Mortgage servicers that collect and record monthly payments and manage insurance and tax payments are getting part of the blame for the onslaught of foreclosures.

"Predatory servicing has attracted little attention, yet in many respects it's more vicious [than predatory lending], and the adverse consequences are more far-ranging," says Jack M. Guttentag, professor of finance emeritus at the University of Pennsylvania's Wharton School.

Predatory practices include failing to credit payments and prematurely initiating foreclosure proceedings. These actions can send struggling home buyers over the edge.

"In the subprime market, it's a huge deal because they're already in a loan that is very expensive. If you live paycheck to paycheck, the penalties of delinquency sink you deeper," says Alfred Ripley, legal counsel for consumer and housing affairs at the North Carolina Justice Center in Raleigh, a nonprofit that helps low-income families statewide.

Source: BusinessWeek, Mara Der Hovanesian (12/22/06)