I own my home outright so this question has nothing to do with me. But in the thread it’s stated that you should always call the mortgage holder and try to work a deal.
But I thought most of these debts have been collateralized and sold as investments in the securities markets. If this is so, then how could there be an identifiable owner of the debt, and how could it be possible to negotiate improved terms? I mean wouldn’t you have to deal with an unidentifiable horde of owners?
Even when the debt has been sold as an investment, there is someone managing the funds going in and out. You don’t send five cents to each owner of the investment when you pay your mortgage bill, after all.
Exactly. There is an owner of the loan (oftentimes, its a trust that owns an asset backed security) and there is a servicer of the loan. The servicer is who collects payments, negotiates forebearance plans, etc.
To complicate matters a bit further, the servicer has a contract with whomever sold it the servicing rights to the loan. That contract has provisions for repurchase of the loan if certain conditions exist. A common condition for repurchase is early payment default (if the loan becomes 90 days delinquent within the first four payments, for example). If these conditions occur, the servicer demands that the transferor repurchase the loan. Assuming the transferor complies, the servicer gets the principal, all accrued interest, and any costs repaid and transfers the mortgage back to the transferor.
There are other conditions that deal with appraisals, loan characteristics, and fraud.
Also, there are forms of insurance involved. MIP, if the loan is FHA, and sometimes PMI for other kinds of loans. If the loan is FHA-insured, the servicer makes a claim on the FHA insurance, HUD pays the insurance claim, often has the servicer complete the foreclosure, and then has its own Management and Marketing contractors sell the property.
HUD might demand indemnity from whomever originated the loan if the loan doesn’t meet HUD’s criteria for insuring a loan. Sometimes they catch errrors like this before the loan goes into default (they do audits and they review underwriting decisions), and of course, they look at loans on which a claim has been made.
No, Ring has a point. And that’s a lot of why untangling this mess will be harder than the original S&L mess of the 1980s.
The mortagee sends his payment to a processor. The processor sends the aggregated payments of lots of folks to the guys who built a particular securitized pool of mortgages. Through a couple more middlemen the money eventually finds its way to the investor who bought a portion of that particular securitized pool.
Everybody at every step has contractual clauses that say they can’t modify the deal after the fact. So the processor does not have the freedom to choose to rework the terms even if they recognize that a rework would be better for themsleves as wellas the mortgageee. … Unless they want to be sending the normal monthly payments on to the middlemen even though they aren’t getting paid the same by the mortgage holder. Can you say “Fat chance?”
Long-winded analogy:
Essentially they’ve created a system sorta like the hamburger business. Every cow in the US is put into a guiant meat grinder. Then the results are made into hash, which is sprinkled into every sort of packaged food you can imagine. Then restaurants combine the results from several packages in a big pot & serve it as a family-style (“please pass the hash”) meal.
And after everybody has eaten a bunch, we discover that 2% of the cows had a deadly disease. Oops …
Quick, remove all the tainted meat from the entire food suppply & assign blame & damages to the responsible parties, all of which can afford very good legal help to try to shift the blame elsewhere.