Will fining lenders help with Modifications?
On December 1, 2009, the Treasury announced that is was going to begin fining services that fail to permanently modify as many mortgages as the government thinks they should be. The press release says:
Servicers failing to meet performance obligation under the Servicer Participation Agreement will be subject to consequences which could include monetary penalties and sanctions.
Originally, mortgage lenders and services were encouraged to modify the mortgages of troubled homeowners through government incentives. Through the Treasury’s homeowner-assistance program, the servicers are paid $1,000 in return for reducing interest rates or extending loan terms when economically sensible.
When a mortgage is modified, it must first go through a trial phase. If the trial phase goes well, then the modifications should become permanent. The problem however is that in many cases these modifications were not made permanent, yet the services would still collect the incentive.
Although the idea of placing sanctions and fining those servicers that are not cooperating as they should sounds like a step in the right direction, it may be nothing more then empty threats. Since the program is voluntary for services, servicers may ultimately decide that the incentive isn’t worth remaining in the program. In the end, the biggest threat may simply be moral suasion. By publicizing the poor performance of many servicers, the negative publicity may have a much higher impact on their bottom line then the government incentive, and has caused some banks to already step up their modification activities.
Should you have any questions or need further information,
please don’t hesitate to contact me, (775) 220-1630
Or visit my blog at www.SellingNorthernNV.com
Joshua Talayka
Chase International
Office: 775 850 5900
Toll Free: 877 922 5900
Cell: 775 220 1630
Fax: 775 850 5901
985 Damonte Ranch Pkwy, Ste. 110
Reno, Nevada (NV) 89521
About The Author
Mortgage lending is the primary mechanism used in many countries to finance private ownership of residential and commercial property (see commercial mortgages). Although the terminology and precise forms will differ from country to country, the basic components tend to be similar: