[quote=SK in CV][quote=SD Realtor]Well CV, I am not sure that foreclosing quickly part is or ever was part of the plan. If institutionalized foreclosures would have happened en masse then those institutions would not have been able to manipulate the books as easily as if the assets were simply not performing. Once that foreclosure is done then financially it is a different ballgame.
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I was only referring here to the loan servicers. That’s where they make their money, collect all their fees, with a completed foreclosure. So their business interest is often at odds with their investors. They often have no skin in the game so maximizing return is sometimes incidental. But they are ill equipped to deal with distressed assets, whether it’s a delinquent loan or REO.
I think the whole “manipulate the books” thing is overblown. To the extent the loans are owned by private label MBS, they have no incentive, none at all. Banks that are subject to FDIC, Treasury, OTS and SEC regulation and supervision? They have incentive, but given the scrutiny they’re under, and the market for the last few years, it would seem unlikely there’s widespread continued manipulation. They were mostly pretty conservative in setting aside loan loss reserves a couple years ago in order to get bad business behind them. Are the GSE’s hiding losses? Maybe. Eh…probably. How much is anyone’s guess, but they make up maybe a 1/3 of the outstanding mortgage market.
As to who forecloses…well it is the servicer. They get the ball rolling, nobody else. The servicers, on behalf of the beneficiary control that process.[/quote]
You are inaccurate about this.
The lenders (or lien holders or note holders or whatever) are the employers of the servicers and can veto their actions.
I am doing one with Aurora right now.
Aurora has misrepresented some of the components of this deal and the seller has had me contact the note holder (who is a major east coast financial firm).
The financial firm has postponed the short sale and we are now dealing with them.
While I do not dispute that it is sometimes in the best interests of the servicer to foreclose, I think that they try very hard not to act in any way that appears to place their own interests above those of their lender.
Now that last thought is pure speculation but it is consistent with both observable behavior as well as models of lien holder and servicer incentive structures.
