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Friday, 05 November 2010 12:09

Here Is a Reason Why Mortgage Modifications May Be Moving So Slowly, The Servicer Gets the Vig!

From an astute BoomBustBlogger that reads the fine print buried in the middle of a 250 page servicer agreement...

IF THIS IS A TYPICAL PSA, NO WONDER SO FEW LOAN MODS BECOME PERMANENT.  THE SERVICER GETS 25% OF THE FORECLOSURE PROCEEDS.

http://www.secinfo.com/d1Ax6e.u1u.c.htm

3.12 Realization on defaulted mortgage loans CitiMortgage will use its best efforts, consistent with its customary servicing procedures, to foreclose upon or otherwise comparably convert the ownership of properties securing any mortgage loans that continue in default and as to which no satisfactory arrangements can be made for collection of delinquent payments pursuant to section 3.2. Consistent with the foregoing, CitiMortgage will use reasonable efforts to realize upon defaulted mortgage loans in a manner that will maximize the receipt of principal and interest by the certificate holders, taking into account, among other things, the timing of foreclosure proceedings.

If a deficiency action is available against the mortgagor or any other person, CitiMortgage may proceed for the deficiency. CitiMortgage may retain 25% of the net proceeds received from a mortgagor pursuant to a deficiency action as compensation for proceeding with the deficiency action.

The reader's interpretation was slightly off. The servicer get's to go after the mortgagor in a delinquency action. Please let it be known that this in know way alters the conflicting dynamic that allows for the servicer to push certain mortgagors into foreclosure vs a mod work out. If you are self-employed and judgment proof, you are more likely to get a mod than if you are high income with a steady job with garnishable wages. The profits could very well keep rolling in. Let's engage in some chart porn...

 


As you can see, economic housing activity is horrible, and getting worse. If you are a bank with a mortgage book or trying to lend, you're in the wrong business. If you can simply service the loans without credit risk AND grab a 1/4 of the foreclosure delinquency action proceeds as the vig, your doing better than most drug dealers. Look at how the foreclosure business is panning out... [this line has been modified to reflect the servicer entitlement to delinquency judgments vs foreclosure proceeds]

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Subscribers have access to all of the data and analysis used to create these charts, in addition to a more granular application, by state in the SCAP template and by region in housing price and charge off templates – see

See the following posts for an extensive background on the topics discussed in the video:

Pay Attention to the National Association of Realtors and Their Chief Marketing Agent At Your Own Risk!

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  1. Is the US Government About to Forgive Mortgage Debt? Let’s Crowdsource Our Way Through a Scenario or Two!
  2. Why the Case Shiller Index, Although Showing Another Downturn Coming, is Overly Optimistic and Quite Misleading!
  3. Yes, Housing Prices Have Much Farther to Fall. We’re Talking Years…
  4. Because 105% LTV On Depreciating Property Wasn’t Good Enough for the US Taxpayer…
  5. I Told You Housing Was Going to Take a Downturn for the Worse. I’ll Tell You Something Else, We Are in a Housing Depression! It’ll Get Worse Until Market Forces Rule Over Government Bubble Blowing!
  6. As I Made Very Clear In March, US Housing Has a Way to Fall
  7. It’s Official: The US Housing Downturn Has Resumed in Earnest
  8. The Great Global Macro Experiment, BoomBust Cycles, and the Refusal to See the Truth: Bubble Economics in the Mainstream Media
Last modified on Thursday, 14 July 2011 10:36
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