The Obama administration believes the way mortgage servicers are paid is unfair and needs to be corrected, according to a report from Reuters. Because of the current system, these companies have no incentive to help consumers renegotiate the terms of their loans so they can better afford to make payments, and consequently, stay in their homes.
“The current model has not motivated mortgage servicers to invest the time, effort and resources needed to fully explore all options to help delinquent borrowers avoid foreclosure,” Treasury Secretary Timothy Geithner and Housing and Urban Development Secretary Shaun Donovan said in a joint statement.
Because of this, the government will seek advice from those within the industry, consumer groups and government agencies for ideas on how to change the system, the report said. Likely, it will incentivize mortgage servicers to renegotiate loans with troubled consumers, though the relevant changes won’t take place until the middle of this year at the earliest.
Currently, the government allows some especially troubled consumers to alter their mortgage agreements through the Home Affordable Modification Program, which has had limited success due to stringent qualification requirements many homeowners can’t meet.