The real cost of loan servicing

Katie Porter at Credit Slips has a transcript of a call from a borrower to his servicer (hat tip, Naked Capitalism). See below. For the record, and contrary to the suggestion being made at Credit Slips (which tends to be a lenders-suck sort of site), there isn’t anything really immediately insidious here in terms of the actual issue at hand — a borrower coming out of BK apparently saw their loan servicing transferred elsewhere (looks like a prior ABN AMRO file, we don’t know when the transfer was or other details), and somehow hadn’t yet paid the servicer’s attorney fees in conjunction with the BK. What’s frustrating in reading the below transcript is the absolute lack of competency shown by the servicing staff in explaining the situation to the borrower. While I don’t know “Bob the borrower” in the transcript below, I do know that what he’s getting in the way of customer service is exactly the outcome of a mortgage banking ethic that has placed near-zero value on those employees that actually have to service the loans — and doubly so for many loss mitigation departments, which are traditionally staffed by those that aren’t even required to have a college degree. Check out the job advertisements on any job board (try HW’s own job board, for example), and you’ll see what I mean. Or consider the fact that huge servicing operations have literally outsourced all or the majority of their call center operations overseas in the name of operational efficiency. (Which, BTW, makes most of the consumer advocate/mortgage fraud whistle-blowers/lenders suck crowd look idiotic when they say that servicers are trying to “rip-off consumers for profit.” Servicing isn’t profitable, especially these days; and in fact, that’s part of the problem. And an issue for a separate BuzzPost.) In this industry, production was king — and that’s where the money went, that’s where the executive ladder was climbed. Show me one mortgage banking CEO that’s come out of default. Or out of loan boarding. Or out of REO. You won’t find one. Loan servicing has long been an expense that banking operations look to minimize, something that has always rubbed me the wrong way. These days, it means that lenders and bankers are getting exactly what they paid for — which, let the transcript show, isn’t a whole hell of a lot:

Bob I was wondering what that charge of $650 was for? CSR [customer service rep]The charge of $665.30… Bob Yep CSR It’s for doing (not understandable) expenses. Bob They told me once before it was for bankruptcy. CSR (pause) Yes it is. Bob What exactly does this mean? CSR Umm…let me get my manager to advise me…I apologize but I have to put you on hold for one second. . . . CSR Ok this is the attorneys’ fee Bob For what? CSR For the bankruptcy. Bob What did the attorneys do? CSR The attorney is the one that filed the bankruptcy for you. Bob The attorney is the one that filed the bankruptcy for me? CSR Yes Bob I don’t understand. I paid my attorney. CSR You paid your attorney? Bob I paid my attorney. CSR Ok. This is actually showing he put a bill on to your account. Bob Who is he? CSR Whoever your attorney was that filed your bankruptcy. Bob My attorney’s a lady, not a he. CSR Ok. Bob She didn’t put no charge on my acct., because I paid her. CSR Ok if I could go ahead and put you on hold for a second, I’m going to go ahead and get my manager? . . . [manager comes on line] Shane Hey my name is Shane. I’m the lead on the floor. How are you doing today? Bob Ok I was wondering what these attorney fees are, you tried to charge me for? Shane Ok did you pay your attorneys a fee? Bob Yes Shane Ok, Well what he is suppose to do…He is actually suppose to send us the money after you sent it to him. Bob She is suppose to what? Shane Send us the money, after you send the money to him. Bob For what? Shane For the attorney fees. Bob Why would they send them to you? I paid my attorney. Shane Yes. The attorney is supposed to send us the money to take care of the fees of the account. Bob What are the fees for? Shane For going into bankruptcy and having an attorney. . . . Shane Let me just take a look at the account real quick. I’m going to put you on hold, alright? (Very long wait!) Shane Ok it took me a little bit to find this in your account. What happens is when anybody goes into bankruptcy…You hire your attorney, we hire our attorney. Then the two attorneys work together for the bankruptcy. You paid your attorney for the fees but when you’re worked with ABN…you didn’t pay ABN for their attorney fees. So that’s where these attorney fees are from. . . . Bob Who was your attorney? Shane I don’t know. It was with ABN’s attorney. Bob Oh Ok. Shane So the fees just carried over. They were already on your account…so when we bought you on they just carried over to your account. Bob Ok, well can you find out who the attorney was? Shane I don’t know if it’s really important who it is, because things were still charged, no matter what. Bob I’d like to know the attorney. I’m paying money; I’d like to know what I’m paying for. Shane That’s what you’re paying for…it’s when you go into bankruptcy. They hire an attorney…say if you were with us at the time. We would hire an attorney…our attorney would talk to your attorney and get the bankruptcy taken care of. So there are going to be fees because we hired an attorney. So the fees for our attorney are going to be on the account. Then you pay your fees to your attorney and it takes care of him…but you didn’t take care of ours. So that’s what happens, you didn’t take care of ABN’s fees. Bob I’d still like to know what your attorney did. Shane He worked out the bankruptcy with your attorney. Bob He worked out the bankruptcy with my attorney? Shane Yes. Those two are the ones who talked during your bankruptcy to get your account into bankruptcy and everything that happens when you are in a bankruptcy. Bob And you don’t know who the attorney is? Shane No. Bob I’d like to know who it is. Shane You might be able to talk to your attorney. He might be able to look it up in his records. Bob Ok… Shane Ok. Bob I don’t know. I’d still like to know who the attorney is. Shane I understand but… . . . Bob Oh ok. How can I reach you? Shane I don’t have a direct extension. Bob You don’t have a phone number? Shane No.

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