When a homeowner is delinquent on a mortgage that's been securitized, the servicer must front the late payment to the investors. When a home is foreclosed, the servicer is typically first in line to recoup losses. But if a mortgage is modified, the servicer typically loses money that isn't necessarily recoverable.
"Servicers lose no money from foreclosures because they recover all of their expenses when a loan is foreclosed, before any of the investors get paid. The rules for recovery of expenses in a modification are much less clear and somewhat less generous," she said.
The whole National Consumer Law Center report is here:
Why Servicers Foreclose When They Should Modify and Other Puzzles of Servicer Behavior