Why Foreclosure Services Are Helpful To Mortgage Lenders?
One of the most difficult aspects of dealing with mortgage loans from the lender's viewpoint is disposing of property that was put up as collateral on a defaulted loan. There is a great deal of paperwork and several legal steps that must be taken in order to foreclose on a loan and take the property as a means of attempting to collect the value of the loan. This is why foreclosure services are helpful to mortgage lenders.
Foreclosure services are companies that offer a variety of services to lenders. The lenders and their agents often employ such services because the fees they are charged in the end wind up being considerably lower than what the lenders would have to pay employees to take care of all of the legal steps involved in foreclosure.
Some items that foreclosure services handle for lenders include occupancy inspections, taxing title research, going through the judicial process to get an order of eviction served on the current tenants of the property, coordination of applicable insurance claims, property maintenance prior to foreclosure sale, and scheduling and arranging the foreclosure sale. Having someone else to take all of these steps allows mortgage lenders to focus on addressing new applications without having to worry about dealing with already defaulted loans.
One item that is beginning to cause problems for some of the larger mortgage lenders is that many of their defaulted loans are being turned over to foreclosure services who proceed with the foreclosure process even as the bank or lender is working to modify the loan under the provisions of the government's home affordable modification program (HAMP).
Under the provisions of this program, lenders are required to evaluate all existing loans that are at risk of default or already in default to determine if they qualify for modification of loan terms that would allow the homeowner to make affordable monthly payments and keep the home even if the bank or lender has to extend the term of the loan and lower the interest rate.
When banks initiated the policy of turning defaulted loans over to outside agencies for collection or foreclosure, they created a situation in which they have no knowledge of what stage the foreclosure process has reached while trying to renegotiate and modify the loan according to the terms of the government program. This creates a clear situation in which the right hand does not know what the left one is doing and creates hardship for homeowners attempted to save their homes.
Another problem is that even if the bank agrees to modify the loan, many foreclosure services will continue with the process of foreclosure until it is finalized or they receive a court order that indicates that property may not be foreclosed on. This is because the foreclosure services are only paid a percentage of the amount they are able to collect when the foreclosure is finalized as payment for their services.
It is unclear whether this continuation of the foreclosure process is a deliberate move on the part of the agencies handling the foreclosure in order to increase the amount they can charge lenders or if it is simply a lack of communication between the mortgage lenders and those they have working for them and on their behalf.