On August 24, Chicago Federal Reserve President Charles Evans said that securitized mortgages, those that were bundled into bonds and sold to investors, create a disincentive to issue loan modifications. "The securitization process appears to have created conflicts between the interests of servicers and lenders," Evans said. This, in turn, kept the number of modifications lower than the Fed had hoped.
This makes sense to someone involved in the industry. It may be impenetrable double-talk to anyone else. Mr. Evans is correct, but perhaps some explanation is useful. Servicers (the people to whom you send your mortgage payments) want you to keep paying on your loan. If they don't collect payments, they don't get paid. If a mortgage forecloses, the servicer loses a long-term income stream.
Lenders, on the other hand, may be private investors, not banks. Suddenly owning a foreclosed property may be a worthwhile investment. These people aren't necessarily looking for long-term gain, they are looking for payouts in the next few years, not the next thirty. Their incentive to keep you in your home is very minimal.
This is why litigation can be an effective tool in your overall loss mitigation strategy. Although litigation takes time, that's the point. The longer it takes an investor to get his ROI, the more likely he is to settle -- at least the asset is generating some income as opposed to costing more money in attorney's fees.
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