the $100K Mistake?
By Cathy Moran, Esq.
Moran Law Group
Mount View, California
the loan was modified was due only
Asked for a payoff, the servicer
returned a payoff that failed to include
some $127,000 of non-interest
Granted, this particular mistake cut
in favor of my client. Who are we to
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The job of a mortgage servicer is to
collect loan payments and keep track
of what’s owed on the mortgage. That
shouldn’t be too hard.
But the evidence is that they don’t do
that basic job very well.
Throw a loan modification into the mix,
and who knows what you’ll get.
Accounting for modification
I got a glimpse of what we face when
my client requested a loan payoff in
connection with a sale.
The loan had been modified some
five years ago, with the result that a
sizable hunk of the amount due when
CONSUMER BANKRUPTCY JOURNAL
But it is just as easy to image that
the blunder works the other way: the
requested payoff doesn’t take into
account the changes made to the
debt when the loan was modified
downward. The payoff demand could
just as easily have been calculated at
the old, higher rates in effect before
Multiply this instance by a fraction
of the modified loans out there, and
we need to tell Houston we have a
Mortgage modifications to the
Mortgage modifications were
supposed to save both individual
homeowners and the economy as a
They promised to keep homeowners
in their homes despite the housing
crash of the Great Recession.
To some extent that has worked.
Or at least mortgage modifications
spread the failures out over time so
that the market wasn’t glutted with
The job of a mortgage servicer
is to collect loan payments and
keep track of what’s owed on
the mortgage. That shouldn’t
be too hard. But the
evidence is that they don’t
do that basic job very well.
National Association of Consumer Bankruptcy Attorneys