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Loan servicers rewarded with double pay
Real estate roundup
Freddie Mac offers carrots for short sales, loan workouts
Freddie Mac is doubling the amounts paid to loan servicers who are able to engage in workouts with borrowers that help them avoid foreclosures. Some critics have said that because of the way they are compensated, loan servicers often won't put in the time and expense required to craft repayment plans, loan modifications or engage in short sales. Freddie Mac announced today it will double compensation for servicers who close short sales or pre-foreclosure sales to $2,200. Compensation for loan modifications is being increased from $400 to $800, and servicers who draw up approved repayment plans will be paid $500 instead of $250.
Loan servicers rewarded with double pay
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IRS Eases REMIC Servicing Rules
Mortgage servicers of REMIC securitizations no longer have to wait for a borrower to miss a payment before they contact and offer a homeowner a loan modification with a lower interest rate or principal reduction, according to an Internal Revenue Service ruling.
Revenue Procedure (2008-28) opens the door for servicers to actively identify borrowers likely to end up in foreclosure without jeopardizing the tax status of a real estate mortgage investment conduit. "This is an important change that will allow more homeowners who may potentially get in trouble to be able to have their loans modified prior to default," said Anne Canfield, executive director of the Consumer Mortgage Coalition.
The IRS recognizes that servicers have developed sophisticated programs to identify borrowers likely to default using data such as declining credit scores, falling house prices, or interest rate resets. Once they form a reasonable belief that there is significant risk of foreclosure, "then they can go ahead and contact the borrower before any payment goes late," IRS associate counsel Susan Baker said. Currently, REMIC regulations prohibit a loan modification before the borrower is in default.
