Mortgage Modifications Restrained By Complexity Of Mortgage Financial Markets
Why won't my mortgage company offer me a reasonable mortgage modification? Why would they choose to foreclose when with just a little help I can pay the mortgage. These are questions I hear all the time from clients concerned about deficiency liability following a prospective mortgage foreclosure.
I usually advise the questioners that their mortgage lender will not agree to a workable mortgage modification (despite Washington's modification program) because the mortgage service company is not able to provide a reasonable modification or its not in their self-interest to modify.
I saw a blog post from bankruptcy attorney Craig Andresen that sheds some light on the modification problem. He writes:
None of the sources referred to here discussed what could be the real reason for the astonishingly small number of modified mortgages: most mortgages owed on the homes of American consumers are owned by securitized trusts. The trustees of these trusts may lack the authority to compromise on the amounts due under the terms of the mortgages. Having no authority to modify these mortgages, none are being modified. Instead, meaningless "trial modifications" are being offered as window dressing. Thankfully, the real story is beginning to emerge
This make sense. Borrowers should keep in mind that the mortgage industry build a very complicated "house of cards." A result of the complicated financial structure is that is difficult for the lenders to focus on one mortgage at a time and make unique settlement modifications based on the facts of each borrower's circumstances. I've been told by attorneys representing the lenders in foreclosure suits that their biggest frustration is finding people working for their own clients with authority to approve settlements. Mr Andresen's blog post is consistent with my clients' experiences.
