There was a legal case in New York recently that, although unique in some of its merits, opens the door to a public discussion. The case contains legalese and a clouded view of the problems with the current Owner of a loan/Servicer of a loan/Borrower triangle. But there are some interesting, discussable points that result in the debt being discharged.
In the case linked below, a borrower has made repeated efforts to make arrangements to work out the debt she owes. The Court also tries to get the servicing company to meet and negotiate a resolution to the debt. In the end, however, the servicer is not able to even state the actual amount of the debt.
The court resolves the situation by making the original debt void, and also bars its collection. One thing that is clear in the record, is that the servicer was (is?) very disorganized. This disorganization could be from the number of accounts they are handling, it could be from the way that servicers operate apart from the owner of the note, or some other less obvious issue.
One thing that isn't often discussed around loan modifications, is that the servicer does not have an interest in helping the borrower, because the owner of the loan is the servicer's client. There are no requirements for a servicer to involve an owner in negotiations, let alone provide documentation that the owner of the loan has even been notified of developments. In fact, inside MERS, loans are transferred between parties using "blank assignment" that do not provide a written record of the actual owner of the loan. Perhaps if the owner of this note has seen some of the ongoing confusion, they would have transferred the servicing to fresher management.
In any case, it will be interesting to see how this decision affects other borrowers' efforts to resolve their debts - with this servicer especially.
http://www.nycourts.gov/reporter/3dseries/2009/2009_52333.htm
Heath Coker, Associate Broker
Robert Paul Properties
www.CapeGroup.com / capegroup@capegroup.com
508-274-5613 Licensed in MA
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