paperwork showing proper chain of title on the part of the investment bank), falsifying dates and other information in foreclosure documents and "robo-signing," the practice of paying under-qualified personnel to sign hundreds or thousands of foreclosure documents a day, often without properly reviewing the documents. Homeowners are creating sites online to discuss these issues on sites such as Face Book's "Homeowners Against Mortgage Servicing Fraud" and MSFraud dot ORG site. Many Youtube videos are available to help educate victims done by Attorney and securities expert Neil Garfield. Mr Garfield also has a Living Lies Blog site. Other sites include the Consumer Warning Network by Attorney Chris Hoyer in Florida. ^[3]

Congressional hearings

The alleged problems regarding foreclosure fraud were so widespread and popularized by the media that U.S. Congresswoman Maxine Waters announced that the United States House of Representatives subcommittee on housing issues will hold a hearing on November 18, 2010 to examine problems emerging in the mortgage servicing industry.^[4]

Illegal foreclosures and mortgage overcharges on active-duty military members

The Servicemembers Civil Relief Act (SCRA) of 2003 protects United States active-duty military members from civil court proceedings (such as foreclosure) while serving their country. The SCRA also limits the interest rate which an active-duty military member can be charged on any outstanding debt (secured before their deployment) to 6% (six percentage points). In spite of these special protections granted to active-duty military members, a string of news reports have surfaced between 2005 and 2011 in which large mortgage servicers and investment banks illegally overcharged military families with members on active duty on their mortgages, with several large banks such as Wells Fargo and JP Morgan Chase even illegally foreclosing on American Armed Forces families.^[5]

In January 2011, JP Morgan Chase, the United States' second-largest bank based on market share, admitted that it had illegally overcharged some 4,000 active-duty military members on their home mortgage and accidentally foreclosed on as many as 14 families. Facing pressure from a United States Marine's lawsuit over the violations, Chase announced that it would work to reverse the illegal foreclosures and was mailing $2 million to the 4,000 military families as compensation, implying the mortgage bank overcharged each family an average of $500 on their mortgage. Lawsuits regarding the overcharges are still pending as of January 2011.^[6]

In spite of this recent media attention, relief from illegal foreclosures and mortgage overcharges may not be easy or quick for some military members; One National Guard Sergeant has been fighting Deutsche Bank in the courts over his illegal 2004 foreclosure for over four years, with no resolution as of January 2011.^[7]

Investigation by the US Department of Justice

The repeated news headlines pointing to abuse of American active-duty military members by mortgage servicers and rampant violations of the Servicemembers Civil Relief Act prompted the United States Department of Justice to launch an investigation into various mortgage companies' practices regarding the servicing of military member's mortgages. While the DOJ would not identify the banks at the center of its investigation, Delaware Attorney General Beau Biden sent a letter to several large lending institutions demanding they review their operations in order to safeguard active-duty military members from illegal mortgage overcharges and fraudulent foreclosures. Those institutions included Citigroup, Inc., Bank of America Corp., Wells Fargo & Co., PNC Financial Services Group Inc., Ally Financial Inc. and Goldman Sachs Group Inc.'s Litton Loans.^[8]

References

1. ^ "FDIC Law, Regulations, Related Acts". Federal Deposit Insurance Corporation. 1992-11-02. http://www.fdic.gov/regulations/laws/rules/6500-2520.html#fdic6500res35002. Retrieved 2010-11-10. 
2. ^ Goodman, Peter (2009-07-29). "Lucrative Fees May Deter Efforts to Alter Loans". The New York Times. pp. 2. http://www.nytimes.com/2009/07/30/business/30services.html?_r=3. Retrieved 2010-11-10. 
3. ^ "Flawed Paperwork Aggravates a Foreclosure Crisis". The New York Times. 2010-10-03. pp. 2. http://www.nytimes.com/2010/10/04/business/04mortgage.html. Retrieved 2010-11-12. 
4. ^ "House panel sets hearing on foreclosure problems". Reuters. 2010-10-19. pp. 3. http://www.reuters.com/article/idUSTRE69I05G20101019. Retrieved 2010-11-10. 
5. ^ Henriques, Diana (2005-03-28). "A Law Gets Lost; Creditors Press Troops Despite Relief Act". The New York Times. pp. 3. http://query.nytimes.com/gst/fullpage.html?res=9A05E1D9153FF93BA15750C0A9639C8B63&scp=2&sq=. Retrieved 2011-01-30. 
6. ^ Kopecki, Dawn; Margaret Cronin Fisk (2011-01-18). "JPMorgan Mails $2 Million to Military Families for Overcharges, Lost Homes". Bloomberg. pp. 1. http://www.bloomberg.com/news/2011-01-18/jpmorgan-mails-2-million-to-military-families-for-overcharges-lost-homes.html. Retrieved 2011-01-30. 
7. ^ Henriques, Diana (2011-01-26). "A Reservist in a New War, Against Foreclosure". New York Times. pp. 2. http://www.nytimes.com/2011/01/27/business/27foreclose.html. Retrieved 2011-01-30. 
8. ^ Benoit, David (2011-01-28). "DOJ Investigating Violations Of Military Lending Protections". Fox Business News. pp. 1. http://www.foxbusiness.com/markets/2011/01/28/doj-investigating-violations-military-lending-protections/. Retrieved 2011-01-30.