Servicing Loan

Direct Loan Servicing
Executive Summary about Servicing Loan By Richard Romando and Nick Adama

It can happen to anybody - a debilitating illness, a messy divorce, a bad investment. There are reliable direct loan servicing organizations and companies ready to lend you a hand. The key is to find a legitimate direct loan service lender who can give you the best rates possible.

Direct loan payment schemes vary from one lender to another, and are usually fit the borrower's financial requirements and capacity to pay.

Where can I get direct loan servicing?

Direct loan servicing is available from many organizations and companies.

The federal government provides direct lending services to a particular demographic, for example. Private direct loan servicing companies are generally much easier to deal with - almost anyone with a decent credit history can borrow from them. Their interest rates are slightly higher than what the government and nonprofit organizations impose, but you can typically haggle for a better deal (especially if you have a clean credit background).

Most direct loan servicing agencies and companies provide counseling for interested borrowers. Direct loan servicing counselors will brief you on documentary requirements, how much you can borrow and what payment terms is optimum for your situation. Take advantage of free counseling services to find out if direct loan is really the right solution for your present money problems.

In Foreclosure, Loan Servicing Companies Lose More Money by Helping Homeowners

Although there are tens of thousands of pages of regulations on the lending industry, and thousands more on the procedures that must be followed even to begin a foreclosure lawsuits, finding which laws the bank violated during the term of the mortgage may seem an insurmountable task for the average homeowner. Loans are packaged into mortgage-backed securities (MBS) and sold to holders which then use trustees to administer the loans. The trustees can not be held accountable for many claims that homeowners have against the company that originated the mortgage.

Trustees, although they may administer the loans, do not lose money when a property goes into foreclosure, as they are paid their fees in any event. The holders of the mortgage securities will lose money as homeowners stop making payments, but one property or another going into foreclosure is a small matter when even one mortgage-backed security may be comprised of hundreds of different loans spread throughout the country. This illustrates the concept of spreading risk around, but it also makes it less worthwhile for MBS holders to care about one or another borrower.

Even further removed from the origination company, MBS holders, and trustees are the mortgage servicing companies, which are hired to collect payments and perform the day-to-day operations necessary to administer the loan. These companies will also be compensated regardless of the success or failure of the loan, and so have little incentive to help homeowners apply for loan modifications or otherwise save their homes.

If the origination company is not already out of business, all the rest of the parties are protected from legal responsibility and loss in case of default. Only the investors that purchase parts of the securities and the homeowners themselves suffer monetarily as a result of a foreclosure, and they are unable to speak with each other to modify a mortgage.

Thus, no one at the servicing company cares terribly much if the homeowners are pushed into foreclosure or not. This is one reason why most companies offer only a forbearance agreement, keeping the original interest rate and payment the same but giving borrowers the ability to pay extra every month to get caught up. Servicing companies are also paid a flat fee for administration of a mortgage, so it is quite a bit easier to push the loan to a local law firm to pursue foreclosure. It is also less expensive than spending the time and hiring the personnel necessary to work with homeowners on a solution that will help them stop foreclosure for the long term. Although mortgage holders lose more money on a foreclosure than a modification, servicers that actually work with the loans every day lose more money in a modification.

If a mortgage servicer even offers mortgage modification programs at all, they are usually taken care of by the least-paid help in the country, if not the world. The executives and attorneys for the servicing companies and the trustees, however, are required to care about these mortgages and mitigate the losses to the end holders of the MBS and property owners. When a trustee is involved, mortgage servicers are often forced to negotiate and negotiate a deal that works out in the homeowners' interests.

This is why borrowers must use their legal defenses against those responsible for the mortgage, rather than the parties who are just paid flat fees to push homes into foreclosure when they fail and force them through the courts as quickly as possible. The important point to remember is that mortgage holders suffer more from a foreclosure than a modification, whereas the profits of servicing companies suffer more from modifying a loan than just dumping it onto a local attorney to foreclose quickly.