Pocket Picking the Mortgage Investor
By Andy Miofsky, Illinois Bankruptcy Attorney on Jul 31, 2007 in Illinois
So just who pays a servicer to service a home mortgage loan? Generally, the servicer earns a flat rate per each mortgage account in its portfolio. The servicer sends the borrower a monthly statement. Upon payment, the servicer applies funds to the account and forwards money to the investor. If payment is untimely or incomplete, the servicer assesses charges to the account to the extent permitted by the mortgage.
These charges can range from the ubiquitous late payment penalty to more obscure corporate advances. Such advances include property inspection fees, broker price opinions, tax payments, placed insurance, appraisals and litigation costs. All charges exist as debits against the account and are recovered from money paid on the account prior to any distribution to investors.
Is this an incentive for the servicer to assess extra charges to the account? Not by itself, but, if the servicer, or an affiliated company, performs the services covered by the corporate advance, a profit stream can be diverted from the investor to the servicer. A non-performing account can incur substantial additional fees that devour whatever payments are eventually received by the investor.
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