May 2011-05-23
Mortgage servicers (many from large US Banks participating under the TARP) were being sued for abuses or practices that resulted in excessive fees or improper foreclosure practices (WSJ 8-6-2009). (NOTE: Even though legal actions had started in 2009, the US Congress/Administration/50 State Attorney Generals are just wrapping up some challenges and investigations and are in the process of negotiating a “final settlement” – from $5 B to $20B - with the largest of loan servicers.)
$50 B of the 700 B TARP funds were applicable under the HAMP program that pays Mortgage loan servicers for loan modifications if the homeowner maintains payments for at least three (3) months and payments are made to servicers after the three month time period. Servicers generally earn ½ to 1% of the loan balance each year and lower balances mean lower profits. Servicers normally earn more from late fees or by foreclosing on a property, but not on loan modification.
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