Comments on: The three monkeys of mortgage bonds A slice of lime in the soda Sun, 26 Oct 2014 19:05:02 +0000 hourly 1 By: walt9316 Fri, 19 Nov 2010 19:56:08 +0000 Danny_Black, this is just to let you know you are read and appreciated.

By: Danny_Black Fri, 19 Nov 2010 01:47:25 +0000 If the house goes into foreclosure then the servicer doesn’t get paid until the house is sold ( hint who is paying the servicer those fees if the owner isn’t even making his mortgage payments? ). It also has to justify the expenses to the investor. Of course back in the day when houses were being sold for more than the loan the investor didn’t really care. Now, you can bet they are all over those accounts given those expenses are being paid out of their pocket. So a servicer has to make upfront payments to foreclose, has to wait until the property is sold and has to haggle over every penny when claiming. Maybe you are confusing them with the foreclosure lawyers who ARE coining it out of this.

Servicers are very profitable when someone is simply paying his mortgage – money for old rope – and when people are slightly late paying – all those yummy late fees – where they most certainly are not profitable is when there are massive numbers of foreclosures with a significant number being disputed and where the equity in the house is around or below the loan value.

Foreclosure doesn’t “destroy value” for the owners of the loan. If the loan is in foreclosure then the owner of the loan is getting zero. When the house is foreclosed and sold he gets the amount it is sold for minus expenses up to the value of the loan which is typically non-zero which is more than zero.

As for the title issues, surely with all the excitement, one of the intrepid reporters would be doing some investigating. Ask the courts. When this came out Alphaville posted a wholely unsatisfying article from WaPo where they interviewed a NY judge who threw out around 40% of cases when they first arrived. He knew the exact number but weirdly couldn’t even vaguely guess how many were resubmitted and passed second muster. It seemed to me that a halfway decent journalist would have asked the judge – how representive he was, how many passed second muster, how many had fundamental issues and how many had just procedural issues.

Personally, I will happily bet that in the vast majority of cases there are zero issues with title because with all the focus and all the lawyers swarming around if cases were **regularly** being thrown out over **title** then it would be getting covered regularly – and not just a here and there story.