UCGAL you have it correct. The servicing company will abide by the terms of the loan, (essentially the loan docs) with regards to how to proceed. So in the foreclosure process, or even the short sale process, the beneficiary is well removed from everything. They pretty much put a rubber stamp on whether to accept or reject an offer, (say during a short sale) or to take another example they will set the asking price when a property does go to auction.
The phenomenah of people essentially living in thier home for free is true. I have clients who I have advised during the short sale process and yes they have not paid thier mortgages.
So yes the servicers are simply abiding by the contract and it is the bene’s that will instruct them to do otherwise in most cases. In some cases like when a servicer is working out a short sale and the trustee sale date is imminent the servicer will indeed have thier legal dept call the trustee and postpone the trustee sale. Now if the investors want, yes they can instruct the servicer to postpone the trustee sale for a longer time.
Now as for who does the servicer “call or contact” to get authorization for a short sale or to set the opening bid for the trustee sale, they call the investors or the entity who represents the investors.
So when the property does “go back” to the bene that is pretty much the end of life with the servicer. What that bene does with the property is up to them.
Note I am using the terms bene and investors as interchangeable pieces.
