Servicer creates homeowner woes
Servicer creates homeowner woes

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By Jeremy Herron and Stephen Bernard
Published: October 3, 2007

NEW YORK — A cancer diagnosis forced Lindsey Jennings to give up his government job. With less income, Jennings feared he might lose the home he and his wife, Pearl, built near Atlanta almost 20 years ago.

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So he asked for help.

But Jennings, who needed to lower his monthly mortgage payment, was rejected for a loan modification. The snub didn't come from the mortgage lender, but from a less likely source — the company that collects and processes the payments, the loan servicer.

All mortgage and student-loan payees know their servicer — it's the company that collects their monthly payments.

Home owners like the Jenningses, who try in good faith to salvage a troubled mortgage, are finding many servicers unwilling, and in most cases not even able, to renegotiate terms.

How it happened
Like many home owners, the couple refinanced their home three years ago to lower their monthly payments, but got caught short when their adjustable rate rose and Lindsey became ill. For a year they asked the mortgage company for a break, but eventually missed several monthly payments, Pearl said.

At that point, the company made an offer, but the servicer stipulated that any renegotiation include an upfront payment of at least $3,000.

"We were already in trouble with our payments, how could we afford that?” she said.

One problem is that servicing operations are not designed to cater to customers, said Guy Cecala, publisher of Inside Mortgage Finance.

"They are like a factory,” he said.

A change made
As of Sept. 1, the Jenningses' servicer is Citi Residential Lending, a unit of Citigroup that acquired AMC from ACC Capital Holdings.

"The servicer is obligated to guide their actions by what's in the best interest of the owner,” said Larry Platt, a lawyer with K&L Gates specializing in mortgage financing and consumer credit issues.

In most cases, the investor wants to avoid foreclosure — especially when that means taking possesion of a property that is losing value.

But if a workout merely forestalls the inevitable, that ultimately makes the foreclosure more costly.


 

Related Topics: Business, Real Estate, Personal Finance, Home Financing, Consumer Credit and Debt

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