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Loan servicing is extremely
lucrative. Servicers, which collect payments
from borrowers and pass them on to investors who own the loans,
generally
receive a percentage of income from a loan, often 0.25 percent
on a prime
mortgage and 0.50 percent on a subprime loan. Servicers
typically generate
profit margins of about 20 percent.
Now that big lenders are originating fewer mortgages,
servicing revenues
make up a greater percentage of earnings. Because servicers
typically keep
late fees and certain other charges assessed on delinquent or
defaulted
loans, ³a borrower¹s default can present a servicer with an
opportunity for
additional profit,² Ms. Porter said.
The amounts can be significant. Late fees accounted for 11.5
percent of
servicing revenues in 2006 at Ocwen Financial, a big servicing
company. At
Countrywide, $285 million came from late fees last year, up 20
percent from
2005. Late fees accounted for 7.5 percent of Countrywide¹s
servicing revenue
last year.
But these are not the only charges borrowers face. Others
include $145 in
something called ³demand fees,² $137 in overnight delivery
fees, fax fees of
$50 and payoff statement charges of $60. Property inspection
fees can be
levied every month or so, and fees can be imposed every two
months to cover
assessments of a home¹s worth.
³We¹re talking about millions and millions of dollars that
mortgage
servicers are extracting from debtors that I think are totally
unlawful and
illegal,² said O. Max Gardner III, a lawyer in Shelby, N.C.,
specializing in
consumer bankruptcies. ³Somebody files a Chapter 13 bankruptcy,
they make
all their payments, get their discharge and then three months
later, they
get a statement from their servicer for $7,000 in fees and
charges incurred
in bankruptcy but that were never applied for in court and
never approved.²
Some fees levied by loan servicers in foreclosure run afoul
of state laws.
In 2003, for example, a New York appeals court disallowed a
$100 payoff
statement fee sought by North Fork Bank.
Fees for legal services in foreclosure are also under
scrutiny.
A class-action lawsuit filed in September in Federal
District Court in
Delaware accused the Mortgage Electronic Registration System, a
home loan
registration system owned by Fannie Mae, Countrywide Financial
and other
large lenders, of overcharging borrowers for legal services in
foreclosures.
The system, known as MERS, oversees more than 20 million
mortgage loans.
The complaint was filed on behalf of Jose Trevino and Lorry
S. Trevino of
University City, Mo., whose Washington Mutual loan went into
foreclosure in
2006 after the couple became ill and fell behind on
payments.
Jeffrey M. Norton, a lawyer who represents the Trevinos,
said that although
MERS pays a flat rate of $400 or $500 to its lawyers during a
foreclosure,
the legal fees that it demands from borrowers are three or four
times that.
A spokeswoman for MERS declined to comment.
The Foreclosure
Fraud Alert Website http://www.foreclosurefraudalert.com/
The
Foreclosure Fraud Alert
Blog
http://www.foreclosurefraudalert.com/fraudblog
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