Legal Issues.(Special Report)

Mortgage servicing executives can be forgiven if they've developed a taste for jokes about lawyers these days. After all, a souring economy, rising defaults, and increased scrutiny of servicing practices have left mortgage servicers in the cross hairs of lawsuits and investigations all too often.

But while all that attention may be causing you stress, it also means you are more dependent than ever on your legal counsel, both in-house and external. Servicers face threats from consumer advocates and plaintiffs' lawyers who are trying to protect their clients by delaying or blocking foreclosures, sometimes relying on arcane legal arguments and all too eager to shine a light on minor infractions or legal loopholes that might put a cog in the foreclosure proceedings. To top it off, bankruptcy reform is on deck in Congress, and servicers appear likely to face the threat of "cram downs" on existing, underwater mortgage loans. Some experts believe the lure of cram downs will lead more consumers ...