Its not any old servicer we are talking here - its Countrywide. All your points make sense but didn't make a difference. The article just confirmed my opinion of CW - and my scepticism of their much touted 40k mortgages saved from foreclosure. Technically true, if you call a short sale a save and so on - but a distinction without a difference.
My only comment has to do with Chase. We missed an escrow increase on a rental property because we were moving and they failed to credit the payment to the base loan and marked it delinquent. It got pretty ugly for a bit, but the "delinquency" never showed up on our credit report and I did not have to follow though on my threat to engage an attorney. This all had to do with a comedy of errors surrounding management of the escrow for a pair of almost identical loans as they were transferred from PHH (I think) to Chase.
So my comment is that escrow issues should not be be reflected in the performance of the underlying loans.
why on earth would you tell your story to the NYT if you're facing fc? with the HOPE of putting pr pressure on cfc to somehow bail you out? i don't get it.
sk, here's what Gretchen had to say in March of 2007:
"Moreover, a lag in reported defaults is almost certainly attributable to the increasingly aggressive practice of loss mitigation among lenders, in which they try to keep stretched borrowers from defaulting. But investors get little to no information about how lenders work with troubled borrowers and whether those efforts actually cure the problem or simply postpone the inevitable. As a result, investors do not know whether the default figures they are seeing reflect reality. . . .
While it is a splendid idea to do whatever is necessary to try to cure a sick borrower, it is worth remembering that the rollover of nonperforming loans was central to what made the savings and loan mess of the early 1990s so disastrous. And it is well worth asking: are loss-mitigation practices predatory since they give lenders an opportunity to squeeze the last ounce of blood out of a terminally ill patient?"
So back in March, she thought workouts were predatory. And she claimed that they were widespread, even though now she says that they were never more than 1.00% in Q1. Now she thinks CFC is a predator for doing short sales instead of mods for borrowers who just can't carry the payments.
I conclude that the principle here is: whatever CFC does, she's against it.
Is there a conflict of interest if the out of pocket expenses collected are from ancillary companies (like landsafe)? Could there be an incentive to use excess fees as a cross selling opportunity?
Is there a conflict of interest if the out of pocket expenses collected are from ancillary companies (like landsafe)?
Well, perhaps there is. But how is it different from the conflict of interest when the loan was originated? On performing loans that require title services? On refis?
Say you're a performing customer of CFC and you want to drop MI. CFC requires (per note) a new appraisal, and gets it from Landsafe. Is that "making money off dropping MI"? Well, yes. Landsafe shows a profit on the appraisal. That rolls up to CFC's big profits.
Doesn't it seem a touch odd to worry about affiliated companies and the possibility of kickbacks only now?
Those of us who have been raging for years about things like the FHA DAPs and builder-owned mortgage companies and other gross conflicts of interest are just a bit awed that the press only cares now because CFC might have made $25 after costs on an appraisal. As if an unaffiliated appraisal company wouldn't have made a profit.
Would you please write a technically right criticism of Countrywide? It will be nice to know, which parts of this crisis can be blamed on them, which parts on the general practices of the banking and finance industry and which on vagaries of nature?
to tell her she doesn't know what she is talking about. I just did, using the critique on this blog as evidence. I will report back if she answers. LOL
But what about the headliner, Ms. Rivas-Spivey, who is doomed to homelessness after being served her papers on Christmas Eve, with the harsh winds of Winter circling about her, as the Sheriff came a-calling, giving them the unwelcome, (though not unexpected) news that Angelo's mustache twirling minion had finally gotten her where he wanted her? Does your heart not go out to her, and the hundreds of thousands like her? Mine did.
And that Orange master of the Legions of Legree, to add insult to injury, will soon have us complaining to Bangalore if we don't like it!
Now, I myself avoid reading the NYT unless you or CR insist on it, but I do understand that there are still many famous people who consider it a reliable substitute for thinking. What in the world are they up to, I wonder? I mean, is this supposed to create a "there but for the grace of God go I" kind of awakening in the American Scrooges? Or are their soon to be long suffering readers being prepared for their own Christmas surprises?
Well slap me silly for actually thinking GM had a point this time -- the interesting (for me-but maybe infuriating for you) thread that ran through this seemed to be that Countrywide may be behaving like a credit-card issuers -- it's not in a credit card issuer's interests to "work out" debt because that is where they make all their money - and it seemed like the same thing is happening here (although I agree it's not exactly laid out straight in her story).
Maybe I'm too hung over ... but this does seem like an interesting implication -- is it all b.s.?
I conclude that the principle here is: whatever CFC does, she's against it.
Well, perhaps this is a sound principle.
Facetiousness apart, she's a reporter, not a domain expert. If the experts she consults don't point out the pitfalls of her arguments, she's not going to be able to do any better. Perhaps you should send her a note when you see the error in her ways. Most reporters I know are happy to take such information, and even happier to cite their sources.
Would you please write a technically right criticism of Countrywide?
No, I won't. Shorts have to do their own work (well, except when Gretchen helps them do it).
Alo, you might still be under the weather. Remember mortgage 101: the investor puts in the principal, and gets interest payments back. If the borrower stops paying interest, the servicer on behalf of the investor takes the property and sells it. The sales proceeds are applied: first, to the servicer's expenses, second to investor's principal, third to accrued but unpaid interest, fourth to any junior lienholder, and fifth, if there's any left, to the borrower. No lienholder can claim more than loan amount plus interest plus expenses.
So take this example loan that makes no sense: it's apparently an 11% interest rate. If it takes a year to foreclose, that means that 11% of the loan amount is unpaid interest due to the investor. Most RE markets are not seeing 11% annual appreciation for existing homes (REO, no less) right now. If you forclosed because the loan amount is more than the sales price anyway--the borrower couldn't sell or refi because she's upside down--then you are accomplishing nothing by delaying, unless you can get a deficiency judgment from the borrower for the difference, and even then you may or may not ultimately get paid if the borrower simply has no money.
It doesn't do anyone any good to fart around for the express purpose of racking up past-due interest. The investor just wants principal back so it can be reinvested somewhere else where it might not be at risk of loss.
The thing about CFC raking up fee income? Well, you have to show that the fee reimbursements they're getting are above out-of-pocket costs and general overhead. And I ask you if anyone really thinks that investors aren't looking at those expense reports right now and throwing a fit if they're too high. That comes off the proceeds from liquidating the REO before the investor gets anything.
I'm not saying the system is perfect, by any means, but it has countervailing forces in it that Gretchen simply doesn't understand. If CFC is milking fees, that's coming out of the investors' pockets, and they are actually in a position to refuse to pay excessive fees.
She writes this whole article, and we're still just guessing that something nefarious is going on. Still have no evidence at all.
You're saying she's just a stenographer. If someone feeds her stupidity, she prints stupidity. No wonder NYT can't get people to pay for subscriptions.
And who, precisely, has put a gun to her head and made her write three or four major feature articles jumping all over CFC in the last few weeks, all of which were full of disinformation, insinuations, garbled facts, and histrionics?
I am not kidding: GM is working for the shorts. I can't see any other explanation for her behavior.
After reading your blog entry, I tend to come up with this impression that you are more inclined to find technical errors in her reporting than to commend or criticize the main message of the text.
Let me give you an analogy. Few years back, I read a group email about some Stanford students interested in joining a Iraq-war protest rally, and asking others whether they would come. One guy said he won't not go, because one of the supporters of the rally was Stanford Communist group, and he does not want to join the Communists. So, this guy was finding some secondary excuse against the rally rather than telling us, whether he supported or opposed Iraq war.
After reading your blog entry, I tend to come up with this impression that you are more inclined to find technical errors in her reporting than to commend or criticize the main message of the text.
I'm not generally inclined to take too seriously our resident Troll, but let me congratulate you. You figured out what I do, which is to complain that the press is more interested in "messages" or sermons or themes or whatever than in technically correct business analysis which some of us still look for in the business section.
She is not claiming to be a fiction writer, you know. Novelists get to play around with facts and "realism" in order to communicate some "message," if they want to. Reporters, however, are supposed to not mess with the facts.
Of course my personal sympathies are with these distressed borrowers, not with some corporate behemoth. So? I'm supposed to judge NYT reporting on whether it reaffirms my biases or not?
As far as I'm concerned--and as far as many of my blogees are concerned--we're tired of shilling and misinformation from any and all sides. And yes, we think the measure of intellectual rigor is whether you can maintain fairness in a critique. GM is simply not being fair to CFC. That doesn't mean you have to love CFC. But why should I be impressed by this?
Your analogy is telling. You want this to be about politics. I actually want it to be about business practices.
..can you explain how being reimbursed for an out-of-pocket expense, like a fee paid to a lawyer or an appraiser, is "making a profit"? Are you saying there's a markup in there? Do you have evidence for that?
Servicers commonly charge a flat amount for attorney fees as soon as a case is referred to an attorney for foreclosure, even if the foreclosure is not completed or commenced. This is usually listed as a corporate advance. Additionally, many attorneys use paralegals to generate form documents in as little as 15 minutes on a computer.
Then it would be a lovely subject for a long feature article in the NYT.
What the feature article could do is explain the problem, examine some actual foreclosure settlement statements, interview some attorneys, and read through those ponderous PSAs to see if they shed any light on how FC legal work is mandated to be handled in the contract. It could then involve some interviews with informed observers without an axe to grind who could discuss alternative approaches. We could even consider whether regulation of FC legal work is necessary.
But what it probably couldn't do, as far as I'm aware, is conclude that this practice is 1) limited to CFC or 2) especially a problem for CFC or 3) anything new about CFC. No?
This goes to the risk undertaken by the buyer's of debt constructed out of consumer loans, whatever they may be. Why do I say that? Because Accrued Interest admits it in response to a comment.
The comment was, "Where were you five years ago? If you are able correctly characterize CDO's today as flawed statistically, why weren't you five years ago."
He replied,
Did I see this coming 5 years ago? Yes and no. I was very negative on consumer credit bonds for basically the last 10 years. So I always avoided auto loan, credit card, HELOC, and non-agency MBS paper. The spreads on that stuff was never that great, and I have long been concerned about high consumer debt levels.
Now my concern was more about weak performance in whatever pools I'd wind up buying. Not some calamity.
I was worried about HPA 5 years ago as well. But my view was that an overheated housing market was self-correcting. If housing prices didn't rise, people would stay in their houses longer. That would cause supply to drop enough to keep HPA from going significantly negative in nominal terms. I underestimated the impact of speculators.
I also underestimated how bad credit standards became. It was only last year that I became aware that as much as half of all sub-prime loans were lim doc. That's when I became much more negative on sub-prime. And honestly, I wasn't that far behind the curve. I believe sub-prime credit standards rapidly deteriorated in 2005 and 2006, and statistics on loan orginiations were not widely reported.
What has this to do with GM?
Simply this. The money lenders are the villains of the piece. The municipal pension funds who fell for the sales pitches for bonds constructed out of predatory money lending are not the villains. They will suffer, but they are not the villains.
The guys who made the predatory loans are the villains. A heritage of predatory lending practices dating back to the early days of Sandy Weil and Chuck Prince cheating poor people in the South.
I don't care if GM is talking through her hat. CW deserves unfair treatment and I hope they get it.
...what it probably couldn't do, as far as I'm aware, is conclude that this practice is 1) limited to CFC or 2) especially a problem for CFC or 3) anything new about CFC. No?
Well, I am the one and only troll here, and manage to keep other ones away. You better be nice to me, and feed me once in a while
I understand that you want to identify errors and shilling in business reporting, but the title of the blog is 'Calculated risk', and so my request (copied below) was not completely unreasonable. I am just trying to understand, who can be blamed for what.
"Would you please write a technically right criticism of Countrywide? It will be nice to know, which parts of this crisis can be blamed on them, which parts on the general practices of the banking and finance industry and which on vagaries of nature."
If the title of the blog were "Smoke out the Shills in Business Reporting", GM is one of the smallest offenders. The biggest are those, who report everyday that "Stocks went up(/down) because of XXX". Two are completely unrelated events. The second group is NAR and the shills who repeat their lies every month without asking questions.
You want this to be about politics. I actually want it to be about business practices.
Uh-huh. But at the end of the day, it's always about politics, as I've noted here previously. The NYT is meting out a little rough justice today; in the future, don't be surprised if things get rougher still (from CFC's POV).
I am not kidding: GM is working for the shorts. I can't see any other explanation for her behavior.
This really does make you sound like a shill. Out of character for you imho, and really very puzzling.
I cannnot, literally, think of a better way to stir up sympathy for Countrywide than printing crap like this.
Getchen Morgensen made her name with exactly this kind of reporting against wall street analysts in 2000 and now she's after the mortgage lenders. Not saying analysts deserve any sympathy but the whole mess of investment banks/investors/corporate issuers government etc was completely conflicted back then too. Yet the only ones that got hit were the analysts.
She's playing the game of "find the villain" and she has decided that, for now anyway, that honor goes to Contrywide. If we wanted to be as paranoid/cynical a she is, we'd say that she's in the pay of the MSM/political classes that caused all of these bubbles. They now need a fall guy that they can pin the blame on, ideally this fall guy is not at the center of the whole thing (they know too much), is already badly damaged by the fall out (so no great loss if they are already about to go under), and have acted in an egregious manner to allow the priggish media types to demonise the lead individuals.
There is a negative article about Countrywide (or rather their CEO) in LA Times this weekend. I think the media is preparing him as the Kenny boy of this round.
Americans like simplicity. They want to believe that few bad apples cause most troubles. No reporter will be allowed to write about systemic problems, neither will he/she get enough readership to do so. Gosh, even readers of this blog criticize Jas Jain, when he suggests that there are problems in the American system.
On Tanta vs Troll Brothers I vote for Tanta. This blog has value precisely because it is knowledge based exploration of the mortgage business. There are plenty of other less useful places for screaming heads to exchange opinions whether I agree with them or not.
Borrower advocates fear that fees imposed during periods of delinquency and even foreclosure can offset losses that lenders and servicers incur.
The fees are supposed to offset those losses. Exactly what do those advocates fear?
Gretchen does not seem to understand the concept of default. When you dont make timely payments you are in default, period. But we should know better than to read the NYT on almost anything. The real purpose of this article is to bash lenders by using the emotive force of sob stories.
I believe GM is trying, just like Herb Greenberg is trying, to convey to the little folks how far their interests have diverged from the folks who are running big business. The lack of traction in the overstock lawsuits tells me that it was a fever dream of a certain CEO who should have stuck to the knitting of selling stuff really cheap and stopped trying to build a crappy retail outlet store online.
I think that we have seen so much degradation in the media that we think GM and HG must be in the pay of shorts against the relentless feelgood of CNBC and most mainstream reporting. The Arizona Republic had an excellent reporter (John Talton) who dared to call the bubble the HOUSING bubble and predicted tears. He has since left town after the real estate industrial complex leaned very heavily on the republic to get rid of him due to many emperor has no clothes moments.
The mainstream media is so darned biased that extreme viewpoints are severely underrepresented. What I like about this blog is that the smart and thus far proven right perspective is available without filtering. That dumbing down effect is what destroys mainstream media. All mainstream suffers from the LCD problem, with the economist suffering the least of readily available publications. The evening news is suitable for wrapping virtual fish and determining what mayhem may be closing intersections.
As for Countrywide, it will soon to paraphrase a famous star be part of the late great Golden State. CR is way too academic to be a former CW executive.
The NetBank failure was far more stunning than anything else this week.
That was a very interesting and way underreported moment.
May you live in interesting times.
They will be more interesting as my tagline comes to be:
This really does make you sound like a shill. Out of character for you imho, and really very puzzling.
Now you do understand how I respond to GM and her ilk.
I guess you can call this "rough justice." She picks up a "fact," and each time, the "explanation" is CFC is exploiting someone. It never really matters how, or if it even makes any sense when you stop to think about it. You aren't supposed to stop and think about it. You are supposed to think that nothing ever happens except because of bad faith.
It makes exactly as much sense as my suggesting that GM is working for the shorts.
I infer that you're reacting to what this kind of reporting implies for the lending industry as a whole, and not CFC in particular. If this is the case, I most certainly sympathize with you. GM will turn out to be a bit player in a much larger, uglier drama. I wish I could envision an alternative outcome, but I'm afraid the script is already written and all we can do at this juncture is watch it play out.
"I noticed that no one took up my explicit challenge to make sense out of the long anecdote of the "Connor" loan." Tanta | 09.30.07 - 4:59 pm |
Hardly tempting. Our valuable time is far better spent learning more about the real estate industry from you, or considering Accruedint's Four Simple Reforms (they're at the bottom of the blogpost) to restore credibility to the CDO market.
The worst part of that story was the anecdote it opened with, no real facts are given, the story seems somewhat implausible, then Morgenson admits she really doesn't know what the facts are... The whole point in using an anecdote is that it illustrates some point, here the point seems to be that Morgenson isn't a particularly good reporter and a god-awful business reporter.
But I find her work not nearly as bad as Ben Stein's. That guy seems on a mission to define fatuous.
Well, I know this isn't what you mean, but geez, I love a challenge.
(requires brief suspension of disbelief)
The Connor Fiasco:
(A ramshackle Victorian hovel, somewhere outside Cambridge. A schoolmarm in petticoats sits forlornly at an empty table, head in her hands. A knock; she gets up to answer the door. A man in a black top hat and cloak, with unusually orange skin and a thick mustache stands there)
Countrywide:Pay the rent! Connor:(Swoons) I can't pay the rent! Countrywide:(Leers, and strokes his mustache)Well, my dear, you know what this means! Connor:(Imploring)No, please! Just give me a little more time! If you only... Countrywide:Enough! I've given you and your wastrel 'husband' enough time already! Today was your last chance! (Grabs her roughly, and begins to bind her hand and foot with a convenient length of clothesline) Connor:(Crying loudly) Help! Oh, won't someone stop him?
(A commotion as a new figure bursts through the door)
New figure:Unhand her, you cad!(Steps between the two) You're through extracting usurious fees in this fair town! Connor:(Shaking free of her bonds, throws her arms around the New figure) My Hero! And look! My breast cancer is cured! Countrywide:(Slinking out the door) Curses! Foiled again!
I can't wait to see how it ends! Of course, after the performance, New figure and Countrywide are usually sipping bourbon together in the tavern. Connor really is homeless, her cancer wasn't cured either, but by then Gretchen has other stories to report on.
I read your brief against Morgenstern's article and I don't see why you're so out of joint over it. You didn't refute anything that Morgenstern actually wrote.
In fact, the mortgage servicing business is profitable. Nothing wrong with that, and I don't see Morgenstern arguing that it's wrong, either. She's just noting how CW makes its money.
On the suspense account issue, it's news to most people that a partial payment won't be applied to the loan itself. Partial payments are applied to credit card loans, which is the other form of credit that most people are familiar with.
I agree that the issue of "dipping in" to suspense accounts should be clearer. I am genuinely curious about it. That said, there's something a little stinky about not applying the partial payment to the loan, and then turning around and making money on the float. If suspense accounts are held in custody, then the interest should belong to the borrower.
Morgenstern didn't state that foreclosure is a profit opportunity. She quoted someone who said so. Yes, this could be further explained. Lots of things could be. We'll just have to wait for her next article.
Generally speaking, I like this blog quite a bit. But I think you missed your target on this rant. Instead, you should go after Jim Cramer for his ignorant comment about the alleged health of the Seattle real estate market.
Even as Countrywide maintains that helping its borrowers modify their loans is its top priority, its investors have heard a slightly different story. In a conference call with analysts and investors in late July, Kevin Bartlett, Countrywides chief investment officer, counted about 2,000 loan modifications done in June.
Second:
But on the billions of dollars worth of mortgage loans that have been sold to investors in the last few years, it is not the banks or lenders like Countrywide that are hit with big losses when homes go into foreclosure. It is the sea of faceless investors who own pieces of these trusts.
The second group of investors, "the sea," clearly are buyers of wide mortgages. But if they're the ones taking the bad loan losses, how is wide supposedly using servicing fees as an offset? Is the claim that wide is using overcharges on servicing fees to offset losses to investors in wide stock and liabilities? Is that who the first group of investors are? The first group could after all be prospects for the purchase of more wide mortgage assets, but we don't know from GM's presentation.
I don't care one bit for wide or most other purveyors of this infernal boom, and don't even get me started on the values issues involved; that's why my handle has a handle. But this is just too sloppy, slippery, and inconclusive, even before you get to the lousy exposition of the consumer cases.
I'd be most grateful, 4shzl, if you could spare a few moments to outline what you envision.
A latter-day Huey Long spring-boarding out of talk radio and cyberspace, spewing some updated version of the "share our wealth" meme that played so well seventy some years ago. The anti-corporate, anti-Wall Street elements of his rap will sound appealing to some lefties at the outset, but in the fullness of time it will become apparent that behind the populist rhetoric lies a hard core authoritarian agenda.
Pick up a DVD of the recent remake of "All the King's Men" and watch the documentary on Long in the special features. You may just discover that what I'm suggesting is not far-fetched as it sounds.
So Gret has outdone herself trying to elicit a mawkish sense of empathy with borrowers, and detestation of lenders. So august a being, surely, would not set herself to fleshing out the "talking points" of our liberal politicos. No way.
Thank you Tanta. As soon as I read that piece I was wondering what you'd have to say about it. (I couldn't make sense out of any of the cases either.) However, I'm a bit less clear on this:
If CFC is milking fees, that's coming out of the investors' pockets, and they are actually in a position to refuse to pay excessive fees.
From the article it seems that the fees are actually charged to the borrower. The only sense in which they are coming out of the investors' pockets is that the borrower can not afford to pay them and they eat up a chunk of the house's value.
Maybe in some theoretic sense the way the fees are charged makes no difference, because the house will be lost anyhow. But the emotional cost to a borrower who's losing their house to watch 10's of thousands of dollars of fees build up before the loss is huge. And I think this is reflected in the reaction of the borrowers to the foreclosure process.
I noticed that no one took up my explicit challenge to make sense out of the long anecdote of the "Connor" loan.
Tanta | 09.30.07 - 4:59 pm | #
What's to explain? Couple buy a house, refinance for a hundred thousand more, can't make the payment, fall behind, think they can make a deal, make a deal they don't understand, don't live up to the terms of the deal. The numbers and dates are almost spurious, if not wrong.
They were behind at least three months in April of 2006, so a year later, April 2007, with the missed payments and fees the 500k+ total shows up, the phantom short sale buyer really isn't pertinent (makes me wonder whether that wasn't another nascent scam), and I'm not sure the credit union Heloc is pertinent (but again brings in tantalizing side issues.) GM does a good job of clouding the issue with numbers, much like Ms. Conner (and her lawyer?) who seems to think talking to 9 different people about half a million dollars is an ordeal. Working in the breast cancer and the husband lost job is great writing, I mean, we're not really trying to be fair and unbiased, (or is that fair and balanced?)
I'm starting to think that GM has a grudge against Tanta and is cleverly leading our heroine to the edge of madness. Perhaps she has an unrequited love who idolizes Tanta and so has hatched a fiendish plot to avenge herself with the journalistic equivalent of Chinese Water Torture!
Ironically, I think that article will make many people less sympathetic to borrowers in trouble. In Both cases, people borrowed more money than they could really afford, and when things got bad they were in trouble. In both cases, the borrowers are looking to shift blame from themselves by being selective in the facts they provide.
A lot of people making the same incomes as these people chose to live in smaller houses, rent, etc., rather than get over-extended. These are the people that spent too much money and didn't save enough, when things turn bad for them, they'll suffer.
Ok...Take CFC out of the story and insert "Servicer X". Once you get beyond the individual company and any style points for writing this is absolutely CLASSIC MORTGAGE SERVICING FRAUD Tanta.
To date, I don't think I've seen a closer portrayal of Mortgage Servicing Fraud without someone actually SAYING Mortgage Servicing Fraud.
1.) Servicers - not all but apparently more and more - tend to charge borrowers for expenses that they legally have no business charging them for. "Property preservation" fees are a big one - BPOs and such. I've been charged for probably 12 of them over the course of the last 6 years despite my note making the note holder specifically responsible for those fees. And even after a court order reversing those fees Fairbanks/SPS STILL continued to charge me for them. Force placed insurance is another big way to help create a default situation with a borrower.
2.) What this also implies, Tanta, is that borrowers cannot pay extra money in order to pay down the P&I because any overage or "partial" amount gets shunted into a "suspense" account. I know of one Mortgage Servicing Fraud victim who used to send in an additional $500 a month on top of her monthly payment with specific instructions to apply it to P&I. It never was. It was always dumped into suspense.
3.) See #2
4.) YES!! The standard party line is "No one makes any money on foreclosures." Pardon my French - Bullshit!! You want examples? Try reading Mortgage Servicing Fraud for starters - specifically here: Legal Lounge
When you're done there, try running JUST Select Portfolio Servicing through Justia.com . As of last night, 84 cases against SPS ALONE had made it to Federal court. God only knows how many are tied up in lower courts. After that, if you're really into it, take a gander at other servicers like Ocwen, Litton, EMC, Countrywide etc.
The bottom line, Tanta, is that servicers are literally MAKING UP charges in many cases. You want one more example? Go read Dillon v. Select Portfolio Servicing et al.
People seem to have an expectation that their creditors will fall all over themselves to "work things out" so "everyone benefits". Yeah, right. What did the Connors do with the $100+ Gs they "refinanced" out of the house? (Not to mention the separate HELOC) Maybe they wish they hadn't spent all that money.
We are clearly building a slow-motion version of the indignation we had over government reaction (inaction) to Hurricane Katrina. Like that event, though, everyone seems to gloss over the personal choices part of things:
Why did you borrow so much money & then spend it?
Why do you live below f'in sea level in a hurricane zone?
People would be better off watching out for themselves & relying less on other people doing it for them.
And a good lovely Sunday morning to everyone. Thanks Tanta and CR
Its not any old servicer we are talking here - its Countrywide. All your points make sense but didn't make a difference. The article just confirmed my opinion of CW - and my scepticism of their much touted 40k mortgages saved from foreclosure. Technically true, if you call a short sale a save and so on - but a distinction without a difference.
These liars really get up my nose.
-K
My only comment has to do with Chase. We missed an escrow increase on a rental property because we were moving and they failed to credit the payment to the base loan and marked it delinquent. It got pretty ugly for a bit, but the "delinquency" never showed up on our credit report and I did not have to follow though on my threat to engage an attorney. This all had to do with a comedy of errors surrounding management of the escrow for a pair of almost identical loans as they were transferred from PHH (I think) to Chase.
So my comment is that escrow issues should not be be reflected in the performance of the underlying loans.
why on earth would you tell your story to the NYT if you're facing fc? with the HOPE of putting pr pressure on cfc to somehow bail you out? i don't get it.
Journalists are so often idiots. There's a reason that they majored in journalism instead of biology, accounting, physics or engineering.
sk, here's what Gretchen had to say in March of 2007:
"Moreover, a lag in reported defaults is almost certainly attributable to the increasingly aggressive practice of loss mitigation among lenders, in which they try to keep stretched borrowers from defaulting. But investors get little to no information about how lenders work with troubled borrowers and whether those efforts actually cure the problem or simply postpone the inevitable. As a result, investors do not know whether the default figures they are seeing reflect reality. . . .
While it is a splendid idea to do whatever is necessary to try to cure a sick borrower, it is worth remembering that the rollover of nonperforming loans was central to what made the savings and loan mess of the early 1990s so disastrous. And it is well worth asking: are loss-mitigation practices predatory since they give lenders an opportunity to squeeze the last ounce of blood out of a terminally ill patient?"
So back in March, she thought workouts were predatory. And she claimed that they were widespread, even though now she says that they were never more than 1.00% in Q1. Now she thinks CFC is a predator for doing short sales instead of mods for borrowers who just can't carry the payments.
I conclude that the principle here is: whatever CFC does, she's against it.
Mortgages May Be Messier Than You Think - New York Times
Is there a conflict of interest if the out of pocket expenses collected are from ancillary companies (like landsafe)? Could there be an incentive to use excess fees as a cross selling opportunity?
Is there a conflict of interest if the out of pocket expenses collected are from ancillary companies (like landsafe)?
Well, perhaps there is. But how is it different from the conflict of interest when the loan was originated? On performing loans that require title services? On refis?
Say you're a performing customer of CFC and you want to drop MI. CFC requires (per note) a new appraisal, and gets it from Landsafe. Is that "making money off dropping MI"? Well, yes. Landsafe shows a profit on the appraisal. That rolls up to CFC's big profits.
Doesn't it seem a touch odd to worry about affiliated companies and the possibility of kickbacks only now?
Those of us who have been raging for years about things like the FHA DAPs and builder-owned mortgage companies and other gross conflicts of interest are just a bit awed that the press only cares now because CFC might have made $25 after costs on an appraisal. As if an unaffiliated appraisal company wouldn't have made a profit.
Would you please write a technically right criticism of Countrywide? It will be nice to know, which parts of this crisis can be blamed on them, which parts on the general practices of the banking and finance industry and which on vagaries of nature?
You can send an email to Gretchen here:
The New York Times > Member Center > Site Help > Page Not Found
to tell her she doesn't know what she is talking about. I just did, using the critique on this blog as evidence. I will report back if she answers. LOL
But what about the headliner, Ms. Rivas-Spivey, who is doomed to homelessness after being served her papers on Christmas Eve, with the harsh winds of Winter circling about her, as the Sheriff came a-calling, giving them the unwelcome, (though not unexpected) news that Angelo's mustache twirling minion had finally gotten her where he wanted her? Does your heart not go out to her, and the hundreds of thousands like her? Mine did.
And that Orange master of the Legions of Legree, to add insult to injury, will soon have us complaining to Bangalore if we don't like it!
Now, I myself avoid reading the NYT unless you or CR insist on it, but I do understand that there are still many famous people who consider it a reliable substitute for thinking. What in the world are they up to, I wonder? I mean, is this supposed to create a "there but for the grace of God go I" kind of awakening in the American Scrooges? Or are their soon to be long suffering readers being prepared for their own Christmas surprises?
Well slap me silly for actually thinking GM had a point this time -- the interesting (for me-but maybe infuriating for you) thread that ran through this seemed to be that Countrywide may be behaving like a credit-card issuers -- it's not in a credit card issuer's interests to "work out" debt because that is where they make all their money - and it seemed like the same thing is happening here (although I agree it's not exactly laid out straight in her story).
Maybe I'm too hung over ... but this does seem like an interesting implication -- is it all b.s.?
Tanta said:
I conclude that the principle here is: whatever CFC does, she's against it.
Well, perhaps this is a sound principle.
Facetiousness apart, she's a reporter, not a domain expert. If the experts she consults don't point out the pitfalls of her arguments, she's not going to be able to do any better. Perhaps you should send her a note when you see the error in her ways. Most reporters I know are happy to take such information, and even happier to cite their sources.
Would you please write a technically right criticism of Countrywide?
No, I won't. Shorts have to do their own work (well, except when Gretchen helps them do it).
Alo, you might still be under the weather. Remember mortgage 101: the investor puts in the principal, and gets interest payments back. If the borrower stops paying interest, the servicer on behalf of the investor takes the property and sells it. The sales proceeds are applied: first, to the servicer's expenses, second to investor's principal, third to accrued but unpaid interest, fourth to any junior lienholder, and fifth, if there's any left, to the borrower. No lienholder can claim more than loan amount plus interest plus expenses.
So take this example loan that makes no sense: it's apparently an 11% interest rate. If it takes a year to foreclose, that means that 11% of the loan amount is unpaid interest due to the investor. Most RE markets are not seeing 11% annual appreciation for existing homes (REO, no less) right now. If you forclosed because the loan amount is more than the sales price anyway--the borrower couldn't sell or refi because she's upside down--then you are accomplishing nothing by delaying, unless you can get a deficiency judgment from the borrower for the difference, and even then you may or may not ultimately get paid if the borrower simply has no money.
It doesn't do anyone any good to fart around for the express purpose of racking up past-due interest. The investor just wants principal back so it can be reinvested somewhere else where it might not be at risk of loss.
The thing about CFC raking up fee income? Well, you have to show that the fee reimbursements they're getting are above out-of-pocket costs and general overhead. And I ask you if anyone really thinks that investors aren't looking at those expense reports right now and throwing a fit if they're too high. That comes off the proceeds from liquidating the REO before the investor gets anything.
I'm not saying the system is perfect, by any means, but it has countervailing forces in it that Gretchen simply doesn't understand. If CFC is milking fees, that's coming out of the investors' pockets, and they are actually in a position to refuse to pay excessive fees.
She writes this whole article, and we're still just guessing that something nefarious is going on. Still have no evidence at all.
she's a reporter, not a domain expert
Forgive me, but what hogswallop.
You're saying she's just a stenographer. If someone feeds her stupidity, she prints stupidity. No wonder NYT can't get people to pay for subscriptions.
And who, precisely, has put a gun to her head and made her write three or four major feature articles jumping all over CFC in the last few weeks, all of which were full of disinformation, insinuations, garbled facts, and histrionics?
I am not kidding: GM is working for the shorts. I can't see any other explanation for her behavior.
Maybe you need a "Morgenson" tag to keep track of all the GM stories?
Nakedcapitalism thinks Jorgensen's article is good, unlike her previous ones:
Countrywide’s Sham Borrower Rescue Programs « naked capitalism
After reading your blog entry, I tend to come up with this impression that you are more inclined to find technical errors in her reporting than to commend or criticize the main message of the text.
Let me give you an analogy. Few years back, I read a group email about some Stanford students interested in joining a Iraq-war protest rally, and asking others whether they would come. One guy said he won't not go, because one of the supporters of the rally was Stanford Communist group, and he does not want to join the Communists. So, this guy was finding some secondary excuse against the rally rather than telling us, whether he supported or opposed Iraq war.
I see the light - one of you guys ( I guess CR) must be and ex-countrywide executive.
....and he is on the left coast too. Close to Calabasas I presume, may be Santa Barbara.
After reading your blog entry, I tend to come up with this impression that you are more inclined to find technical errors in her reporting than to commend or criticize the main message of the text.
I'm not generally inclined to take too seriously our resident Troll, but let me congratulate you. You figured out what I do, which is to complain that the press is more interested in "messages" or sermons or themes or whatever than in technically correct business analysis which some of us still look for in the business section.
She is not claiming to be a fiction writer, you know. Novelists get to play around with facts and "realism" in order to communicate some "message," if they want to. Reporters, however, are supposed to not mess with the facts.
Of course my personal sympathies are with these distressed borrowers, not with some corporate behemoth. So? I'm supposed to judge NYT reporting on whether it reaffirms my biases or not?
As far as I'm concerned--and as far as many of my blogees are concerned--we're tired of shilling and misinformation from any and all sides. And yes, we think the measure of intellectual rigor is whether you can maintain fairness in a critique. GM is simply not being fair to CFC. That doesn't mean you have to love CFC. But why should I be impressed by this?
Your analogy is telling. You want this to be about politics. I actually want it to be about business practices.
I see the light - one of you guys ( I guess CR) must be and ex-countrywide executive.
I don't suggest you apply to the FBI Academy. Your detective skills have a way to go.
..can you explain how being reimbursed for an out-of-pocket expense, like a fee paid to a lawyer or an appraiser, is "making a profit"? Are you saying there's a markup in there? Do you have evidence for that?
Servicers commonly charge a flat amount for attorney fees as soon as a case is referred to an attorney for foreclosure, even if the foreclosure is not completed or commenced. This is usually listed as a corporate advance. Additionally, many attorneys use paralegals to generate form documents in as little as 15 minutes on a computer.
Tanta, the arrangement is ripe for abuse.
"Shorts have to do their own work"
We have dear. There is not much to like there...
Tanta, the arrangement is ripe for abuse.
Then it would be a lovely subject for a long feature article in the NYT.
What the feature article could do is explain the problem, examine some actual foreclosure settlement statements, interview some attorneys, and read through those ponderous PSAs to see if they shed any light on how FC legal work is mandated to be handled in the contract. It could then involve some interviews with informed observers without an axe to grind who could discuss alternative approaches. We could even consider whether regulation of FC legal work is necessary.
But what it probably couldn't do, as far as I'm aware, is conclude that this practice is 1) limited to CFC or 2) especially a problem for CFC or 3) anything new about CFC. No?
I commend to the readership a post by Accrued Interest about CDO's (the other side of the story):
Accrued Interest: You fixed us all pretty good
This goes to the risk undertaken by the buyer's of debt constructed out of consumer loans, whatever they may be. Why do I say that? Because Accrued Interest admits it in response to a comment.
The comment was, "Where were you five years ago? If you are able correctly characterize CDO's today as flawed statistically, why weren't you five years ago."
He replied,
Did I see this coming 5 years ago? Yes and no. I was very negative on consumer credit bonds for basically the last 10 years. So I always avoided auto loan, credit card, HELOC, and non-agency MBS paper. The spreads on that stuff was never that great, and I have long been concerned about high consumer debt levels.
Now my concern was more about weak performance in whatever pools I'd wind up buying. Not some calamity.
I was worried about HPA 5 years ago as well. But my view was that an overheated housing market was self-correcting. If housing prices didn't rise, people would stay in their houses longer. That would cause supply to drop enough to keep HPA from going significantly negative in nominal terms. I underestimated the impact of speculators.
I also underestimated how bad credit standards became. It was only last year that I became aware that as much as half of all sub-prime loans were lim doc. That's when I became much more negative on sub-prime. And honestly, I wasn't that far behind the curve. I believe sub-prime credit standards rapidly deteriorated in 2005 and 2006, and statistics on loan orginiations were not widely reported.
What has this to do with GM?
Simply this. The money lenders are the villains of the piece. The municipal pension funds who fell for the sales pitches for bonds constructed out of predatory money lending are not the villains. They will suffer, but they are not the villains.
The guys who made the predatory loans are the villains. A heritage of predatory lending practices dating back to the early days of Sandy Weil and Chuck Prince cheating poor people in the South.
I don't care if GM is talking through her hat. CW deserves unfair treatment and I hope they get it.
Tanta said:
You want this to be about politics. I actually want it to be about business practices.
What? In the 'Business' section of the Times?
...what it probably couldn't do, as far as I'm aware, is conclude that this practice is 1) limited to CFC or 2) especially a problem for CFC or 3) anything new about CFC. No?
Agreed.
Well, I am the one and only troll here, and manage to keep other ones away. You better be nice to me, and feed me once in a while
I understand that you want to identify errors and shilling in business reporting, but the title of the blog is 'Calculated risk', and so my request (copied below) was not completely unreasonable. I am just trying to understand, who can be blamed for what.
"Would you please write a technically right criticism of Countrywide? It will be nice to know, which parts of this crisis can be blamed on them, which parts on the general practices of the banking and finance industry and which on vagaries of nature."
If the title of the blog were "Smoke out the Shills in Business Reporting", GM is one of the smallest offenders. The biggest are those, who report everyday that "Stocks went up(/down) because of XXX". Two are completely unrelated events. The second group is NAR and the shills who repeat their lies every month without asking questions.
You want this to be about politics. I actually want it to be about business practices.
Uh-huh. But at the end of the day, it's always about politics, as I've noted here previously. The NYT is meting out a little rough justice today; in the future, don't be surprised if things get rougher still (from CFC's POV).
I am not kidding: GM is working for the shorts. I can't see any other explanation for her behavior.
This really does make you sound like a shill. Out of character for you imho, and really very puzzling.
I cannnot, literally, think of a better way to stir up sympathy for Countrywide than printing crap like this.
I cannot, literally, believe you are this naive.
hey ,
can someone please put add me to the
"snarky-sunday e-mail notification list"
this is the second time in a month that i missed the memo.
I am not kidding: GM is working for the shorts. I can't see any other explanation for her behavior.
Tanta | 09.30.07 - 2:14 pm |
You mean it's all a Grand Illusion?
Getchen Morgensen made her name with exactly this kind of reporting against wall street analysts in 2000 and now she's after the mortgage lenders. Not saying analysts deserve any sympathy but the whole mess of investment banks/investors/corporate issuers government etc was completely conflicted back then too. Yet the only ones that got hit were the analysts.
She's playing the game of "find the villain" and she has decided that, for now anyway, that honor goes to Contrywide. If we wanted to be as paranoid/cynical a she is, we'd say that she's in the pay of the MSM/political classes that caused all of these bubbles. They now need a fall guy that they can pin the blame on, ideally this fall guy is not at the center of the whole thing (they know too much), is already badly damaged by the fall out (so no great loss if they are already about to go under), and have acted in an egregious manner to allow the priggish media types to demonise the lead individuals.
"But at the end of the day, it's always about politics, as I've noted here previously."
Sorry but at the end of the day it's always about money, politics are just about which way it flows.
There is a negative article about Countrywide (or rather their CEO) in LA Times this weekend. I think the media is preparing him as the Kenny boy of this round.
Americans like simplicity. They want to believe that few bad apples cause most troubles. No reporter will be allowed to write about systemic problems, neither will he/she get enough readership to do so. Gosh, even readers of this blog criticize Jas Jain, when he suggests that there are problems in the American system.
Sorry but at the end of the day it's always about money, politics are just about which way it flows.
Yup. You're right. What I really meant to say was that politics is ultimately dispositive with regard to which way it flows . . .
On Tanta vs Troll Brothers I vote for Tanta. This blog has value precisely because it is knowledge based exploration of the mortgage business. There are plenty of other less useful places for screaming heads to exchange opinions whether I agree with them or not.
And I've been short CFC for nearly a year.
This is interesting:
Criminals as Brokers - Real estate and mortgage fraud information, real estate scams, cash back fraud, equity skimming
Gretchen writes:
Borrower advocates fear that fees imposed during periods of delinquency and even foreclosure can offset losses that lenders and servicers incur.
The fees are supposed to offset those losses. Exactly what do those advocates fear?
Gretchen does not seem to understand the concept of default. When you dont make timely payments you are in default, period. But we should know better than to read the NYT on almost anything. The real purpose of this article is to bash lenders by using the emotive force of sob stories.
I believe GM is trying, just like Herb Greenberg is trying, to convey to the little folks how far their interests have diverged from the folks who are running big business. The lack of traction in the overstock lawsuits tells me that it was a fever dream of a certain CEO who should have stuck to the knitting of selling stuff really cheap and stopped trying to build a crappy retail outlet store online.
I think that we have seen so much degradation in the media that we think GM and HG must be in the pay of shorts against the relentless feelgood of CNBC and most mainstream reporting. The Arizona Republic had an excellent reporter (John Talton) who dared to call the bubble the HOUSING bubble and predicted tears. He has since left town after the real estate industrial complex leaned very heavily on the republic to get rid of him due to many emperor has no clothes moments.
The mainstream media is so darned biased that extreme viewpoints are severely underrepresented. What I like about this blog is that the smart and thus far proven right perspective is available without filtering. That dumbing down effect is what destroys mainstream media. All mainstream suffers from the LCD problem, with the economist suffering the least of readily available publications. The evening news is suitable for wrapping virtual fish and determining what mayhem may be closing intersections.
As for Countrywide, it will soon to paraphrase a famous star be part of the late great Golden State. CR is way too academic to be a former CW executive.
The NetBank failure was far more stunning than anything else this week.
That was a very interesting and way underreported moment.
May you live in interesting times.
They will be more interesting as my tagline comes to be:
Someday this war's gonna end...
This really does make you sound like a shill. Out of character for you imho, and really very puzzling.
Now you do understand how I respond to GM and her ilk.
I guess you can call this "rough justice." She picks up a "fact," and each time, the "explanation" is CFC is exploiting someone. It never really matters how, or if it even makes any sense when you stop to think about it. You aren't supposed to stop and think about it. You are supposed to think that nothing ever happens except because of bad faith.
It makes exactly as much sense as my suggesting that GM is working for the shorts.
I noticed that no one took up my explicit challenge to make sense out of the long anecdote of the "Connor" loan.
Tanta,
I infer that you're reacting to what this kind of reporting implies for the lending industry as a whole, and not CFC in particular. If this is the case, I most certainly sympathize with you. GM will turn out to be a bit player in a much larger, uglier drama. I wish I could envision an alternative outcome, but I'm afraid the script is already written and all we can do at this juncture is watch it play out.
"I noticed that no one took up my explicit challenge to make sense out of the long anecdote of the "Connor" loan." Tanta | 09.30.07 - 4:59 pm |
Hardly tempting. Our valuable time is far better spent learning more about the real estate industry from you, or considering Accruedint's Four Simple Reforms
(they're at the bottom of the blogpost) to restore credibility to the CDO market.
The worst part of that story was the anecdote it opened with, no real facts are given, the story seems somewhat implausible, then Morgenson admits she really doesn't know what the facts are... The whole point in using an anecdote is that it illustrates some point, here the point seems to be that Morgenson isn't a particularly good reporter and a god-awful business reporter.
But I find her work not nearly as bad as Ben Stein's. That guy seems on a mission to define fatuous.
The bitch is back.
Angelo R Mozilo, CEO of
Countrywide Financial
(CFC), Earns
$57.0 mil
Tanta,
Well, I know this isn't what you mean, but geez, I love a challenge.
(requires brief suspension of disbelief)
The Connor Fiasco:
(A ramshackle Victorian hovel, somewhere outside Cambridge. A schoolmarm in petticoats sits forlornly at an empty table, head in her hands. A knock; she gets up to answer the door. A man in a black top hat and cloak, with unusually orange skin and a thick mustache stands there)
Countrywide:Pay the rent!
Connor:(Swoons) I can't pay the rent!
Countrywide:(Leers, and strokes his mustache)Well, my dear, you know what this means!
Connor:(Imploring)No, please! Just give me a little more time! If you only...
Countrywide:Enough! I've given you and your wastrel 'husband' enough time already! Today was your last chance! (Grabs her roughly, and begins to bind her hand and foot with a convenient length of clothesline)
Connor:(Crying loudly) Help! Oh, won't someone stop him?
(A commotion as a new figure bursts through the door)
New figure:Unhand her, you cad!(Steps between the two) You're through extracting usurious fees in this fair town!
Connor:(Shaking free of her bonds, throws her arms around the New figure) My Hero! And look! My breast cancer is cured!
Countrywide:(Slinking out the door) Curses! Foiled again!
I can't wait to see how it ends! Of course, after the performance, New figure and Countrywide are usually sipping bourbon together in the tavern. Connor really is homeless, her cancer wasn't cured either, but by then Gretchen has other stories to report on.
guess the NYT used to be a good newspaper, otherwise i don't get why it is respected.
the worst part for me to swallow is it's typical article that states at the beginning:
"... well, hard data about the topic is very hard to find but the anectodical evidence is compelling"
so they go ahead, find 3 different cases that confirm NYT statement and add some pictures to make it even more
"realistic". quite scientific approach.
i've seen this style regardless whether it's an article on health, on housing, on job market, ... it will be used no matter what!
4shzl said:
I'm afraid the script is already written and all we can do at this juncture is watch it play out.
I'd be most grateful, 4shzl, if you could spare a few moments to outline what you envision.
I read your brief against Morgenstern's article and I don't see why you're so out of joint over it. You didn't refute anything that Morgenstern actually wrote.
In fact, the mortgage servicing business is profitable. Nothing wrong with that, and I don't see Morgenstern arguing that it's wrong, either. She's just noting how CW makes its money.
On the suspense account issue, it's news to most people that a partial payment won't be applied to the loan itself. Partial payments are applied to credit card loans, which is the other form of credit that most people are familiar with.
I agree that the issue of "dipping in" to suspense accounts should be clearer. I am genuinely curious about it. That said, there's something a little stinky about not applying the partial payment to the loan, and then turning around and making money on the float. If suspense accounts are held in custody, then the interest should belong to the borrower.
Morgenstern didn't state that foreclosure is a profit opportunity. She quoted someone who said so. Yes, this could be further explained. Lots of things could be. We'll just have to wait for her next article.
Generally speaking, I like this blog quite a bit. But I think you missed your target on this rant. Instead, you should go after Jim Cramer for his ignorant comment about the alleged health of the Seattle real estate market.
Can these be the same sets of investors?
First:
Second:
The second group of investors, "the sea," clearly are buyers of wide mortgages. But if they're the ones taking the bad loan losses, how is wide supposedly using servicing fees as an offset? Is the claim that wide is using overcharges on servicing fees to offset losses to investors in wide stock and liabilities? Is that who the first group of investors are? The first group could after all be prospects for the purchase of more wide mortgage assets, but we don't know from GM's presentation.
I don't care one bit for wide or most other purveyors of this infernal boom, and don't even get me started on the values issues involved; that's why my handle has a handle. But this is just too sloppy, slippery, and inconclusive, even before you get to the lousy exposition of the consumer cases.
I'd be most grateful, 4shzl, if you could spare a few moments to outline what you envision.
A latter-day Huey Long spring-boarding out of talk radio and cyberspace, spewing some updated version of the "share our wealth" meme that played so well seventy some years ago. The anti-corporate, anti-Wall Street elements of his rap will sound appealing to some lefties at the outset, but in the fullness of time it will become apparent that behind the populist rhetoric lies a hard core authoritarian agenda.
Pick up a DVD of the recent remake of "All the King's Men" and watch the documentary on Long in the special features. You may just discover that what I'm suggesting is not far-fetched as it sounds.
Ratefink,
I like it -- are the film rights still available?
So Gret has outdone herself trying to elicit a mawkish sense of empathy with borrowers, and detestation of lenders. So august a being, surely, would not set herself to fleshing out the "talking points" of our liberal politicos. No way.
Paul Krugman responds re: Morgenson:
Enrons Second Coming?
By PAUL KRUGMAN
Enron’s Second Coming? - New York Times
Thank you Tanta. As soon as I read that piece I was wondering what you'd have to say about it. (I couldn't make sense out of any of the cases either.) However, I'm a bit less clear on this:
If CFC is milking fees, that's coming out of the investors' pockets, and they are actually in a position to refuse to pay excessive fees.
From the article it seems that the fees are actually charged to the borrower. The only sense in which they are coming out of the investors' pockets is that the borrower can not afford to pay them and they eat up a chunk of the house's value.
Maybe in some theoretic sense the way the fees are charged makes no difference, because the house will be lost anyhow. But the emotional cost to a borrower who's losing their house to watch 10's of thousands of dollars of fees build up before the loss is huge. And I think this is reflected in the reaction of the borrowers to the foreclosure process.
I noticed that no one took up my explicit challenge to make sense out of the long anecdote of the "Connor" loan.
Tanta | 09.30.07 - 4:59 pm | #
What's to explain? Couple buy a house, refinance for a hundred thousand more, can't make the payment, fall behind, think they can make a deal, make a deal they don't understand, don't live up to the terms of the deal. The numbers and dates are almost spurious, if not wrong.
They were behind at least three months in April of 2006, so a year later, April 2007, with the missed payments and fees the 500k+ total shows up, the phantom short sale buyer really isn't pertinent (makes me wonder whether that wasn't another nascent scam), and I'm not sure the credit union Heloc is pertinent (but again brings in tantalizing side issues.) GM does a good job of clouding the issue with numbers, much like Ms. Conner (and her lawyer?) who seems to think talking to 9 different people about half a million dollars is an ordeal. Working in the breast cancer and the husband lost job is great writing, I mean, we're not really trying to be fair and unbiased, (or is that fair and balanced?)
I'm starting to think that GM has a grudge against Tanta and is cleverly leading our heroine to the edge of madness. Perhaps she has an unrequited love who idolizes Tanta and so has hatched a fiendish plot to avenge herself with the journalistic equivalent of Chinese Water Torture!
Like many here I have long assumed Morgenson to have a general anti-corporate bent.
But I was just reading her Wikipedia entry, and I see that she was spokesman for the Steve Forbes presidential campaign.
Make sense of that, if you will.
Ironically, I think that article will make many people less sympathetic to borrowers in trouble. In Both cases, people borrowed more money than they could really afford, and when things got bad they were in trouble. In both cases, the borrowers are looking to shift blame from themselves by being selective in the facts they provide.
A lot of people making the same incomes as these people chose to live in smaller houses, rent, etc., rather than get over-extended. These are the people that spent too much money and didn't save enough, when things turn bad for them, they'll suffer.
It's a lesson even most cavemen were taught.
Ok...Take CFC out of the story and insert "Servicer X". Once you get beyond the individual company and any style points for writing this is absolutely CLASSIC MORTGAGE SERVICING FRAUD Tanta.
To date, I don't think I've seen a closer portrayal of Mortgage Servicing Fraud without someone actually SAYING Mortgage Servicing Fraud.
1.) Servicers - not all but apparently more and more - tend to charge borrowers for expenses that they legally have no business charging them for. "Property preservation" fees are a big one - BPOs and such. I've been charged for probably 12 of them over the course of the last 6 years despite my note making the note holder specifically responsible for those fees. And even after a court order reversing those fees Fairbanks/SPS STILL continued to charge me for them. Force placed insurance is another big way to help create a default situation with a borrower.
2.) What this also implies, Tanta, is that borrowers cannot pay extra money in order to pay down the P&I because any overage or "partial" amount gets shunted into a "suspense" account. I know of one Mortgage Servicing Fraud victim who used to send in an additional $500 a month on top of her monthly payment with specific instructions to apply it to P&I. It never was. It was always dumped into suspense.
3.) See #2
4.) YES!! The standard party line is "No one makes any money on foreclosures." Pardon my French - Bullshit!! You want examples? Try reading Mortgage Servicing Fraud for starters - specifically here: Legal Lounge
When you're done there, try running JUST Select Portfolio Servicing through Justia.com . As of last night, 84 cases against SPS ALONE had made it to Federal court. God only knows how many are tied up in lower courts. After that, if you're really into it, take a gander at other servicers like Ocwen, Litton, EMC, Countrywide etc.
The FTC recently submitted modified stipulations to USA/Curry v Fairbanks United States of America v. Fairbanks Capital Corp., Fairbanks Capital Holding Corp., and Thomas D. Basmajian (District of Massachusetts). to Judge Woodlock for review and possible acceptance. One of the stip mods was that Fairbanks/SPS would "stop charging for legal fees when work was not actually performed."
The bottom line, Tanta, is that servicers are literally MAKING UP charges in many cases. You want one more example? Go read Dillon v. Select Portfolio Servicing et al.
And if you want to get REALLY kooky try reading Ellington Credit Fund v. SPS http://www.getdshirtz.com/index_files/ellingtoncase_doc.pdf to see what servicers are doing to INVESTORS.
I agree with Tanta (& I am short CFC).
People seem to have an expectation that their creditors will fall all over themselves to "work things out" so "everyone benefits". Yeah, right. What did the Connors do with the $100+ Gs they "refinanced" out of the house? (Not to mention the separate HELOC) Maybe they wish they hadn't spent all that money.
We are clearly building a slow-motion version of the indignation we had over government reaction (inaction) to Hurricane Katrina. Like that event, though, everyone seems to gloss over the personal choices part of things:
Why did you borrow so much money & then spend it?
Why do you live below f'in sea level in a hurricane zone?
People would be better off watching out for themselves & relying less on other people doing it for them.
Bank Lawyer's Blog 10/01
Countrywide: Good News and Bad
Bank Lawyer's Blog: Countrywide: Good News and Bad