While mortgage servicers give a lame excuse that they can't help homeowners in trouble until they've missed at least two payments because they are acting in the best interest of their investors, you need to look at their profit margins to understand why they really have no incentive to help borrowers. Countrywide (NYSE: CFC) raked in $285 million in late fees according to a story today in the New York Times. Another major loan servicer, Ocwen Financial counts on 11.5 percent of its servicing revenue from late fees.
Loan servicing can be extremely lucrative. The companies collect payments from borrowers and pass them on to the investors who own the loans. I'm sure you've experienced changes in whom you pay your mortgage to. In many cases it's just a change in servicing company and not necessarily a change in who owns the loan. Loan servicers usually get 0.25% on a prime mortgage and 0.50% on a subprime mortgage. The profit margins for servicers is about 20 percent according to the Times.
But even bigger than late fees are the fees the loan servicing companies tack on if a loan defaults. These include $145 in demand fees, $137 in overnight delivery fees (wow is that a personal door to door trip?), fax fees of $50 and payoff statement charges of $60, according to research done by Katherine Porter who is quoted in the Times
story. In addition they can add on charges for monthly property inspection. All of these fees add to the profits of the loan servicing company. http://www.bloggingstocks.com/2007/11/06/mortgage-servicers-raking-in-millions-from-homeowners-in-trouble/