Lowell Deeds

The latest on real estate recordings and new technology from the Middlesex North Registry of Deeds in Lowell

November 6, 2007

Hidden Costs of Foreclosure

by @ 7:10 am. Filed under Real Estate

A front page story in today’s New York Times discloses how the mortgage servicing industry is making millions of dollars in questionable fees from homeowners going through foreclosure. A study conducted by the University of Iowa Law School that examined foreclosures that had filed for Chapter 13 bankruptcy protection disclosed that more than half of the claims submitted by lender-creditors contained “questionable fees.” Major lenders such as Wells Fargo and Countrywide who were front and center in the subprime crisis have been sanctioned for questionable practices in assessing fees during the foreclosure process. Loan servicing agencies (i.e., those who collect the money and pass it along to investors) typically get paid a fee equal to 0.25% of a prime mortgage or 0.5% of a subprime mortgage, but their agreements with investors usually allow the servicing agency to retain fees assessed for late payments and foreclosure charges. As profits from loan originations have plunged due to the housing slowdown, it appears that these lenders are trying to maintain their profit margins by tacking on all types of fees that get paid when the house is auctioned off. As our political leaders engage in the time honored tradition of trying to close the barn door after the horse has left by trying to impose future regulations on loan originators, the same companies that were major factors in causing this crisis in the first place are exploiting the largely unregulated foreclosure process to continue reaping profits at the expense of homeowners who are in over their heads.

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