Conflicts of interest? Loan servicer pulls one on the investors too.

I just attended a Foreclosure rescue seminar this past weekend. One of the things that I learned is their is another victim besides the homeowner, the INVESTOR. These "mortgage backed securities" were supposed to be safe investments. Triple AAA rated, SAFE, reasonable returns. The kind of investments that were sold as low risk. They too are being burned in this real estate bubble.

The people in the middle: servicer(s), and the firms that sold these mortgages to the investors got their profits and no consequence.

The homeowner loses their home and credit, and the INVESTOR that actually put up real money, takes the loss. No one that originated, or sold, and resold the mortgages had any loss. In fact they are making money with fees from the foreclosures! The pension fund that owns your mortgage does not have an REO dept, do they!

I attended the seminar because I wanted to gain insight, and perspective from homeowner's and their attorneys that are attempting to defeat, or force REAL loan modifications. In some (rare) cases the homeowners are getting their home "free and clear", most often the attorneys are able to stall the foreclosure sale to help the homeowner get back on their feet. Their arguments make sense. Some of it attracts the people that are just trying to get their mortgage wiped out. Sounds good, but really this is the exception not the rule.

What I found was a lot of people that are in tough situations, upside down in their homes, but wanting desperately to keep them. These were people that I meet everyday that end up short selling their homes.

My experience is that the "token" loan modifications never include principle reduction, and typically only reduce the payment by a very small percentage. Soon they realize that if their home has lost half the value it makes no sense to stay. Short sales look attractive.

One major insight that I gained was a major conflict of interest between the "SERVICER", and the "INVESTOR". It was amazing to see how much money was made off the mortgage mess for all the people in the middle. Every time the loan was sold, repackaged, split-up, someone made money.

The servicer makes money, handling the payments for the investor. They also make additional fees when they start dealing with a default situation, then when the homeowner defaults, they make money farming out the REO deal. The investor gets the short end of the stick, they get the loss. I think that more investors would be eager to actually take principle reduction loan mods. If the "middle men" had some real incentive to make a deal happen. Just the fixed foreclosure costs being reduced from the principle would be incentive for many homeowners to stick it out, work harder, and find a way to keep their home.

In my market homes are selling for HALF of their boom price. When will the banks, and investors get it that keeping people in their homes is good for them, and everyone else too.

If you or someone you know needs help buying or selling real estate in Manatee County please give me a call, text, or email. There is help for you if you need it! I have closed 38 transactions in the past 12 months, and I am ready to help with yours. Short sales do not have to be scary.

Joe Murphy, Broker-Associate

Coldwell Banker Residential Real Estate

941-780-3260

joe@manateemoves.com

www.activerain.com/manateemoves

www.manateemoves.com