Drowning in mortgage fees
Warren Reports’ hometown newspaper, the Boston Globe, runs this story about people losing their homes not because they cannot make the mortgage payments to stave off foreclosure, but because they cannot cover the fees due to attorneys hired by the mortgage companies. Granted, the reality is that some homeowners fail to cover their mortgage payments; foreclosure is an appropriate, if unfortunate, incident of securing a loan with one’s home. But as the article relates, there are plenty of people out there trying desperately to hang on to their homes. They find ways to cover the back payments they owe and the next payment due. But if they cannot cover the exorbitant and rapidly-rising fees, including the fees of the attorneys responsible for taking away their homes, they are out of luck.
State Senator Jarrett Barrios has introduced legislation requiring mortgage holders to wait thirty days after initiating foreclosure to hire a firm to handle the proceedings. The legislation is sensible and moderate. Mortgage holders benefit greatly from people staying in their homes because it reduces their transaction and bankruptcy costs. The cooling off period allows mortgagors time to make a good faith effort to get back on track. If the article’s anecdotal evidence is representative, many will be able to do so.
We have written on many occasions about bad faith lenders and loan products that virtually guarantee default. This is different. People who fall behind on their mortgage payments should be permitted a reasonable final effort to get back on track – particularly if we think homeownership is a social good.
I am pretty sure that Barrios's bill is unnecessary. As long as payment is made within 30 days of Harmon's notice of intent to foreclose they do not bill the mortgagor for the legal fees. This is statutory, but I don't have the cite handy.
I have seen Harmon force one of their clients to pay $1,500 in fees they tried to apply to a homeowner who had been frivolously referred for foreclosure. In other cases I have seen them lean on banks for long extensions where a payoff was reasonably certain.
In the legal community they (Harmon)are well known for being tough but fair. Like many lawyers, they have some sleazy clients (i.e. many national mortgage banks). They are entitled by statute to a fair fee for their work, so let them have it.
January 19, 2007 10:22 PM | Reply | Permalink
I live in a wealthy area where you see so many couples in way over their head. Many of them came from perfectly adequate homes but just "wanted something bigger". The rise in interest rates has pushed them over the razor's edge they were living on. I have some sympathy but do not feel sorry for them. Greed is only good for a man as wealthy as Gordon Gecko. For the average middle class, greed gets you in a lot of trouble.
January 20, 2007 12:35 PM | Reply | Permalink