That’s a lesson large lenders should learn from Webster Financial Corp., a regional bank based in Waterbury, Conn. The bank, which services $8 billion in mortgages and home-equity loans, has been able to prevent foreclosures, for the most part, by helping borrowers and providing them with good customer service.
According to a story published in The Wall Street Journal this week, the lender has taken a proactive approach to loan modifications and has profited from doing so.
The lender offers struggling borrowers a chance to extend loan terms and reduce interest on mortgages that are owned by the bank, the article reports. While restructuring the loan, the bank waives late fees, penalties and unpaid interest. Most servicers simply add those costs to the balance of the loan. About 80 percent of the modifications started by Webster are approved. Big banks have long been criticized for putting borrowers on trial modification plans, requiring them to make payments for several months and later telling the borrowers they don’t qualify for a permanent modification.
The post goes on to talk about how the bank is doing this successfully. It’s very strange, isn’t it? Here you are reading about a bank doing what banks normally did for most of the last century.
They made money by loaning money and collecting interests, and when those loans had problems they didn’t casually foreclose, they attempted to work something out to the benefit of all. They helped people, their clients avoid foreclosure and acted as responsible members of the community.
That’s not how business is done anymore. Banks make money from default not renegotiation. They charge fees for late payments. Once a homeowner is in difficulty they stall when asked for help, compromise or renegotiation knowing that more late payments generate more income for the bank. Banks have told their clients to stop paying for three months so that they would qualify for the federal HAMP program. Then the bank denied them admission to the program and foreclosed. That’s how business is done now.
But you can see that it doesn’t have to be this way.
- How to make mortgage relief work (blogs.reuters.com)
- Nevada v. Bank of America Complaint (axsmithlaw.wordpress.com)
- Foreclosure Is Dirty Word for One Lender (online.wsj.com)
- Nevada Wallops Bank of America With Sweeping Suit; Nationwide Foreclosure Settlement in Peril (247wallst.com)
- Bank of America Accused of Breaching Accord (nytimes.com)
- JPMorgan, BofA take heat for foreclosure program (seattletimes.nwsource.com)