Mortgage Service Providers Incentives

In today's New York Times there is an interesting article revolving around the incentives that mortgage providers have for delinquent mortgage holders. Basically, mortgage holders hedge against mortgage delinquency by charging fees when mortgages become delinquent. The interesting thing, is whether the marginal revenues from the probability of a mortgage becoming delinquent are greater than the marginal costs of the mortgage becoming more delinquent.

Mortgage service providers argue that that fees are a small drop in the bucket of their overall profits, and that mortgage service providers delaying re-negotiating mortgage terms would be not make sense (see article linked above). This is true if there is excess demand - or at least demand for foreclosed existing housing, but if the probability of the house not re-selling in the near future is relatively low, then collecting some income as opposed to none will be a strong incentive for mortgage service providers to delay re-negotiating delinquent mortgages.

My guess is that someone in the credit card industry is now pondering how to collect fees from delinquent credit card debt as a way of off-setting the incentive that credit card holders have to quickly re-negotiate credit card lending and re-payment terms. Since it works in the residential housing mortgage debt market, why not try it in the unsecured revolving credit debt market?