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Do you know what a mortgage servicer is? Many borrowers do not know that the company which receives their monthly payments and sends nasty letters when they are behind on their payments is often not the company or investor that sold them the mortgage in the first place or even the current investor. In the mortgage industry there are three main players, mortgage originators, mortgage servicers and mortgage investors. Mortgage investors put forward the money for the loan, mortgage servicers handle the payments and communication with the borrowers and mortgage originators sell the mortgage. In some cases, all three roles are played by the same company but often these roles are split between specialized companies.
Of course, throughout the life of your mortgage fees are paid to the companies that manage your mortgage. The origination fee you pay when you sign for a mortgage is part of the payment mortgage originators receive. Every month interest is paid to the mortgage lender and a portion of the interest and mortgage fees goes to the company that manages your payments. These fees do not stop when you are behind in your payments and you are applying for a mortgage modification.
Mortgage modifications are paperwork intensive procedures which require a lot of research and communication between borrowers, mortgage servicers and mortgage lenders. This may help you understand why mortgage modifications often take so long to get processed even when borrowers clearly qualify for them. Mortgage servicers receive a fee for their work during mortgage modifications. However, the rules that regulate how much they receive have just been changed.
Fannie May requires mortgage servicers to only charge a fee, if the loan modification is approved. That has been the case for some time now. However, how much mortgage servicers can charge has recently changed. Why? Fannie Mae states recent simplifications in the mortgage modification process as a basis for the reduction in fees charged by servicers under the government sponsored mortgage assistance programs. The current limit is 0.25 percent of the mortgage amount or whatever the mortgage servicer received before the loan modification.
The maximum allowed servicing fee for mortgage modifications is not the only change announced by Fannie Mae. Mortgage investors and mortgage servicers must also adapt to changes in foreclosure time frames and rules on mortgage delinquency management. Now, if mortgage servicers exceed the allowed time frame to assess a loan modification, Fannie Mae will impose penalties so servicers remediate the problem and improve their performance.
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