Newspaper article THE JOURNAL RECORD

Banks Drop Mortgage Servicing; Profits Fail to Justify Expenses

Newspaper article THE JOURNAL RECORD

Banks Drop Mortgage Servicing; Profits Fail to Justify Expenses

Article excerpt

NEW YORK _ Bankers still like to loan mortgage money but some have concluded that collecting the payments is too much trouble.

Many are selling their mortgage-servicing businesses, which handle payments and keep track of what's owed.

In the last two weeks, several banks around the country have said they will bail out of mortgage-servicing. Others already have quit the business.

The banks say they aren't abandoning the home loan business. They've just decided that profits from servicing mortgages doesn't justify the expense of maintaining customer service lines and paying for computerized accounting.

"We don't want to make the necessary investments to stay in the business," said Robert S. McCoy, chief financial officer at Wachovia Corp., a banking company in Winston-Salem, N.C., that put $9 billion worth of servicing rights on the auction block this week.

Bankers say the changes will have little everyday impact _ borrowers will just send their monthly payments to a different address.

But others aren't so sure. Credit counselors, who advise people troubled by debt, say mishaps can occur when servicing changes hands. They advise borrowers to keep canceled checks and other documentation.

"Screwups do happen," said Cora Fulmore, director of housing at the National Foundation for Consumer Credit, based in Silver Springs, Md.

"I've seen situations where payments have not been applied, payments have been lost or the customer didn't read the notice about the switch and sent their payment to the wrong company," said Fulmore.

Servicers are required to advise customers in writing at least 15 days before their account is transferred under a law that took effect last month.

Customers will get new payment-coupon books, or will be sent a monthly statement and bill.

Fulmore said she believes 15 days notification is inadaquate, but says most lenders alert customers 60 to 90 days before the switch.

Not all banks are exiting the business. The biggest home lenders in the country _ such as Norwest Corp., which services $70 billion worth of mortgages _ are gobbling up servicing units, adding to their already huge operations. …

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