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1.4.1 Introduction

The life of a mortgage loan presents many opportunities for servicer error and abuse. In general terms, abusive servicing occurs when a servicer seeks to collect unwarranted fees or other costs from borrowers, engages in unfair collection practices, or through its own improper behavior precipitates borrower default or foreclosure.63 The effect of mortgage servicing errors and abuses can be severe. The stress of facing foreclosure and battling with a mortgage servicer, even if the situation is eventually resolved, can be overwhelming for the average homeowner. Negative credit ratings can make it more difficult for borrowers to refinance their homes, obtain other credit, or even get a job. The most devastating result of mortgage servicing abuses is unwarranted foreclosure of the borrower’s home.

This section provides an overview of servicing issues that may arise at different stages in a mortgage loans’ lifecycle: before default; after default, but before foreclosure; after pay off or foreclosure. It also highlights mortgage issues that may arise if the borrower files for bankruptcy. The section next outlines first steps that an advocate should consider when presented with a servicing related case. It goes on to suggest specific questions an advocate may want to ask with respect to loss mitigation and potential mortgage servicing abuses.


  • 63 {63} See Kurt Eggert, Fannie Mae Foundation, Limiting Abuse and Opportunism by Mortgage Servicers, Housing Policy Debate 15(3), at 756 (2004). These practices are distinguishable from appropriate servicer actions that may nevertheless harm borrowers, such as collecting appropriate late fees or foreclosing on borrowers who have not made their payments despite proper loss mitigation efforts.