According to an article in the Star-Telegram , at least 30 mortgage servicers have faced lawsuits accusing them of harassing borrowers, imposing illegal fees, charging for unnecessary insurance and failing to quickly aid homeowners facing foreclosure despite billions of dollars invested in foreclosure prevention by the government. But despite the lawsuits and controversy surrounding mortgage servicers’ complicity in the foreclosure crisis the industry will receive money for each toxic mortgage they modify to prevent foreclosure.

The article describes the function of mortgage servicers:

“The companies, known as mortgage servicers, are middlemen who collect monthly payments from homeowners and funnel the money to the banks or investors who hold the loans. As the only link between borrowers and lenders, they’re in the best position to rework the terms of loans under the government’s $50 billion mortgage-modification program. The servicers are paid by the government if the changes keep homeowners from falling behind on payments for at least three months.”

Their description is interesting because some of the biggest players in the mortgage servicing industry are mortgage lenders themselves — Bank of America, Wells Fargo & Co., JPMorgan Chase & Co. and Citigroup Inc. who have all faced litigation from homeowners, many of whom are victims of foreclosure. And despite the government’s massive investment in the foreclosure prevention plan and their most recent “shame” tactics, foreclosures nationwide continue to rise. And the foreclosure crisis will not be abated unless the government is willing to force the mortgage lenders’ hand by allowing toxic mortgages to be modified during bankruptcy. This is the best solution to the foreclosure problem and provides a huge incentive for lenders to prevent foreclosures in the first place.