While mortgage servicers give a lame excuse that they can't help homeowners in trouble until they've missed at least two payments because they are acting in the best interest of their investors, you need to look at their profit margins to understand why they really have no incentive to help borrowers. Countrywide (NYSE: CFC) raked in $285 million in late fees according to a story today in the New York Times. Another major loan servicer, Ocwen Financial counts on 11.5 percent of its servicing revenue from late fees.

Loan servicing can be extremely lucrative. The companies collect payments from borrowers and pass them on to the investors who own the loans. I'm sure you've experienced changes in whom you pay your mortgage to. In many cases it's just a change in servicing company and not necessarily a change in who owns the loan. Loan servicers usually get 0.25% on a prime mortgage and 0.50% on a subprime mortgage. The profit margins for servicers is about 20 percent according to the Times.

But even bigger than late fees are the fees the loan servicing companies tack on if a loan defaults. These include $145 in demand fees, $137 in overnight delivery fees (wow is that a personal door to door trip?), fax fees of $50 and payoff statement charges of $60, according to research done by Katherine Porter who is quoted in the Times story. In addition they can add on charges for monthly property inspection. All of these fees add to the profits of the loan servicing company.

Continue reading Mortgage servicers raking in millions from homeowners in trouble

Mortgage servicers raking in millions from homeowners in trouble originally appeared on BloggingStocks on Tue, 06 Nov 2007 14:55:00 EST. Please see our terms for use of feeds.

MOST NOTEWORTHY:

• Merck & Co (NYSE: MRK ) was upgraded to Neutral from Sell at Goldman Sachs to reflect the company's continued revenue strength and raised guidance. They believe strong execution continues.
• JP Morgan upgraded Intersil Corp NASDAQ: ISIL) to Overweight from Neutral based on improving fundamentals.
• Matrix USA upgraded shares of Nautilus Group (NYSE: NLS) to Hold from Strong Sell after this week's sell-off.
• Pacific Sunwear of California (NASDAQ: PSUN) was added to Freidman Billing's Top Picks List, believing the turnaround is taking hold following strong March comps.

• Goldman added L-3 Communications Hlds (NYSE: LLL) to its Conviction Buy List and raised its target to $105 from $95.
• McCormick Corp (NYSE: MKC) was upgraded to Outperform from Market Perform at Wachovia citing core performance in both Industrial and Consumer, including a nominal boost in long-term growth outlook.
• Bear Stearns upgraded shares of Ventana Medical Systems (NASDAQ: VMSI) to Outperform from Peer Perform, citing the company's solid base business outlook and Symphony potential.
• Piper Jaffray upgraded Ocwen Financial (NYSE: OCN) to Outperform from Market Perform.
• JP Morgan upgraded TJX Cos (NYSE: TJX) to Neutral from Underweight expecting merchandising initiatives and marketing spending to drive growth.

Analyst upgrades 4-13-07: LLL, MRK, NLS and PSUN upgraded today originally appeared on BloggingStocks on Fri, 13 Apr 2007 11:06:00 EST. Please see our terms for use of feeds.