Are banks making too much money from foreclosures to bother modifying them?

That’s what the Times suggests – fees for insurance, appraisals, handling etc. all dwarf the puny payment the feds offer if they’ll work a deal with their customers. BusinessInsider has a summary. I don’t know whether it’s true but when it comes to banks, not much would surprise me.

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One response to “Are banks making too much money from foreclosures to bother modifying them?

  1. Paco

    It’s true. Mortgage servicing/foreclosure businesses have morphed into vertical integrated businesses where the obvious fees don’t appear too large but the accumulated charges – title searches, etc. – are highly profitable. Title companies are phenomenally profitable and being able to steer business to it is, almost literally, a license to print money.

    Note that it’s mortgage service companies, not mortgage holders, who benefit from a drawn out foreclosure process. There may not be enough proceeds at closing to make the mortgage holder whole but the fees – seemingly arbitrary and accruing daily – get paid first.

    I would have thought delinquent fees, etc., would accrue to the mortgage holder but apparently they don’t. If this is the case then why would mortgage holders agree to terms like these that effectively work against their interest? Why should service companies, who have no capital at risk in this matter, get paid for anything more than … gee, I don’t know… maybe servicing the mortgage.

    The original article has this howler: “To think that somehow or other we would jeopardize investor relationships and customer relationships for the very small incremental income we would receive by delaying seems ludicrous,” said Robert V. James, the bank’s senior vice president for mortgage operations and insurance.”

    But that “relatively small incremental income” is pure profit generated from essentially no invested capital.

    Sounds to this backwoods bozo like these companies are in the mortgage servicing business the same way that the rancher down the road who ones several bulls is in the cow servicing business…