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Why Are Loan Servicers So Incompetent?

Loan servicing involves the daily management of loan repayment related to a home loan or student loan by a third party. In theory, this third party manages the loans on behalf of the loan's owner, with a primary purpose of collecting payments and correctly applying them to the proper account.

While not all that complicated, (after all it basically involves simple accounting), the loan service industry is still saddled with enormous problems ten years after the start of our nation's foreclosure crisis. Most servicers seem to observe a business model based upon greed in which profits are derived from the unethical and illegal treatment of customers. Simply put, their incompetence is a function of maximizing profits with a conscious disregard for the needs and rights of their customers.

Mortgages are typically transferred at least once during the life of a loan, thus borrowers may find themselves in a relationship with a servicer that they didn’t select and consequently don't prefer. But this is a result of the fact that homeowners don't get to decide which company services their mortgage. They may find a lender that services the loans it originates, but even in this situation, the lender may decide to change this practice at any time in the future.

Some common "errors" made by mortgage loan servicers include:

  • mishandling requests for loan modifications;
  • informing homeowners that they had to make mortgage payments in order to be eligible for a loan modification;
  • not responding to requests for short sales within the time stated;
  • making phone calls as early as 5am and as late as 11pm when homeowners missed payments; calling homeowners at work and using offensive phone language during such calls.
  • insisting on payment of the original loan amount after borrowers had received a loan modification;
  • pressuring homeowners to use limited payment options which were often exorbitant (a $12 payment fee);
  • falsely implying that certain payment options were the only way to avoid late fees;
  • withdrawing payments from customers' bank accounts using bank account information given by a borrower originally for only a one-time payment; and
  • reporting unfavorable information known to be inaccurate about borrowers to credit bureaus.

Unfortunately, home borrowers aren't the only ones affected by bad loan servicing. Student loan borrowers have similar problems as there are a number of different ways that federal loan servicers may commit errors that result in more money for the government and for the loans servicer. Often, a student loan borrower will believe that he or she is on a repayment plan which may lead to loan forgiveness, only to find out that their long stream of payments never applied to any forgiveness program. Sadly, it is common for the employees and agents of student loan servicers to provide borrowers with incorrect or inadequate advice.

At Loan Lawyers, our South Florida consumer rights and debt defense attorneys help individuals with financial problems that cause hardship. The experienced South Florida defense attorneys at Loan Lawyers are here to review your potential claims against a debt collector, and will help you recover the damages you deserve. Contact our office today by calling (888) FIGHT-13 (344-4813) and see how we can help.
  • ABC News
  • American Civil Liberties Union
  • CBS 4
  • CNN
  • Daily Business Review
  • Florida Trend's - Florida Legal Elite 2014
  • Florida Trend's - Florida Legal Elite 2014
  • National Association of Consumer Advocates
  • National Association of Consumer Bankruptcy Attorneys
  • NBC News
  • National Consumer Law Center
  • The New York Times
  • Avvo
  • Avvo
  • Avvo
  • Avvo
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