Mortgage servicer
Encyclopedia
A mortgage servicer is the company that borrowers pay their mortgage loan
payments to. Mortgage servicers either purchase or retain mortgage servicing rights that allow them to collect payments from borrowers in return for a servicing fee. The duty of a mortgage servicer varies, but typically includes the acceptance and recording of mortgage payments; calculating variable interest rates on adjustable rate loans; payment of taxes and insurance
from borrower escrow
accounts; negotiations of workouts and modifications of mortgage upon default; and conducting or supervising the foreclosure
process when necessary.
Many borrowers confuse mortgage servicers with their lender. A mortgage servicer may be a borrower's lender, but often the beneficial rights to the payment of principal
and interest
on mortgages are sold to investors such as Fannie Mae, Freddie Mac, Ginnie Mae, FHA
, and private investors in mortgage securitization
transactions.
in the United States
. Despite pressure from President Barack Obama
's Administration on mortgage servicers to permanently modify thousands of loans to make them more affordable and prevent foreclosures, allegations arose that the servicers had an apparent conflict of interest which led them to stop or slow the modification process in many cases. Industry insiders and legal experts cited the lucrative fees which mortgage servicers charge to delinquent homeowners as the main reason behind the slow and difficult process of modifying a mortgage.
on the part of the investment bank), falsifying dates and other information in foreclosure documents and "robo-signing," the practice of paying under-qualified personnel to sign hundreds or thousands of foreclosure documents a day, often without properly reviewing the documents. Homeowners are creating sites online to discuss these issues on sites such as Face Book's "Homeowners Against Mortgage Servicing Fraud" and MSFraud dot ORG site. Many Youtube videos are available to help educate victims done by Attorney and securities expert Neil Garfield. Mr Garfield also has a Living Lies Blog site. Other sites include the Consumer Warning Network by Attorney Chris Hoyer in Florida.
announced that the United States House of Representatives
subcommittee on housing issues will hold a hearing on November 18, 2010 to examine problems emerging in the mortgage servicing industry.
In January 2011, JP Morgan Chase, the United States' second-largest bank based on market share, admitted that it had illegally overcharged some 4,000 active-duty military members on their home mortgage and accidentally foreclosed
on as many as 14 families. Facing pressure from a United States Marine's lawsuit over the violations, Chase announced that it would work to reverse the illegal foreclosures and was mailing $2 million to the 4,000 military families as compensation, implying the mortgage bank overcharged each family an average of $500 on their mortgage. Lawsuits regarding the overcharges are still pending as of January 2011.
In spite of this recent media attention, relief from illegal foreclosures and mortgage overcharges may not be easy or quick for some military members; One National Guard Sergeant has been fighting Deutsche Bank
in the courts over his illegal 2004 foreclosure for over four years, with no resolution as of January 2011.
to launch an investigation into various mortgage companies' practices regarding the servicing of military member's mortgages. While the DOJ would not identify the banks at the center of its investigation, Delaware
Attorney General
Beau Biden
sent a letter to several large lending institutions demanding they review their operations in order to safeguard active-duty military members from illegal mortgage overcharges and fraudulent foreclosures. Those institutions included Citigroup, Inc.
, Bank of America Corp.
, Wells Fargo & Co.
, PNC Financial Services Group Inc.
, Ally Financial Inc. and Goldman Sachs Group Inc.
's Litton Loans.
Mortgage loan
A mortgage loan is a loan secured by real property through the use of a mortgage note which evidences the existence of the loan and the encumbrance of that realty through the granting of a mortgage which secures the loan...
payments to. Mortgage servicers either purchase or retain mortgage servicing rights that allow them to collect payments from borrowers in return for a servicing fee. The duty of a mortgage servicer varies, but typically includes the acceptance and recording of mortgage payments; calculating variable interest rates on adjustable rate loans; payment of taxes and insurance
Insurance
In law and economics, insurance is a form of risk management primarily used to hedge against the risk of a contingent, uncertain loss. Insurance is defined as the equitable transfer of the risk of a loss, from one entity to another, in exchange for payment. An insurer is a company selling the...
from borrower escrow
Escrow
An escrow is:* an arrangement made under contractual provisions between transacting parties, whereby an independent trusted third party receives and disburses money and/or documents for the transacting parties, with the timing of such disbursement by the third party dependent on the fulfillment of...
accounts; negotiations of workouts and modifications of mortgage upon default; and conducting or supervising the foreclosure
Foreclosure
Foreclosure is the legal process by which a mortgage lender , or other lien holder, obtains a termination of a mortgage borrower 's equitable right of redemption, either by court order or by operation of law...
process when necessary.
Many borrowers confuse mortgage servicers with their lender. A mortgage servicer may be a borrower's lender, but often the beneficial rights to the payment of principal
Debt
A debt is an obligation owed by one party to a second party, the creditor; usually this refers to assets granted by the creditor to the debtor, but the term can also be used metaphorically to cover moral obligations and other interactions not based on economic value.A debt is created when a...
and interest
Interest
Interest is a fee paid by a borrower of assets to the owner as a form of compensation for the use of the assets. It is most commonly the price paid for the use of borrowed money, or money earned by deposited funds....
on mortgages are sold to investors such as Fannie Mae, Freddie Mac, Ginnie Mae, FHA
FHA
FHA may mean:* Federal Housing Administration. See also FHA loan.* Federal Highway Administration* Civil Rights Act of 1968 -- In particular, Title VIII of the Act, also known as the Fair Housing Act* Forced Hot Air heating...
, and private investors in mortgage securitization
Securitization
Securitization is the financial practice of pooling various types of contractual debt such as residential mortgages, commercial mortgages, auto loans or credit card debt obligations and selling said consolidated debt as bonds, pass-through securities, or Collateralized mortgage obligation , to...
transactions.
Reluctance to modify mortgages, prevent foreclosures
In July 2009, the mortgage servicing industry received criticism for many servicers' apparent unwillingness to modify adjustable rate mortgages held by homeowners on the verge of foreclosureForeclosure
Foreclosure is the legal process by which a mortgage lender , or other lien holder, obtains a termination of a mortgage borrower 's equitable right of redemption, either by court order or by operation of law...
in the United States
United States
The United States of America is a federal constitutional republic comprising fifty states and a federal district...
. Despite pressure from President Barack Obama
Barack Obama
Barack Hussein Obama II is the 44th and current President of the United States. He is the first African American to hold the office. Obama previously served as a United States Senator from Illinois, from January 2005 until he resigned following his victory in the 2008 presidential election.Born in...
's Administration on mortgage servicers to permanently modify thousands of loans to make them more affordable and prevent foreclosures, allegations arose that the servicers had an apparent conflict of interest which led them to stop or slow the modification process in many cases. Industry insiders and legal experts cited the lucrative fees which mortgage servicers charge to delinquent homeowners as the main reason behind the slow and difficult process of modifying a mortgage.
Accusations of "robo-signing," foreclosure document fraud
In October 2010, many major mortgage servicers in the United States came under intense media and government scrutiny for their alleged mishandling of the large amount of foreclosures moving through the court system. Allegations included foreclosures being processed with missing or questionable paperwork (including paperwork showing proper chain of titleChain of title
A chain of title is the sequence of historical transfers of title to a property. The "chain" runs from the present owner back to the original owner of the property. In situations where documentation of ownership is important, it is often necessary to reconstruct the chain of title...
on the part of the investment bank), falsifying dates and other information in foreclosure documents and "robo-signing," the practice of paying under-qualified personnel to sign hundreds or thousands of foreclosure documents a day, often without properly reviewing the documents. Homeowners are creating sites online to discuss these issues on sites such as Face Book's "Homeowners Against Mortgage Servicing Fraud" and MSFraud dot ORG site. Many Youtube videos are available to help educate victims done by Attorney and securities expert Neil Garfield. Mr Garfield also has a Living Lies Blog site. Other sites include the Consumer Warning Network by Attorney Chris Hoyer in Florida.
Congressional hearings
The alleged problems regarding foreclosure fraud were so widespread and popularized by the media that U.S. Congresswoman Maxine WatersMaxine Waters
Maxine Waters is the U.S. Representative for , and previously the 29th district, serving since 1991. She is a member of the Democratic Party....
announced that the United States House of Representatives
United States House of Representatives
The United States House of Representatives is one of the two Houses of the United States Congress, the bicameral legislature which also includes the Senate.The composition and powers of the House are established in Article One of the Constitution...
subcommittee on housing issues will hold a hearing on November 18, 2010 to examine problems emerging in the mortgage servicing industry.
Illegal foreclosures and mortgage overcharges on active-duty military members
The Servicemembers Civil Relief Act (SCRA) of 2003 protects United States active-duty military members from civil court proceedings (such as foreclosure) while serving their country. The SCRA also limits the interest rate which an active-duty military member can be charged on any outstanding debt (secured before their deployment) to 6% (six percentage points). In spite of these special protections granted to active-duty military members, a string of news reports have surfaced between 2005 and 2011 in which large mortgage servicers and investment banks illegally overcharged military families with members on active duty on their mortgages, with several large banks such as Wells Fargo and JP Morgan Chase even illegally foreclosing on American Armed Forces families.In January 2011, JP Morgan Chase, the United States' second-largest bank based on market share, admitted that it had illegally overcharged some 4,000 active-duty military members on their home mortgage and accidentally foreclosed
Foreclosure
Foreclosure is the legal process by which a mortgage lender , or other lien holder, obtains a termination of a mortgage borrower 's equitable right of redemption, either by court order or by operation of law...
on as many as 14 families. Facing pressure from a United States Marine's lawsuit over the violations, Chase announced that it would work to reverse the illegal foreclosures and was mailing $2 million to the 4,000 military families as compensation, implying the mortgage bank overcharged each family an average of $500 on their mortgage. Lawsuits regarding the overcharges are still pending as of January 2011.
In spite of this recent media attention, relief from illegal foreclosures and mortgage overcharges may not be easy or quick for some military members; One National Guard Sergeant has been fighting Deutsche Bank
Deutsche Bank
Deutsche Bank AG is a global financial service company with its headquarters in Frankfurt, Germany. It employs more than 100,000 people in over 70 countries, and has a large presence in Europe, the Americas, Asia Pacific and the emerging markets...
in the courts over his illegal 2004 foreclosure for over four years, with no resolution as of January 2011.
Investigation by the US Department of Justice
The repeated news headlines pointing to abuse of American active-duty military members by mortgage servicers and rampant violations of the Servicemembers Civil Relief Act prompted the United States Department of JusticeUnited States Department of Justice
The United States Department of Justice , is the United States federal executive department responsible for the enforcement of the law and administration of justice, equivalent to the justice or interior ministries of other countries.The Department is led by the Attorney General, who is nominated...
to launch an investigation into various mortgage companies' practices regarding the servicing of military member's mortgages. While the DOJ would not identify the banks at the center of its investigation, Delaware
Delaware
Delaware is a U.S. state located on the Atlantic Coast in the Mid-Atlantic region of the United States. It is bordered to the south and west by Maryland, and to the north by Pennsylvania...
Attorney General
Attorney General
In most common law jurisdictions, the attorney general, or attorney-general, is the main legal advisor to the government, and in some jurisdictions he or she may also have executive responsibility for law enforcement or responsibility for public prosecutions.The term is used to refer to any person...
Beau Biden
Beau Biden
Joseph Robinette "Beau" Biden III is an American lawyer, Army JAG officer, and politician from Wilmington, Delaware. He serves as the Attorney General of Delaware and a Major in the Delaware Army National Guard...
sent a letter to several large lending institutions demanding they review their operations in order to safeguard active-duty military members from illegal mortgage overcharges and fraudulent foreclosures. Those institutions included Citigroup, Inc.
Citigroup
Citigroup Inc. or Citi is an American multinational financial services corporation headquartered in Manhattan, New York City, New York, United States. Citigroup was formed from one of the world's largest mergers in history by combining the banking giant Citicorp and financial conglomerate...
, Bank of America Corp.
Bank of America
Bank of America Corporation, an American multinational banking and financial services corporation, is the second largest bank holding company in the United States by assets, and the fourth largest bank in the U.S. by market capitalization. The bank is headquartered in Charlotte, North Carolina...
, Wells Fargo & Co.
Wells Fargo
Wells Fargo & Company is an American multinational diversified financial services company with operations around the world. Wells Fargo is the fourth largest bank in the U.S. by assets and the largest bank by market capitalization. Wells Fargo is the second largest bank in deposits, home...
, PNC Financial Services Group Inc.
PNC Financial Services
PNC Financial Services Group, Inc. is a U.S.-based financial services corporation, with assets of approximately $264.3 billion...
, Ally Financial Inc. and Goldman Sachs Group Inc.
Goldman Sachs
The Goldman Sachs Group, Inc. is an American multinational bulge bracket investment banking and securities firm that engages in global investment banking, securities, investment management, and other financial services primarily with institutional clients...
's Litton Loans.