« A New Title Loan Philanthropic Organization? | Main | New Rule Requires that Collectors Disclose that a Debt is Time-Barred »

Mortgage Servicing Paper

posted by Adam Levitin

Credit Slips Guest Blogger Tara Twomey and I have a new paper out on mortgage servicing in the Yale Journal on Regulation.  It's long, but it tries to present a comprehensive overview of the economics and regulation of the servicing industry, as well as an argument that servicing suffers from a serious principal-agent problem.  We hope it will be a useful resource for those dealing with servicing and working on foreclosure-related issues.  


Adam, I wanted to share with you a way to find important documents about foreclosure. http://www.pdf-finder.com/

Then just type in your search word and out comes actual PDF documents. I have already found some wows.

All the foreclosure stuff being talked about now was identically being talked about, IN THE FALL OF 2007!

And, the author of that document was, Tara Twomey!

This is just mind blowing. To think everything being discussed today was forewarned THREE YEARS AGO in Tara's paper.

I'm the http://www.swarmthebanks.com guy, and the http://www.parallelforeclosure.com guy as well.

Liked Taras' brief in Espinosa... Can't wait to read this one. Still digesting "Explaining the housing bubble" and I must say the history you put into that paper was hugely beneficial to me. Just in the History sections of your paper, I couldn't stop my mind from wondering and making connections. Some paragraphs brought so many connections that I had to read them multiple times. "Bullet Loans" for example.

hi Adam thaks for the nice article. Keep on doing the good work...

I agree with the logic of the thesis that mortgage servicing suffers from a principal / agent gap by creating, maybe, a middle-person / agent problem. I wonder if academics realize that these "problems" are most likely intentional. Thus, pointing it out and creating good policy ideas is not a solution. Power is a solution. . . . Courts need to find doctrines that prevent widespread immorality (despite the subjectivity of that term). For instance, an Ohio District Court found that a mortgage servicer without assignment paperwork for the deed of trust did not have (injury in fact) personal standing to sue to come into a bankruptcy case.

From what I can tell, all of the tools necessary to "reform" the servicing industry have been in place for at least the last decade.

One of the problems lies in the fact that apparently few at the state or federal judicial levels and even fewer attorneys, although numbers are growing, either understand how or are willing to enforce and/or prosecute the various, sundry and, as we have all at least now seen, oftentimes egregious infractions and "standard" business practices in the industry.

Another related "problem" lies in the all too frequent use of the phrase "without admitting wrongdoing." Go back and look at USA/Curry v. Fairbanks, FTC v. EMC/Bear and FTC v. C-Wide/BACHLS. Those three cases alone most likely represent a minimum of 500,000 borrowers (I have yet to see class numbers on C-Wide/BACHLS).

Until and unless actual, honest to dog civil AND CRIMINAL prosecution of servicers' actions takes place on a regular basis and the same level of enforcement/prosecution is applied as is applied to most every other area of the law, the industry is not going to change the manner in which it does business.

As a ridiculous example of just how wrong things are, Housing Wire just released Fannie Mae's list of 11 approved BPO vendors. LPS/Fidelity occupies three of those 11 slots. http://www.housingwire.com/2010/12/17/fannie-mae-approves-four-new-bpo-providers?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+housingwire%2FuOVI+%28HousingWire%29

And those in either the mortgage, political or regulatory industries who say "no one could have seen this "crisis" coming" are either truly dumb, ignorant of their surroundings, covering their own or someone else's 6, or they're a paid shill. A strong accusation? Maybe. In the next few weeks I'll be backing it up with evidence of borrower complaints to legislators and regulators about Fairbanks/SPS alone going back as far as 1998. Feel free to decide if the statement is off base after that. I wonder just how many complaints about OTHER servicers have been written and sent by borrowers seeking justice over the years...

You can't make a silk purse out of a sow's ear.

The servicer is but one spoke in the wheel of THE GSE BUSINESS MODEL. The Model is "fatally flawed" for a million reasons even if you considered the servicer only as one problem.

The GSE Model simply does not work and poses a systemic risk. Going back fifteen years to the old mortgage model should be the first order of business rather than attempting to breath life into something that is dead. The various "players" in the GSE Model with fight this tooth and nail until they realize that the taxpayers will no longer finance the Model.

The comments to this entry are closed.


Current Guests

Follow Us On Twitter

Like Us on Facebook

  • Like Us on Facebook

    By "Liking" us on Facebook, you will receive excerpts of our posts in your Facebook news feed. (If you change your mind, you can undo it later.) Note that this is different than "Liking" our Facebook page, although a "Like" in either place will get you Credit Slips post on your Facebook news feed.

News Feed



  • As a public service, the University of Illinois College of Law operates Bankr-L, an e-mail list on which bankruptcy professionals can exchange information. Bankr-L is administered by one of the Credit Slips bloggers, Professor Robert M. Lawless of the University of Illinois. Although Bankr-L is a free service, membership is limited only to persons with a professional connection to the bankruptcy field (e.g., lawyer, accountant, academic, judge). To request a subscription on Bankr-L, click here to visit the page for the list and then click on the link for "Subscribe." After completing the information there, please also send an e-mail to Professor Lawless (rlawless@illinois.edu) with a short description of your professional connection to bankruptcy. A link to a URL with a professional bio or other identifying information would be great.