[quote=BGinRB]
The servicers advance the monthly payments to the investors. They recoup those payments *and* the late fees when the place gets sold. In that scenario it makes sense for the servicer to keep the current owner in the house for a while, let the fees grow and foreclose when the market value of the property comes close to what the servicer will get after trustee sale.[/quote]
The problem is that this is expensive for the servicer. When servicers price a contract for a particular securitization they assume a certain level of NODs, etc. because servicing defaulted mortgages is more expensive than servicing non-delinquent borrowers. Now, as you point out, the servicer receives late fees in these situations, but… the late fees merely compensate the servicer for the extra time and expense associated with dealing with delinquent borrowers. In the current environment, the late fees are not covering the additional cost of servicing the delinquent borrowers in aggregate. Which is why servicers are losing money left and right. Trust me, in most cases servicers want to get rid of these properties as soon as it’s practical.
