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1.3.3.6 Default Services Providers

Mortgage servicers commonly outsource default services to third parties. These third parties, also known as “default service providers,” offer a variety of products to servicers, such as electronic information technology products, document preparation (e.g., notices of default or assignments), property inspections, broker’s price opinions, bankruptcy proofs of claim preparation, etc.63 In many cases, the default service providers are divisions, subsidiaries, or affiliates of the servicer.64

The use of default service providers by the servicing industry has resulted in more frequent overcharges for improper or unreasonable fees.65

Footnotes

  • 63 {57} For a perceptive analysis by a bankruptcy court of the role of default servicers implicated in the preparation of a mortgage lender’s bankruptcy filings, see In re Taylor, 655 F.3d 274 (3d Cir. 2011), affirming in part and reversing in part the bankruptcy court’s opinion at 407 B.R. 618 (Bankr. E.D. Pa. 2009).

  • 64 {58} See In re Stewart, 391 B.R. 327 (Bankr. E.D. La. 2008) (finding that entity which provided broker’s price opinions was a corporate division of the servicer and that the true cost incurred by the servicer for broker’s price opinions was $50 rather than the $125 charged to the borrower), aff’d, 2009 WL 2448054 (E.D. La. Aug. 7, 2009), vacated in part on other grounds, 647 F.3d 553 (5th Cir. 2011).

  • 65 {59} See National Consumer Law Center, Mortgage Servicing and Loan Modifications § 2.10 (2019), updated at www.nclc.org/library.