Mortgage Servicers Concerned Over the 90-day Moratorium on Foreclosures
Mortgage services have expressed their concerns over the possibility that the 90-day moratorium imposed by the U.S. Congress on home foreclosures could just prolong the worsening housing market crisis.
Residential Credit Solutions President Dennis Stowe explains that a moratorium could delay the application of needed corrections and could affect mortgage servicers who are already experiencing liquidity constraints.
Mortgage servicers are required under agreements that cover pooling and servicing to advance all interest and principal payments, including foreclosure and maintenance cost and insurance and tax, to investors whether borrowers are paying or not.
Mortgage servicers can only receive reimbursement for incurred expenses for a delinquent loan after the property has entered foreclosure proceedings. A moratorium would extend indefinitely the payment advances that mortgage servicers give to investors.
The moratorium comes as borrowing facilities, which servicers depend on for advance payments, are experiencing difficulties due to the liquidity crunch.
National Asset Direct Inc. Chief Executive Officer Matt Stadler points out that independent and special mortgage servicers who deal with borrowers who defaulted are currently experiencing financial difficulties and therefore may not be able to pay advances to investors.
Barney Frank, chairman of the House Financial Services Committee argues that a moratorium is needed because mortgage servicers are not doing their best to expedite loan modifications.
Lenders have also voluntarily suspended foreclosures. JPMorgan Chase and Co. imposed a ban on properties financed by EMC Mortgage Corp. unit of Bear Sterans, Washington Mutual Inc. and Chase Home Finance LLC. JPMorgan will also offer financing to borrowers under threat of foreclosures and conduct independent loan reviews.
Figures released by E-Foreclosuresearch showed a 71 percent increase to 765,000 in foreclosure filings for the third quarter of 2008. Meanwhile, Radar Logic Inc.’s data showed that home sales increased in 19 out of 25 U.S. cities in August 2008.