Where to start this week’s Curmudgeon’s Corner?
Obama calling off the war in Iraq? The continuing saga of the pension crisis that is driving Rhode Island into insolvency? The potential cuts necessary to face North Kingstown’s budget crisis? No, let’s talk about the foreclosure crisis.
David Brochu, my financial advisor friend from New Hampshire who happens to still own a very nice home in East Greenwich writes in his newsletter:
“We recently received a notice of foreclosure on our home in New Hampshire. One problem: we’ve never missed a payment. In fact, we pay extra… Seems Bank of America sold [our mortgage] to PNC and it is being serviced by PHH. PHH claims we haven’t paid since May. Even after speaking with [the bank on which the checks were drawn] and receiving official letters confirming the payment and to whom they where made, [PHH and PNC] still are pressing forward. Why might that be?
Last week, we received a call from a lawyer representing PNC, the bank that holds the mortgage, to help us restructure our loan. When I told him I had no interest in restructuring, he was taken aback. Seems he had a great 30-year mortgage at 5% he wanted to put us in. Considering our mortgage is 2.3%, that didn’t seem like much of a deal. Then it occurred to me that PNC wants the mortgage defaulted on because the interest rate is so low … and isn’t likely to go up. Okay, that explains PNC, but what of PHH, the servicer?
The lawyer from PNC explained to me something even I, someone who studies this, didn’t know. PHH as the servicer gets 25% of every payment. However, if they manage a foreclosure proceeding, they receive between $25,000 and $40,000 in fees. So there you have it. The servicer defaults the loan, though it’s not defaulted, to collect fees, while the loan holder tries to get low-interest loans defaulted to refinance them at higher rates. So who has the five or six mortgage payments? Good question. Someone at Bank of America in New Jersey is going to have a lot of explaining to do. And no, I am not making this up.”
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