Viral Nature of Walking Away

[peterb]

This subject was discussed ad nauseum on this site about 2 years ago. I stand by my original statement that I made back then.”There will come a time in the not too distant future where public opinion will shift and people who continue to pay on their underwater mortgage will be considered “suckers”.

[sdduuuude]

[quote=davelj]Also, remember that most of these mortgages are ultimately held by securitization trusts (MBS) … So, servicers are losing their asses.[/quote]

Thanks for your patience on this and explaining again. I admit I haven’t followed this topic well in the past.

So, let me get this straight. Lets say I own an MBS with 100 mortgages in it. I own it. I get money from the payments, but I lose a fee to the servicer who processes the checks, sends out payment coupons to the borrower, etc.

Don’t I as the owner make the decision to foreclose?

Doesn’t the servicer have to live up to some quality standard of how quickly they process foreclosures ?

[sdduuuude]

[quote=davelj]Also, remember that most of these mortgages are ultimately held by securitization trusts (MBS) … So, servicers are losing their asses.[/quote]

Thanks for your patience on this and explaining again. I admit I haven’t followed this topic well in the past.

So, let me get this straight. Lets say I own an MBS with 100 mortgages in it. I own it. I get money from the payments, but I lose a fee to the servicer who processes the checks, sends out payment coupons to the borrower, etc.

Don’t I as the owner make the decision to foreclose?

Doesn’t the servicer have to live up to some quality standard of how quickly they process foreclosures ?

[sdduuuude]

[quote=davelj]Also, remember that most of these mortgages are ultimately held by securitization trusts (MBS) … So, servicers are losing their asses.[/quote]

Thanks for your patience on this and explaining again. I admit I haven’t followed this topic well in the past.

So, let me get this straight. Lets say I own an MBS with 100 mortgages in it. I own it. I get money from the payments, but I lose a fee to the servicer who processes the checks, sends out payment coupons to the borrower, etc.

Don’t I as the owner make the decision to foreclose?

Doesn’t the servicer have to live up to some quality standard of how quickly they process foreclosures ?

[sdduuuude]

[quote=davelj]Also, remember that most of these mortgages are ultimately held by securitization trusts (MBS) … So, servicers are losing their asses.[/quote]

Thanks for your patience on this and explaining again. I admit I haven’t followed this topic well in the past.

So, let me get this straight. Lets say I own an MBS with 100 mortgages in it. I own it. I get money from the payments, but I lose a fee to the servicer who processes the checks, sends out payment coupons to the borrower, etc.

Don’t I as the owner make the decision to foreclose?

Doesn’t the servicer have to live up to some quality standard of how quickly they process foreclosures ?

[sdduuuude]

[quote=davelj]Also, remember that most of these mortgages are ultimately held by securitization trusts (MBS) … So, servicers are losing their asses.[/quote]

Thanks for your patience on this and explaining again. I admit I haven’t followed this topic well in the past.

So, let me get this straight. Lets say I own an MBS with 100 mortgages in it. I own it. I get money from the payments, but I lose a fee to the servicer who processes the checks, sends out payment coupons to the borrower, etc.

Don’t I as the owner make the decision to foreclose?

Doesn’t the servicer have to live up to some quality standard of how quickly they process foreclosures ?

[davelj]

[quote=scaredycat]
The reason there is no such language in the contract? Can you guess why?

Because there is no “moral component” to the contract davelj! that’s a component that we’re just making up after the fact. It may be “understood”, hoped for as a matter of historical practice. But contracts are interpreted by the four corners of the document, not what you would like them to mean, and the single word “promise” here is to vague to carry all the freight you’re trying to load upon it.[/quote]

For the umpteenth time now… this discussion on the morals or ethics related to behavior outside what’s explicitly written in a document is not much different from a discussion on religion. Everyone’s got their own opinion about right and wrong.

[davelj]

[quote=scaredycat]
The reason there is no such language in the contract? Can you guess why?

Because there is no “moral component” to the contract davelj! that’s a component that we’re just making up after the fact. It may be “understood”, hoped for as a matter of historical practice. But contracts are interpreted by the four corners of the document, not what you would like them to mean, and the single word “promise” here is to vague to carry all the freight you’re trying to load upon it.[/quote]

For the umpteenth time now… this discussion on the morals or ethics related to behavior outside what’s explicitly written in a document is not much different from a discussion on religion. Everyone’s got their own opinion about right and wrong.

[davelj]

[quote=scaredycat]
The reason there is no such language in the contract? Can you guess why?

Because there is no “moral component” to the contract davelj! that’s a component that we’re just making up after the fact. It may be “understood”, hoped for as a matter of historical practice. But contracts are interpreted by the four corners of the document, not what you would like them to mean, and the single word “promise” here is to vague to carry all the freight you’re trying to load upon it.[/quote]

For the umpteenth time now… this discussion on the morals or ethics related to behavior outside what’s explicitly written in a document is not much different from a discussion on religion. Everyone’s got their own opinion about right and wrong.

[davelj]

[quote=scaredycat]
The reason there is no such language in the contract? Can you guess why?

Because there is no “moral component” to the contract davelj! that’s a component that we’re just making up after the fact. It may be “understood”, hoped for as a matter of historical practice. But contracts are interpreted by the four corners of the document, not what you would like them to mean, and the single word “promise” here is to vague to carry all the freight you’re trying to load upon it.[/quote]

For the umpteenth time now… this discussion on the morals or ethics related to behavior outside what’s explicitly written in a document is not much different from a discussion on religion. Everyone’s got their own opinion about right and wrong.

[davelj]

[quote=scaredycat]
The reason there is no such language in the contract? Can you guess why?

Because there is no “moral component” to the contract davelj! that’s a component that we’re just making up after the fact. It may be “understood”, hoped for as a matter of historical practice. But contracts are interpreted by the four corners of the document, not what you would like them to mean, and the single word “promise” here is to vague to carry all the freight you’re trying to load upon it.[/quote]

For the umpteenth time now… this discussion on the morals or ethics related to behavior outside what’s explicitly written in a document is not much different from a discussion on religion. Everyone’s got their own opinion about right and wrong.

[davelj]

[quote=sdduuuude][quote=davelj]Also, remember that most of these mortgages are ultimately held by securitization trusts (MBS) … So, servicers are losing their asses.[/quote]

Thanks for your patience on this and explaining again. I admit I haven’t followed this topic well in the past.

So, let me get this straight. Lets say I own an MBS with 100 mortgages in it. I own it. I get money from the payments, but I lose a fee to the servicer who processes the checks, sends out payment coupons to the borrower, etc.

Don’t I as the owner make the decision to foreclose?

Doesn’t the servicer have to live up to some quality standard of how quickly they process foreclosures ?[/quote]

You’re basically right, but… a couple of inherent problems. First, the ownership is dispersed. So, there is a trust document that “governs” what goes on inside the MBS under different circumstances (a document the owners signed off on). So, the servicer looks to the trust document for what they’re supposed to do – and how they get reimbursed – when a default occurs. But… as with all contracts, there’s inherently a lot of leeway. And in most documents there’s some kind of language that leaves it up to the servicer’s discretion to undertake actions that “maximize the long-term value” of the underlying collateral.

So, if I’m a servicer and I’m “only” collecting my 50 bps and I’ve just had to double my staff just to service the folks who are “late,” but not defaulting or in foreclosure… and THEN I have to deal with the foreclosures – where theoretically I’m going to get reimbursed for these “over and above” costs, but that’s after the fact (I’ve gotta lay out the cash first) – then you can see how the servicing end of things gets clogged up. Just as the lenders underestimated future losses, the servicers underestimated the true costs of servicing these loans. And while they’ll get reimbursed for most of the foreclosure-related costs they incur, it still engenders a cashflow issue. So, the servicers are probably losing money on their “core” servicing business AND they have a cashflow problem related to servicing the foreclosures.

I think you can see how that would lead to some of the problems we’re seeing today.

[davelj]

[quote=sdduuuude][quote=davelj]Also, remember that most of these mortgages are ultimately held by securitization trusts (MBS) … So, servicers are losing their asses.[/quote]

Thanks for your patience on this and explaining again. I admit I haven’t followed this topic well in the past.

So, let me get this straight. Lets say I own an MBS with 100 mortgages in it. I own it. I get money from the payments, but I lose a fee to the servicer who processes the checks, sends out payment coupons to the borrower, etc.

Don’t I as the owner make the decision to foreclose?

Doesn’t the servicer have to live up to some quality standard of how quickly they process foreclosures ?[/quote]

You’re basically right, but… a couple of inherent problems. First, the ownership is dispersed. So, there is a trust document that “governs” what goes on inside the MBS under different circumstances (a document the owners signed off on). So, the servicer looks to the trust document for what they’re supposed to do – and how they get reimbursed – when a default occurs. But… as with all contracts, there’s inherently a lot of leeway. And in most documents there’s some kind of language that leaves it up to the servicer’s discretion to undertake actions that “maximize the long-term value” of the underlying collateral.

So, if I’m a servicer and I’m “only” collecting my 50 bps and I’ve just had to double my staff just to service the folks who are “late,” but not defaulting or in foreclosure… and THEN I have to deal with the foreclosures – where theoretically I’m going to get reimbursed for these “over and above” costs, but that’s after the fact (I’ve gotta lay out the cash first) – then you can see how the servicing end of things gets clogged up. Just as the lenders underestimated future losses, the servicers underestimated the true costs of servicing these loans. And while they’ll get reimbursed for most of the foreclosure-related costs they incur, it still engenders a cashflow issue. So, the servicers are probably losing money on their “core” servicing business AND they have a cashflow problem related to servicing the foreclosures.

I think you can see how that would lead to some of the problems we’re seeing today.

[davelj]

[quote=sdduuuude][quote=davelj]Also, remember that most of these mortgages are ultimately held by securitization trusts (MBS) … So, servicers are losing their asses.[/quote]

Thanks for your patience on this and explaining again. I admit I haven’t followed this topic well in the past.

So, let me get this straight. Lets say I own an MBS with 100 mortgages in it. I own it. I get money from the payments, but I lose a fee to the servicer who processes the checks, sends out payment coupons to the borrower, etc.

Don’t I as the owner make the decision to foreclose?

Doesn’t the servicer have to live up to some quality standard of how quickly they process foreclosures ?[/quote]

You’re basically right, but… a couple of inherent problems. First, the ownership is dispersed. So, there is a trust document that “governs” what goes on inside the MBS under different circumstances (a document the owners signed off on). So, the servicer looks to the trust document for what they’re supposed to do – and how they get reimbursed – when a default occurs. But… as with all contracts, there’s inherently a lot of leeway. And in most documents there’s some kind of language that leaves it up to the servicer’s discretion to undertake actions that “maximize the long-term value” of the underlying collateral.

So, if I’m a servicer and I’m “only” collecting my 50 bps and I’ve just had to double my staff just to service the folks who are “late,” but not defaulting or in foreclosure… and THEN I have to deal with the foreclosures – where theoretically I’m going to get reimbursed for these “over and above” costs, but that’s after the fact (I’ve gotta lay out the cash first) – then you can see how the servicing end of things gets clogged up. Just as the lenders underestimated future losses, the servicers underestimated the true costs of servicing these loans. And while they’ll get reimbursed for most of the foreclosure-related costs they incur, it still engenders a cashflow issue. So, the servicers are probably losing money on their “core” servicing business AND they have a cashflow problem related to servicing the foreclosures.

I think you can see how that would lead to some of the problems we’re seeing today.

[davelj]

[quote=sdduuuude][quote=davelj]Also, remember that most of these mortgages are ultimately held by securitization trusts (MBS) … So, servicers are losing their asses.[/quote]

Thanks for your patience on this and explaining again. I admit I haven’t followed this topic well in the past.

So, let me get this straight. Lets say I own an MBS with 100 mortgages in it. I own it. I get money from the payments, but I lose a fee to the servicer who processes the checks, sends out payment coupons to the borrower, etc.

Don’t I as the owner make the decision to foreclose?

Doesn’t the servicer have to live up to some quality standard of how quickly they process foreclosures ?[/quote]

You’re basically right, but… a couple of inherent problems. First, the ownership is dispersed. So, there is a trust document that “governs” what goes on inside the MBS under different circumstances (a document the owners signed off on). So, the servicer looks to the trust document for what they’re supposed to do – and how they get reimbursed – when a default occurs. But… as with all contracts, there’s inherently a lot of leeway. And in most documents there’s some kind of language that leaves it up to the servicer’s discretion to undertake actions that “maximize the long-term value” of the underlying collateral.

So, if I’m a servicer and I’m “only” collecting my 50 bps and I’ve just had to double my staff just to service the folks who are “late,” but not defaulting or in foreclosure… and THEN I have to deal with the foreclosures – where theoretically I’m going to get reimbursed for these “over and above” costs, but that’s after the fact (I’ve gotta lay out the cash first) – then you can see how the servicing end of things gets clogged up. Just as the lenders underestimated future losses, the servicers underestimated the true costs of servicing these loans. And while they’ll get reimbursed for most of the foreclosure-related costs they incur, it still engenders a cashflow issue. So, the servicers are probably losing money on their “core” servicing business AND they have a cashflow problem related to servicing the foreclosures.

I think you can see how that would lead to some of the problems we’re seeing today.

[Author]

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