What Is Predatory Mortgage Servicing?

Predatory mortgage servicing refers to companies that target borrowers with low credit ratings with the goal of extracting as much profit from them as possible. The logic behind this is simple: the lower your credit rating, the greater the possibility that you will end up being late on your payments, defaulting on your loan, or even forced into foreclosure, meaning that the servicing company will have more administrative work to manage and can charge greater fees to service the loan.

It is important to keep in mind that not all mortgage servicing companies will try to take advantage of you in the event that your financial situation is unstable. There are numerous respectable mortgage servicing companies in this industry that have become successful and have developed a reputation for providing fair treatment to mortgage borrowers. However, it is important for you as a borrower to understand how the incentives in the mortgage servicing market work in practice so you are not caught off guard in the event that you encounter a predatory mortgage servicing company.

Tellus TIP:

This conflict of interest in the mortgage servicing industry has been addressed by certain federal laws that require the servicer to make its best efforts to help you to avoid foreclosure.