Mortgages: Breaking Loose at Last?

Millions of delinquent mortgages have been frozen in a kind of limbo for some time now. Their servicers are unable or unwilling to take definite action, for a variety of reasons. But there are signs that the ice may be beginning to break. Consider the following:

• As part of its settlement with investors announced in June, Bank of America has agreed to release certain high-risk loans to subservicers, and to pay additional fees to investors if servicing timelines are not met.
• Bank of America has also announced plans to sell off a portion of its servicing portfolio.
• A July 22 article in DSNews describes a proposal now being considered by the U.S. Treasury to allow some securitized loans to be sold at a discount to new investors.

What does all this mean? Simply, loan servicers may now be free to act much more swiftly to resolve their defaulted loans.

The big servicers and—their investors—have been paralyzed not only by the volume of delinquencies, but by their own pooling and servicing agreements, which strictly limit their activities. New servicers will not be shackled by those agreements, and unlike the original servicers, will likely be equipped to handle just such problem loans.

New investors will also be inclined to move quickly toward resolution; having purchased the loans at a discount, they’ll have nothing to lose by disposing of them, by modification, short sale, or foreclosure.

This could be good news for the entire industry—but especially for those in the trenches trying to help homeowners resolve their troubles, one way or another.

http://www.dsnews.com/articles/regulators-considering-new-housing-policies-2011-07-22