July 3, 2013We are constantly bombarded with e-mails from homeowners trying to figure out why servicers are so reluctant to offer loan mods and why most loan mod applications are denied for one reason or the other. After all, a loan which is modified with payments being made is better than a non-performing loan, right?Apparently not. Pursuant to agreements negotiated between the servicers and GSEs (Government Sponsored Enterprises, such as Freddie Mac and Fannie Mae), once a servicer forecloses and sells a property, that servicer gets a 27% bonus payment right off the top from the gross proceeds of the sale. This, of course, is in addition to the monies the servicer receives pre-foreclosure, from monthly payments, “trial mod” programs, “temporary forbearance” agreements, and the like. Once the property is sold, the balance of the proceeds are sent to the “investor”, and the servicer (e.g. JPMorgan Chase Bank, N.A.) makes a claim to either Fannie or Freddie (whichever one guaranteed the loan) for the difference. Thus, Chase, for example, gets not only (a) the monies pre-foreclosure, but also (b) a 27 point “kicker” for foreclosing, and (c) all of its “deficiency” on the loan (which it never owned, in the case of WaMu originated loans) paid for by the government (which means the taxpayers).Is this legal? On an adequate disclosure/equity/unjust enrichment basis, most likely not. In fact, it may even amount to a type of fraudulent conduct (e.g. fraud by omission/nondisclosure). We are looking into this more closely with our experts. Jeff Barnes, Esq., www.ForeclosureDefenseNationwide.com