Unscrupulous mortgage servicers sued for inappropriate practices

An investigation by the Associated Press (AP) has found that mortgage servicers, who play a key role in the government’s loan modification program, are making money at the expense of troubled homeowners. According to the AP, at least 30 servicers have been sued for a variety of inappropriate practices - harassing borrowers, imposing illegal fees and charging for unnecessary insurance policies. The list of errant companies includes some of the biggest players in the servicing industry — Bank of America, Wells Fargo & Co., JPMorgan Chase & Co. and Citigroup Inc. “The irony is, in essence, the government is paying servicers to do their job, which is to do loan modifications where appropriate,” said Kurt Eggert, a law professor at Chapman University. “And that’s not a part of their job they were ever especially good at.”

The government says it needs the servicers since they are the only link between borrowers and the investors who indirectly own their mortgages through securities. “Refusing to work with a bad player would deprive homeowners, who have mortgages with that servicer, from getting modifications,” said Treasury spokeswoman Jenni Engebretsen.

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