Just in case you’re still wondering why the big banks are engaged in a seemingly insatiable foreclosure feeding frenzy, this article on MSNBC’s Economy Watch about the blatant and ongoing paperwork fraud at Wells Fargo pretty much sums it up.
“Companies that manage mortgages typically collect only a small fee for each loan that is current. But loans in foreclosure generate a laundry list of foreclosure-related revenues, including legal fees, late charges, back interest, home inspections and maintenance. Last year, Wells Fargo earned $3.3 billion in profits from its mortgage servicing business, or about 20 percent of the bank’s total net income, according to its annual report.”
Most logical, ethical people have a real problem understanding why bank executives seem to think it makes any sense except in very limited circumstances to foreclose, leave a house sitting derelict and then eventually sell it for way less than the original homeowner’s mortgage. Why, we wonder, don’t the banks work with their borrowers who want to pay but are in temporary difficulties simply to re-structure their mortgage loans? Why does it seem that the big banks like Wells Fargo go out of their way to work against borrowers?
Most people are well aware that the modified mortgage is going to cost them more in the long run – lower payments today translate into longer terms and more interest. And wouldn’t the banks end up making more, too? How is that not an incentive for Wells Fargo and the rest of the big banks to enthusiastically help their mortgage customers instead of playing insidious little paperwork games, refusing to return calls or answer letters, and even outright lying to get out of modifying mortgages?
To fully understand how completely messed up the relationship between homeowners and banks has become, those of us who have mortgages need to stop thinking of ourselves as the banks’ customers. Just because you exercised your right to chose which bank with which to initiate the mortgage on your home, you shouldn’t make the mistake of thinking that bank still thinks it owes you any of the courtesies generally expected by customers.
Why? Because without your consent or even your knowledge, your bank sold you out. Or at least it sold your loan to an undisclosed “investor” or “investors.” During the mortgage boom, this probably happened before the ink was even dry on those pages and pages of legalese you signed at closing. (And there’s some evidence showing up that your loan might have been sold multiple times, which should be a big no-no!)
The investor doesn’t know you, nor did it have anything to do with creating the structure of your loan. It (whether it’s another bank or an investment fund of some kind) is only interested in your loan as part of a package deal purchased from a bank in a speculative venture, a sort of bet that it will make more money collecting the interest on all those mortgages than it paid the bank up front for the bundled loans.
But the investor doesn’t necessarily have the desire or the organizational resources to do the boring administrative tasks associated with collecting those payments. Enter the “loan servicer,” the entity formerly known as the bank you think of as your mortgage lender.
But wait, you say, I’m still making my mortgage payments to that same bank I chose when I went looking for a mortgage. What do you mean they don’t own the loan?!
What your bank did was contract with the entity (or entities, who knows?) to which your loan was sold for the right to “service” that loan. That means, in simple terms, that the bank performs administrative tasks such as sending out payment notices and processing incoming payments as a service to the investor. For a fee.
Sounds benign, right? But look closer at what happened here. All of a sudden, you went from being a bank’s valued customer to being, well, a number. After your bank sold your loan and contracted back the servicing rights, the investor became the bank’s customer. Not you.
And the investor has no clue who you are. Your loan is just one of a list of numbers in a whole block of loans bought based on a set of criteria such as geographic region, length of term and age of the loan. The investor’s customers are its shareholders or the people who have pooled their money into some kind of fund, such as a retirement plan. Not you.
That’s because you the homeowner are, to put it rather bluntly, just like a cow kept only to give milk. As long as you keep putting out (paying your mortgage every month), everything is probably just fine and you go on blissfully unaware that your bank has stopped considering you a valued customer. But stop giving milk/paying your mortgage for any reason and you find out pretty quick that your status isn’t what you thought. You’re ripe for abuse and/or neglect, but not for aid and assistance.
Ummm. You do know what happens to cows that stop giving milk, right? No, they do not retire to green fields to live out their days in peace. They are send off to the slaughterhouse and eaten.
Any of you out there fighting for a mortgage mod feel like that’s just what your bank would like to do with you?
Time to get over the delusion that your bank is going to suddenly wake up and start dealing with you in a professional and ethical manner as befits a valued customer and realize you are no more than one of millions of cash cows who have run dry.