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You see stories like this all the time. What Ocwen did is wrong, illegal, and unethical. It would also be stupid if their objective was to maximize the value received from the loan. Until we entered the world of fake securitization, banks would always look for ways to work out the loan rather than foreclose. It is the only reasonable way to approach a borrower who is in trouble.
But none of the assumptions work now.
First of all the servicer has no interest in saving or preserving the value of the loan. Their instructions are to foreclose on as many loans as they can regardless of whether or not the “loans” are current. Of course this violates the promised “review” process in the 50 state settlements and consent decrees. And it violates state and federal law.
Second, the corollary is that their entire business plan is to create opportunities for foreclosure. Stories like the one in the above link prove that repeatedly. If Ocwen was really interested in modification it would get it done — the same way and in the same time periods as getting the “loans” originated without documents and based upon false appraisals. If the banks truly wanted to avoid loans going into distress, they could have done it.
Ocwen has been penalized in a number of ways for its errant ways. That has not stopped it from proceeding full steam ahead with its business plan — getting as many loans as possible through foreclosure. That business plan exists solely because the Wall Street banks have given that instruction. If the servicer starts granting lots of modifications or short-sales, they won’t exist anymore.
Contrary to media reports that the foreclosure crisis is behind us, there is strong evidence that suggests that we are only about the half way mark, with the banks holding back foreclosures and pacing them so they don’t get media attention. SO it looks like foreclosures are shrinking when in fact there are about as many foreclosures in our future as there have been in our recent past.
Filed under: foreclosure