# Foreclosures on a home **URL:** \ **Category:** Factual Questions\ **Created:** [November 4, 2007, 3:17am UTC](https://boards.straightdope.com/t/foreclosures-on-a-home/425159 "2007-11-04T03:17:54Z")\ **Posts on this page:** 8\ **Page:** 1
**Author:** ![Ring](https://avatars.discourse-cdn.com/v4/letter/r/6a8cbe/32.png) [@Ring](https://boards.straightdope.com/u/Ring)\ **Post date:** [November 4, 2007, 3:17am UTC](https://boards.straightdope.com/t/foreclosures-on-a-home/425159/1 "2007-11-04T03:17:54Z")
> **[Forecloure on a Florida home..](https://boards.straightdope.com/sdmb/showthread.php?t=442667)** > > Okay, straight question, and please no judgements or extra info: Today is Nov. 2, and I am current on my home mortgage in the state of Florida. If I quit paying today (and miss the next scheduled Dec. 1 payment) and ignore all notices and phone... The other, now closed thread, is above. 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? ---
**Author:** ![ENugent](https://avatars.discourse-cdn.com/v4/letter/e/4af34b/32.png) [@ENugent](https://boards.straightdope.com/u/ENugent)\ **Post date:** [November 4, 2007, 3:31am UTC](https://boards.straightdope.com/t/foreclosures-on-a-home/425159/2 "2007-11-04T03:31:17Z")
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. ---
**Author:** ![Moriarty](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/moriarty/32/49_2.png) [@Moriarty](https://boards.straightdope.com/u/Moriarty)\ **Post date:** [November 4, 2007, 1:18pm UTC](https://boards.straightdope.com/t/foreclosures-on-a-home/425159/3 "2007-11-04T13:18:37Z")
[QUOTE=ENugent] 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. [/QUOTE] 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. ---
**Author:** ![Gfactor](https://avatars.discourse-cdn.com/v4/letter/g/9de053/32.png) [@Gfactor](https://boards.straightdope.com/u/Gfactor)\ **Post date:** [November 4, 2007, 1:43pm UTC](https://boards.straightdope.com/t/foreclosures-on-a-home/425159/4 "2007-11-04T13:43:32Z")
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. ---
**Author:** ![LSLGuy](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/lslguy/32/5813_2.png) [@LSLGuy](https://boards.straightdope.com/u/LSLGuy)\ **Post date:** [November 4, 2007, 1:45pm UTC](https://boards.straightdope.com/t/foreclosures-on-a-home/425159/5 "2007-11-04T13:45:41Z")
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. ---
**Author:** ![Gfactor](https://avatars.discourse-cdn.com/v4/letter/g/9de053/32.png) [@Gfactor](https://boards.straightdope.com/u/Gfactor)\ **Post date:** [November 4, 2007, 2:28pm UTC](https://boards.straightdope.com/t/foreclosures-on-a-home/425159/6 "2007-11-04T14:28:43Z")
[QUOTE=LSLGuy] Everybody at every step has contractual clauses that say they can’t modify the deal after the fact. [/QUOTE] Here are some examples of clauses from Loan Servicing Agreements: > [@](#): > > Servicer shall: . . . (f) grant appropriate payment deferrals, but not of the maturity of the Loan unless approved by Lender or the Majority in the case of a Multi-Lender Loan; [http://64.233.167.104/search?q=cache:mefatin50ksJ:www.plmweb.com/Forms/LA%2520MASTER%2520-%2520NEW.pdf+loan+servicing+agreement&hl=en&ct=clnk&cd=1&gl=us&client=firefox-a](http://64.233.167.104/search?q=cache:mefatin50ksJ:www.plmweb.com/Forms/LA%2520MASTER%2520-%2520NEW.pdf+loan+servicing+agreement&hl=en&ct=clnk&cd=1&gl=us&client=firefox-a) > [@](#): > > Without limiting the generality of anything contained herein, Lender hereby authorizes and empowers USLS, on Lender’s behalf, to. . . . (4) consent to modifications of the Loans if the effect of any such modification will not materially or adversely affect the security provided by the real or personal property in connection therewith; > **[error.aspx](https://mld.nv.gov/error.aspx?aspxerrorpath=%2FDocuments%2Frevisedloanservingagr.pdf)** > > 26.63 KB This one has a clause like **LSLGuy** describes: > [@](#): > > 2.3 The Participant is not authorized or empowered to waive or vary the terms of the Mortgage Loans, except as may be required by applicable law or regulation of the Federal Housing Administration (FHA) orthe Department of Veteran Affairs (VA) or, if applicable, the provisions of any policy of primary PMI, and will not at any time waive or consent to the postponement of strict compliance on the part of any mortgagor with any term, provisions, or covenant of the Mortgage Loans except to the extent that procedures for forbearance or indulgence may be permitted under the Mortgage Loan Policy or required by applicable law or regulation. > > 2.4 Notwithstanding the provisions of subsection 2.3 of this Section 2 and the provisions of any applicable FHA insurance or VA guaranty or the applicable rules or regulations relating thereto or any applicable policy of PMI, the Participant may not waive (or consent on behalf of the Board pursuant to) the provisions of any Mortgage Loan to the effect that the mortgaged premises may not be assumed without the prior written consent of the Board. > > 2.5 The Participant will promptly report to the Board all actions taken with respect to any Mortgage Loan, including, without limitation, any waivers or variances made pursuant to applicable FHA, VA, or PMI requirements. [http://www.investmentmt.com/FormsApps/Residential%20Service%20Agreemt%20%202\_2005.pdf](http://www.investmentmt.com/FormsApps/Residential%20Service%20Agreemt%20%202_2005.pdf) ---
**Author:** ![Gfactor](https://avatars.discourse-cdn.com/v4/letter/g/9de053/32.png) [@Gfactor](https://boards.straightdope.com/u/Gfactor)\ **Post date:** [November 4, 2007, 2:46pm UTC](https://boards.straightdope.com/t/foreclosures-on-a-home/425159/7 "2007-11-04T14:46:51Z")
[FNMA](http://www.investopedia.com/terms/f/fanniemae.asp)’s policy on loan modification: > [@](#): > > In order to cure a delinquency for a whole mortgage or a participation pool mortgage that we hold in our portfolio, a servicer may recommend a modification that either extends the term of the mortgage by the term of the delinquency or provides for reamortization of the outstanding debt. We will also consider other types of modifications, although for a current mortgage we will accept only a modification that reduces the monthly payment (by reamortizing the current principal balance at the current mortgage interest rate over the remaining mortgage term). [https://www.efanniemae.com/sf/formsdocs/forms/181.jsp](https://www.efanniemae.com/sf/formsdocs/forms/181.jsp) and here’s the form to document a modification request: [https://www.efanniemae.com/sf/formsdocs/forms/pdf/servicingtrans/181.pdf](https://www.efanniemae.com/sf/formsdocs/forms/pdf/servicingtrans/181.pdf) ---
**Author:** ![Gfactor](https://avatars.discourse-cdn.com/v4/letter/g/9de053/32.png) [@Gfactor](https://boards.straightdope.com/u/Gfactor)\ **Post date:** [November 4, 2007, 3:18pm UTC](https://boards.straightdope.com/t/foreclosures-on-a-home/425159/8 "2007-11-04T15:18:31Z")
And here are HUD’s requirements for servicers of mortgages with respect to forebearance and modification: > [@](#): > > ``` > When a mortgage goes into default, HUD expects mortgagees to > > ``` > > offer formal or informal forbearance relief, where the mortgagee > reasonably believes that the mortgagor will be able to resume the > mortgage payments. (See HUD Handbook 4330.1, REV-5, > Administration of Insured Home Mortgages, Chapter 8). Once the > mortgagor has recovered from a financial hardship, > the mortgagee must analyze the mortgagor’s income to determine > whether the mortgagor will be able to resume the original mortgage > payments and repay the arrearage within a reasonable period of time. > If the mortgagor is unable to do so, the mortgagee must analyze > whether the mortgagor qualifies for an FHA streamline refinanced > mortgage. If the mortgagor does not qualify for a refinance, the > mortgagee must consider whether the mortgagor is eligible for > mortgage modification, as prescribed in HUD Handbook 4330.1, > REV-5, Administration of Insured Home Mortgages, 3-2 for > modifying a mortgage. > **[Foreclosures and Pre-Foreclosures Homes for Sale](https://www.foreclosurehub.com/foreclosures/?d=MLET&s1=96-32%5Bno%5D&SECT1=TXTHLB&SECT5=MLET&u=&p=1&r=1&f=G)** > > Browse foreclosure and pre-foreclosure homes for sale and find great deals before they hit the market. > **[Foreclosures and Pre-Foreclosures Homes for Sale](https://www.foreclosurehub.com/foreclosures/?d=HBKS&s1=4330.1&op1=AND&l=100&SECT1=TXT_HITS&SECT5=HBKS&u=.%2Fhudclips.cgi&p=1&r=26&f=G)** > > Browse foreclosure and pre-foreclosure homes for sale and find great deals before they hit the market.