Many PSAs provide minimal guidance about modifications beyond specifying that servicers should apply “usual and normal” servicing standards or the same standards that they apply to the loans held in portfolio. With such vague guidance, servicers assert that they are worried about litigation risk if they employ servicing approaches that have not been widely adopted throughout the industry.
Furthermore, even when the PSAs provide guidance about loan modifications, it can differ widely across PSAs, often preventing servicers from designing a uniform modification program for their entire portfolio. To borrow from the title of a popular marital advice column, Can this contract be saved? I think the answer is no – at least not in its current form.