Sayest Thou What Oh Lender?

If, as is true, that in the vast majority of instances, it is mortgage servicing companies ( as opposed to “lenders” ) who are responsible for the collection and default administration activities regarding residential mortgages, why do virtually all industry, govt., and most surprisingly, private sector “loss mitigation” businesses, suggest that the people contact their originating lenders ( or that they work with the lenders ) ?

Would’nt it be a waste of valuable time and energy, and quite frustrating, to contact the lender, if they have no right or interest to that loan, and no authority to mitigate anything ?

Thank You, Cloud

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Hello Cloud,

According to NCLC Reports (Vol. 26, August 2007), there are three common lender roles:

Mortgage Loan Originator. The mortgage loan originator is the entity whose name appears as the lender on the loan note, mortgage, and HUD-1 settlement statement.

Mortgage Loan Holder.  The mortgage holder is the entity that currently holds the borrower’s note and mortgage This is the party that has the present right to receive payments on the note and to foreclose.

Mortgage Servicer.  The servicer collects the monthly payments and interacts with the homeowner on the holder’s behalf.  It also holds funds in escrow to pay the property taxes and homeowner’s insurance.

The servicing lender typically DOES have delegated authority to enter into a workout with a borrower.  You are correct in stating that they can be “quite frustrating” to deal with as the relationship is somewhat perverse; servicing lenders collect and keep late fees and would much rather have a borrower’s call routed to the collection department than to the servicing lender’s loss mitigation. 

You need to know what to expect and what to ask for before contacting the lender’s loss mitigation department.  I recommend that everyone watch our How To Avoid Foreclosure Seminar and then contact your local HUD Approved Counselor before calling LM. 

To All, know your options and stand your ground.  Foreclosure is a loss for the borrower and the lender and can be avoided with education and the right strategy.

Thanks for the questions and hope this helps.

Paul