Introduction to the Mortgage Servicing Fraud Scam.
This is a game of heads they win - tails you lose.
• These are not "predatory lenders."
These companies do not loan money. They operate in the lending industry after-the-fact. They take on a function that a lender doesn’t want - the backroom functions of handling payments, escrow accounts, annual statements, dealing with borrowers, collections, etc. The perpetrators of the loan servicing scam acquire the servicing rights to loans that other companies have already made. (Loans that were deliberately constructed by predatory lenders are ideal for processing through servicers that specialize in aggressive collections or rapid foreclosure processing, but the loan servicing scam can be operated against any mortgage loan if the servicer acquires the rights from the lender.)
These situations are not errors, mistakes or situations where a servicer’s managers or employees failed to do their job. Their systems are well-designed and state-of-the-art in terms of analytical technology that helps them choose and process their victims. These scams generate enormous profits from a business that is difficult to run, people and litigation intensive and normally only marginally profitable. Many have failed and been acquired (Fairbanks bought several).
The path toward losing your home to this scam is actually quite simple. The first phase is designed to fabricate the default, and typically begins with one, or a combination of ways to arm the servicer's records with false data:
When the servicer decides to manipulate the date the payment is received in order to artificially
create a late payment.
When the servicer applies part of the payment to something other than principal and interest and
When the servicer decides to "force place" an insurance policy on the property by claiming the
When the servicer pays your property taxes late, then adds
their late penalty to your account
If the borrower has anything more than about 10-15% equity in the property, it is to the servicer’s advantage at this point to not aggressively attempt to collect. In fact, if the borrower makes contact, the servicer will engage in delay tactics to avoid resolving the problem in time to prevent default. If the equity position is considerably less than 10%, the servicer does not have as much leverage, nor is the opportunity as great and they will typically be more aggressive in collection efforts and more willing to keep the loan in force.
In the case of force-placed insurance, it is to the servicer’s advantage to ignore the borrower and any proof of insurance as long as possible; again, to keep the borrower’s credit status in a negative light and to maintain their relationship with the insurer they contract with. These policies are extremely profitable because they provide absolutely no coverage for the homeowner. They protect ONLY the value of the loan, including interest if the property is destroyed.
If the servicer has analyzed the opportunity and marked the property for default and recovery, the next payment received will be rejected as being insufficient. If it is accepted, the application of the funds leaves the loan sixty days past due. Typically, the scam now moves toward formal legal notice of acceleration in order to coerce the borrower into signing a highly-profitable forbearance agreement to somehow "save the home." The servicer rolls thousands of dollars in penalties and an incomprehensible combination of legitimate and illegitimate fees into the agreement and the homeowner is left with no choice but to sign it or lose their home. The amount demanded will be calculated to take as much of the homeowner’s equity as possible.
If the homeowner decides to sell the property to get out of the situation and take their equity, they will find the payoff amount (which in the last month of the scam will take longer to get than the amount of time left before foreclosure) strips them of their equity. That combined with their artificially-damaged credit rating helps keep the victim a victim.
If the borrower cannot pay the amounts demanded in the forbearance agreement, the servicer will have one of their network of specialized attorney firms foreclose and the property will be sold, typically at a county auction or through their real-estate network.
If the borrower signs the agreement, they will soon be recycled through the process with yet more late payments and fees. But in the terms of the forbearance agreement, they may find they have signed away any legal protections they may have already had, including the right to sue the servicer for fraud or misrepresentation.
If the homeowner cannot find or afford competent legal representation to stop this fraud, they lose their equity and in most cases, their home. MSFraud.org
Servicing Company Fraud
Abuse and Fraud from your Mortgage Servicing Company
By: Nick Adama
past couple decades, since the government essentially created the
abuse-encouraging mortgage servicing industry, there has been a wave of
lawsuits against these servicers for a range of activities. Obviously,
there is a systemic problem and homeowners need to be aware of it before
they are taken advantage of. While there are a whole host of abuse
practices these companies engage in, this article will look at five of
the most common.
ridiculous as it sounds, many mortgage servicers misapply customer
payments. While they receive the full amount of a payment, they either
do not apply it, apply it to the wrong account, or only credit a partial
payment. For instance, a payment of $1550 may translate into $1150,
creating a $400 per month shortfall that, over time, leads the owners
into foreclosure. It may take months or years for the borrowers to
recognize the issue and get it corrected, if ever.
Nick writes for the ForeclosureFish website and blog, which provide foreclosure help and information to homeowners attempting to hold onto their properties. The site describes numerous methods to avoid foreclosure, including bankruptcy, foreclosure loans, stopping a sheriff sale, and many others. Visit the site today to read more about saving your home while there is still time: www.foreclosurefish.com