With so many folks being hurt as a result of a bad economy and millions still suffering, it is sad to learn that others are making piles of money under the pretense of helping those who are suffering. An investigation conducted by the Associated Press has found that billions of dollars the government is spending to help financially-troubled homeowners avert foreclosure are actually enriching companies that are supposed to be helping. These companies have been accused of preying on the very people they are supposed to help.
Companies, known as mortgage servicers, are middlemen which collect monthly payments from homeowners and funnel the money to the banks who made the loans or to investors who now hold the loans. The government apparently believes that – as the only link between borrowers and lenders – these mortgage servicers are in the best position to rework the terms of loans under the government’s $50 billion mortgage-reduction program. The companies earn a fee for every successful loan modification and, according to Associated Press, apparently the amounts earned are in the billions of dollars.
The Associated Press reports that this industry has a checkered history. According to the report, at least 30 servicers have been accused in lawsuits of harassing borrowers, imposing illegal fees and charging for unnecessary insurance policies. More recently, the companies also have been criticized for not helping homeowners quickly enough. Those delays led to more fees for homeowners and more profits for the servicers.
The plan, called the Home Affordable Modification Program, was designed to help up to 4 million homeowners avoid foreclosure. But thus far only about 200,000 loan modifications are under way. That’s totally unacceptable. The biggest players in the servicing industry are Bank of America, Wells Fargo & Co., JPMorgan Chase & Co. and Citigroup Inc. It appears that the system in place is broken and in need of a quick and effective fix.
Source: Associated Press
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