Consumer Law

Mortgage servicers make their money by screwing consumers and lenders

By Sam Glover

I was amused to read Mark Ireland’s post saying he came under fire by members of a panel on foreclosures at the recent Equal Justice Conference in Minneapolis for suggesting that mortgage loan servicers are not acting in the best interest of either consumers or lenders. I thought that was common knowledge.

Servicers make money from the late fees, attorney fees, inspection fees, and other fees associated with foreclosure. Lenders do not. Obviously, neither do consumers.

And then Professor Katie Porter at Credit Slips summarized a hearing on the mortgage servicing industry in which embattled Countrywide chief Steve Bailey confirmed what Ireland was talking about: servicers really do make their money by screwing lenders and consumers by piling on fees.

There are so many facets to the subprime meltdown, but what seems apparent is that no part of the mortgage has functioned as expected or intended. Whether by regulation or by re-arranging the playing field from top to bottom in some other way, the market needs a facelift going forward, not just a bailout.

Full post as published by Caveat Emptor on May 19, 2008 (boomark / email).