austin-on-lift-in-breckenridgeLoan modifications and the wrong incentives

I’ve been accused by some as being a workaholic  and in some instances there is evidence that it is true.  But the picture to the right that I took of my son is proof that I was in attendance at a family  reunion in Breckenridge, Colorado and tried to have a balanced life.  I don’t know how it happened but an interesting real estate article found  me at our 10,000 foot  retreat. It was waiting for me at the local City Market Food Store, and came in the form of an article from The New York Times about loan modifications that adds another piece to a sometime crazy puzzle.

Incentives favor delinquent loans

In the July 30, 2009 edition, the article “Late-Fee Profits May Trump Plan To Modify Loans”, discussed why banks and mortgage companies that service loans have been reluctant to assit homeowners in modify existing loans in spite of the Government’s $75 billion program to prevent foreclosures.  One of the elements in this plan is to provide a servicer that modifies a loan $1,000, and then $1,000 a year for the next three years.  However, the real money lies somewhere else.  According to the article, “Even when borrowers stop paying, mortgage companies that service the loans collect fees out of the proceeds when homes are ultimately sold in foreclosure. So the longer the borrowers remain delinquent, the greater the opportunities for for these mortgage companies to extract revenue – fees for insurance, appraisals, title searches and legal services.”

To see the complete article, click on Profit from fees trump loan modifications.