The heat is on, as mortgage servicers make an appearance in a Congressional hearing on foreclosure procedures this week. And banks and other mortgage servicers, who rarely place the blame of failed loan modifications on investors, are now singing to a different tune. A top mortgage official in a major mortgage servicer opts to highlight the role of investors in failed loan modifications.

Wall Street investors, says Bank of America’s top mortgage official Barbara Desoer, are at fault in the ballooning number of homeowners losing their properties. She says, “Bank of America is constrained by our duties to investors. Many investors limit Bank of America’s discretion to take certain actions.”

These words, which will reflect her testimony in the day’s hearing, are not new to homeowners. Homeowners have heard different versions of it but the gist is that they are unable to acquire loan modifications because of restrictions set by investors in contracts with servicers. BofA and other banks reveal that the contracts they sign with investors more often than not blocks them from making modifications – and if they’re not blocked from doing so, there are many limitations.

New York-based non-profit newsroom ProPublica, however, presented a different story. ProPublica reports that investors rarely have a say when it comes to modifying loans or even blocking them. A study made recently looked at contracts on subprime deals from the height of the real estate boom in 2006 and the results disagree with what the banks are saying.

The study uncovered that only 8% of the contracts between investors and servicers outright say modifications are prohibited. And although some contracts put limitations on modifications (e.g. no loan extension can be granted by servicers), two-thirds explicitly imposes authority to servicer to grant modifications for homeowners in default or about to default. The rest of the covered contracts do not address modifications.

Investors are now also putting the legal pressure on servicers to further improve on operations. The Association of Mortgage Investors released a statement saying they “share many of the frustrations that homeowners and state Attorneys General are experiencing when dealing with mortgage servicers.”