Loan Servicers – Nobody seems to like them

While looking at various news sources today, I ran across an article from the Kansas City Star that either attempted to write their story in a simplified fashion, or they don’t have a very strong grasp on how loan servicing works. The accuracy improves when the article discusses loan servicing and how well servicers handle loan modifications.

Housing advocates say homeowners still face “reluctant lenders,” said Irwin Trauss, an attorney who represents low-income homeowners for Philadelphia Legal Assistance. He recently testified at a hearing of the Congressional Oversight Panel, the watchdog that monitors the Treasury’s Troubled Asset Relief Program, better known as TARP, or the bank bailout bill.

Trauss said that Bank of America, at least through July, told homeowners that they couldn’t participate in the program when they should’ve been allowed to do so, and he alleges that Saxon Mortgage forced one of his clients into bankruptcy without providing a valid reason for turning down her modification request. Trauss’ comments were echoed by other housing advocates, who’ve found mortgage servicers slow to respond and confused about modification rules.

“Servicers look for reasons to avoid making the modifications when they are most needed, rather than for opportunities to make them,” Trauss said.

There is, of course, two sides to every story, but it is fairly unusual for loan servicers to speak about their business and in most situations, they cannot discuss an individual case due to borrower privacy issues. The one thing that does seem to stand out, and is reported from almost everyone who has been behind on their mortgage, is that the collection people working for the servicers aren’t considered the friendliest people around. This article reminded me of a post on one of our discussion boards talking about just how bad loan servicing can be.