But the whole point of financial innovation was to pass the papers as fast as possible--following rules and reading of paperwork was unnecessary, in fact, undesirable.
BTW, if discussing the topic gets tiresome, does someone want to opine on "attornies" v. "attorneys"?
Remember that you can't just appeal to a style guide. I still like "Treasuries," so there.
For the record, I have always written "attorneys," but I just saw "attornies" in a newspaper (not on line) and thought I'd throw it out to see if the Grammar Police showed up.
I'm shocked they would do that! This really great that the judges caught this, it might mean do to increased cost they go out of business a little sooner. I feel really bad.
jo6pac
Thanks Tanta for keeping us informed on this matter.
You don't have to spend so many words. Gretchen's story this a.m. is about one thing: alleged abuses involving mortgage-related fees, especially those imposed after bankruptcy or foreclosure filings.
It is a big story about a big subject, and it could be racketeering; i.e., systematic fraud. If Countrywide is investigated and these same fees are found to have been massively imposed, it will be curtains for CFC because their reputation won't survive, even if their balance sheet does.
In your average bankruptcy, there is no discernable difference between charging $1,000 and charging $1,000,000. You're still going to get maybe $700.
We are talking about bankruptcies. Nobody's overall profitability is dependent on squeezing blood out of the small percentage of one's turnips who file BK.
There is, however, a whole lotta money to be made in outsourcing your legal work to some low-bid firm who doesn't even bother to show up for the hearing. Universalize that strategy to your whole operation--including all work on good old performing loans whose escrows get screwed up every year and whose transfer letters get lost and so on--and you have a cash cow.
But by all means, let's get excited about calling this a criminal enterprise. It leaves a whole deeply flawed business and economic model untouched, while shifting focus to the "bad apples." I'm sure a lot of people have a real interest in seeing it this way. I do not.
Certainly. I happen to think that, at some level, "sloppy" is "corrupt."
But it's the kind of conspiracy that happens in broad daylight and can be read in detail in financial statements and analyst conference calls. So I guess it's not the "sexy" kind of corrupt.
I wouldn't bet on systematic fraud. I would expect the greater scrutiny to raise the costs of maintaining the biggest servicing portfolion in the world.
Deconsolidation looks safer to me now because so much of the risk is concentrated in a small # of parties. Some of those parties don't appear to have capital addequate enough to manage this risk.
Existing Home Sales Fall Again
AP
Existing Home Sales Fall Again
Wednesday November 28, 10:07 am ET
By Martin Crutsinger, AP Economics Writer
Existing Home Sales Fall for Eighth Straight Month in October
WASHINGTON (AP) -- Sales of existing homes fell for the eighth consecutive month in October, with median home prices falling by a record amount. Analysts blamed the worsening housing slump on the serious credit crunch that hit in August.
The National Association of Realtors reported that sales of existing single-family homes and condominiums dropped by 1.2 percent last month to a seasonally adjusted annual rate of 4.97 million units.
Tanta, from your perspective it might be about the cost of competence in the lending business.
From my perspective it's all about having the facts and evidence before walking into a federal court and making a claim against anyone for any reason. I'm naive enough to hope that federal judges are our last line of defense.
In the age of computer processing it ought to be easy to be precise and descriptive in the handling and explanation of fees, charges and billings. Instead, the opposite seems to be happening at all sorts of businesses and services. CFC, or anybody else, has the chance to make processing more efficient by properly understanding the systems and implemented and automating them. However, that is not the mentality at work there.
I work in architecture and it is amazing how integrated building design and drafting software has added a whole new level of precision to sloppiness.
They cut corners everywhere except broker commissions and executive comp. Everything else got f*ck-all, and keep the money rolling in. These new efficiencies were a facade, and behind the facade was a rotten pile of crap. Unfortunately for CFC et al, the BK judges peek behind the facade.
This industry has to be turned upside down. No outside brokers. Fiduciary responsibility. Regulation like banks. Exile for Mozillo to Devil's Island.
The investigation Gretchen is describing is not about shoddy legal work. That's just CFC's lame excuse.
It's about whether or not illegal fees were imposed by servicers.
In today's world, fees are imposed by computers. And computers are programmed by humans based on policies set by management. If the investigators can trace the chain up to management and prove it, CFC is screwed in the same way that Global Crossing and Worldcom were. Not because they are financially weak. Because they were unscrupulous. This story has a long way to run, as did Global Crossing and Worldcom.
I disagree. The Easiest of the Easy, the Big Obvious Easy, is history. You know, "Teh Subprime."
The "easy" that has become something like a middle-class American birthright? We haven't even started looking at that yet.
That's why I keep trying to bring the conversation back to overall operations, not BKs or FCs or "those subprime people." The same sloppy practices that damage people in BK also keep mortgages cheap to your high FICO downpayment-making taxpayin' native born citizens who put subsidized gas in their cars, too.
integrated building design and drafting software has added a whole new level of precision to sloppiness.
Great line. Part of what's going on here, though, is just that--as long as we let the courts act like courts and not rubber stamps for businesses--the exciting technology has to produce results that can be compared to the low-tech records of the consumer. Eventually, the borrower gets his day in court in which he can display things like cancelled checks. That forces the servicer to go find that date in a large transaction record and figure out what happened. Once you determine, say, that the payment wasn't posted properly, you're left having to reverse back 100 trans lines to get to the day in question, repost the payment correctly, and then repost the 100 transactions (to adjust interest and fees and such on the correct balance).
My experience with a lot of servicing platforms is that that reversal-correction process is incredibly difficult. There are often policies in place that don't allow anyone but senior managers with sooper dooper access codes to do such things, and there are punishments in store for whoever posted the thing wrong to start with. So it's often "better" to let the problem stay there and hope the judge won't notice.
Again, I am hardly defending these practices. But unintended consequences of "data integrity" measures are not exactly the same thing as good old-fashioned fee gouging. They are therefore harder to ferret out and do away with. You have to have the political will to force companies to operate responsibly.
The Napoleon quote, once again: "Never ascribe to malice, that which can be explained by incompetence." The extraneous fees may be the story, but it's just as likely that they were imposed by sheer bureaucratic mistake than by deliberate intent. If CFC has been layering on fees against someone who, by definition, doesn't have any money, that doesn't sound like an effective way of making money as much as it sounds like a stupid mistake.
Until I see a dismissal with prejudice this all looks like judges setting strict rules in anticipation of a flood of foreclosures. N.B. Dismissed with prejudice doesn't let the borrower off the hook, it will probably mean the plaintiff will have to sell the loan to someone who can establish provenance. An expensive lesson nonetheless. Wait until the second lien holders start suing with claims that their position was wiped out in part due to invalid claims of the first note holders.
"In your average bankruptcy, there is no discernable difference between charging $1,000 and charging $1,000,000. You're still going to get maybe $700."
Tanta, I am not sure I understand this comment. In BK processs, the servicer get pay ahead of the noteholder. So if the servicer overcharge their fee, it should get the full amount. So essentially by overcharging, servicer is picking the pocket of the noteholder which is what it is supposed to work for. Are you implying the judge will limit the cost?
If CFC has been layering on fees against someone who, by definition, doesn't have any money, that doesn't sound like an effective way of making money as much as it sounds like a stupid mistake.
Rich wants to claim that these are just, well, "illegal" fees. As if there were some clear law somewhere that says exactly what a fee amount should be, kind of like there are posted speed limit signs, and if you exceed that you're busted.
Um? What law are you referring to, Rich?
One of the fees, btw, that BK judges have shown some dislike of is the "payoff quote fee." I share their dislike of that, and have been bitching about those fees for years on end.
Newsflash: everyone who refinanced a loan in the last 10-15 years paid a payoff quote fee!
Now, that's where you make money: charging this fee to people who are paying off their loans with refi proceeds. You don't make much trying to get some percentage of it out of a BK repayment plan or FC liquidation.
I'm missing something here but don't these companies get something like 1/2 percent to service mortgages?
Billing, collections, etc. is not rocket science. Maybe not as uniform as payroll, but every business has this sort of stuff.
They are just going to have to earn their servicing fees. You can't retroactively go back and reprice the stuff, it has to be built into the original cost.
Go forward, companies with good systems and efficient back offices should be doing the service work. Why not?
If they are larding on fees which would put some debtors under (and was documented in the WSJ a few weeks ago), then they deserve to be punished.
There is a right and a wrong way to take out costs -- and I would bet that the lenders that did it the right way also did a better job of underwriting loans.
Gretchen threw up the word "illegal!!" to sell her article. Fine. That doesn't mean it was illegal, though.
There's still this messy thing called a "burden of proof" - which, one can only note sardonically, is a one-way request for you. It's OK for you to demand it of others, but when it's shown that you're categorically wrong, you hide behind facetious "journalistic" spin.
case in point: Countrywide is probably illegally obtaining the loans from the FHLB by overstating their value.
I'd guess they're simply vastly incompetent with the actual servicing side of the business. Unless you can find incriminating emails or the like, it's really tough to conclusively show their servicing is intentionally bad.
the problem I have with a lot of this is that the "sloppiness" and "accounting errors" seem to only occur unidirectionally, coincidentally helping the company and hurting the consumer.
I know several people who have had their payments posted incorrectly (late, wrong amounts,etc) which led to fines and a huge hassle to turn around.
I've never met anybody who had a mistake in their favor... you know like an incorrect double payment, or a wipe-out of the loan by accident.
there just seems to be an assymetry of "mistakes"
I'd just like the big corporations to be as vigilant with our needs as they are with theirs.
In BK processs, the servicer get pay ahead of the noteholder.
I think you're thinking of foreclosure. In Chapter 13, the noteholder gets paid ahead of unsecured creditors.
Go back and read the details of the two cases again. In one, CFC claimed a huge negative escrow balance (that would have to mean there are bills paid to a taxing authority or insurer) and a big NSF fee.
In the other, CFC says a payment was not made, and the borrowers said it was.
There are, presumably, ways to establish the facts, and that's what the subpoena is all about. As far as I can tell, only a small part of the single "missing payment," plus most of the NSF fee, would actually be money in CFC's pocket, unless you assume that it totally made up the escrow charges--it is simply lying about having paid tax/insurance bills on behalf of the borrower--and it plans to pocket an entire monthly payment (not just its servicing fee).
So, OK, maybe that's the deal here. However, that doesn't seem likely to me.
Is that a big NSF fee? Yep. Are big NSF fees "illegal"?
"...Tanta, from your perspective it might be about the cost of competence in the lending business.
From my perspective it's all about having the facts and evidence before walking into a federal court and making a claim against anyone for any reason. I'm naive enough to hope that federal judges are our last line of defense..."
Easy credit is already history anyway.
sportsfan | 11.28.07 - 10:16 am | #
I'm in agreement here. After the fact legitimization of a flaw'd (my contribution to the spelling component of this thread), contract must not be allowed by the courts. What's the underlying meme? We're too big to have to prove ownership of a debt? If the big boys can't prove, under the Rules of Evidence, that their reason for seeking relief from the court is legitimate, then eff them. Of course, the allegedly injured party will extend the process by seeking continuances to infinity, but the Courts should deny these requests. Justice delayed is justice denied, after all.
Furthermore, any attempt to retroactively get the paperwork in order should be glommed onto by the attorneys(ies) for the borrower, forcing the paper trail be validated with documentation back to the point of origination (the settlement table), where the sales price, interest rates, and all other components of the original transaction would be renegotiated.
The letter of the law is exactly that. Are we supposed to have sympathy for the devil?
What is it, exactly, that makes you think my post is about "sympathy" for CFC?
I am not saying that it's "okay" to charge inaccurate or excessive fees to borrowers in BK.
I am saying that it is likely not an organized conspiracy; it's likely an effect of a bad business model.
However, I do not think it's somehow less wrong if it's not a criminal conspiracy. I think, in essence, it's "more wrong" if it's the result of a perfectly legal way of doing business.
People who instantly reduce any issue to "which side do you feel sorry for" are not, in my view, very helpful. This is not a soap opera.
As a bankruptcy attorney, my take on this is that Countrywide's sloppy conduct isn't all that unusual. What I think is unusual is that the U.S. Trustee's office spent time and energy on it. Note that the "trustee" isn't the Ch.13 trustee, who is an individual charged with administering the payment of claims, but the "U.S. Trustee" which is a "watchdog" agency overseeing the entire bankruptcy system. The U.S. Trustee system is comprised of hundreds of locally-administered offices and, candidly, the quality of the staff varies widely from office to office. Typically a situation like this would elicit a shrug from the U.S. Trustee's office, as they would tell the debtor's lawyer that "you seem to have the situation taken care of." My guess (just that) is that in this case someone in the local U.S. Trustee's office became a bit more zealous than the norm, but I would be very surprised if anyone in the Washington office had any clue that this had happened or there was any change in policy nationally (or even locally).
My experience during the aftermath of the S&L mess was that the portfolio and asset managers constantly sought to reduce costs by hiring cheaper counsel and "standardizing" the fees and process. This approach drove everyone nuts. As a flood of cases hit the bankruptcy courts the judges became increasingly irritated with this practice of trying to do things on the cheap, which forced everyone else in the system to do the real work (like calculating the debt, digging out the real documents, etc.). I expect the same will happen here (and particularly if the law is changed to allow Ch.13 cramdowns, in which case there will be a tsunami of filings). I am sure that there will be more stories like this, but my take is that this isn't all that unusual or shocking (and you could find dozens of similar situations involving student loans, car loans, etc., without looking too hard).
Has anyone ever had a payment incorrectly done in their favor
I agree with most everything Tanta says... in terms of the idea that this is likely more sloppy business as opposed to an actual "evil" corporation... and also that this is a bigger problem than simply having a bad egg out there...
but I'd feel better about this theory if anyone has ever had an error in their favor
Has anyone ever had a payment incorrectly done in their favor
Certainly. This happens nearly 100% of the time that somebody else gets the not-in-your-favor payment processed.
I have spent a lot of years in this business. Very very rarely, a misapplied payment is simply embezzled or otherwise claimed by the bank.
In most cases it just gets applied to the wrong account. So Yearning's account shows past due, and Tanta's account shows paid ahead!
The thing is, when you're talking mortgage loans, when Yearning complains, this can be identified and fixed and Tanta never even realizes that it happened.
"...People who instantly reduce any issue to "which side do you feel sorry for" are not, in my view, very helpful. This is not a soap opera..."
Tanta | Homepage | 11.28.07 - 11:09 am | #
Did I mention feeling sorry for anyone? No. You are correct - it's not a Soap Opera, but it's not Boston Legal, either.
I believe I wrote of the rule of law and Rules of Evidence. Sorry if it wasn't "helpful." If I was running for office, I'd think I've been swiftboated.
Once this whole enterprise (the housing/credit bubble) reaches the courts, the fast dealing should end. If you come before the court with unsubstantiated allegations (especially when you are required by law to keep accurate records, should the need for litigation arise), your case should be summarily dismissed with prejudice.
Playing fast and loose is what got us here. Wanting the courts to favor the side (both sides) that apparently engaged in the negligence and profited (or sought to profit) from that negligence is adding insult to injury (to the nation's economy - not to an aggrieved party to the litigation).
For all I care, everyone involved in the borrowing or lending that led to the current troubles can loose their freekin' shirts. My only concern is that my uninvolved money is being tainted and devalued by the actions of the "players".
Please try not to read into my posts, ot to misstate my points. I have trouble defending that which is no mine to defend.
am sure that there will be more stories like this, but my take is that this isn't all that unusual or shocking (and you could find dozens of similar situations involving student loans, car loans, etc., without looking too hard).
It's surprising a person of your legal experience would compare mortgages to student loans, car loans, etc. To my knowledge, we don't have a federal law in this country that regulates the servicing, servicing fees and disclosures on these loans to the same degree that RESPA does.
Well, I think student loans are pretty highly regulated. My point was that where there are "mass" collection operations of relatively small dollar debts, you find lots of sloppiness and confusion. Indeed, the most commonly screwed-up claims are often filed by taxing authorities. I guess my point is that at the level this case occurred the talent level is more Homer Simpson than astronaut.
If I was running for office, I'd think I've been swiftboated.
And if you were Jesus Christ, you could also think you had been sacrificed for the sins of others.
Fortunately, this is just a blog comment debate, wherein "I believe you misunderstood my point" is usually the first tactic. Normally we don't escalate to charging libel until well into the exchange.
Did I mention feeling sorry for anyone?
Well, you used the phrase "sympathy for the devil." Were you just rockin' out to the Stones? Hey! My bad.
Back in the S&L crisis days, I got an extra interest rate reset in my favor after the loan had changed hands. This was also back in the days when arm resets were decreases. I suppose this doesn't count. And I didn't call to complain. It might have amounted to a thousand or two. I was paying about 8%. I don't feel guilty.
And, yes, I have seen many instances in bankruptcy cases where the bank makes an error in the borrower's favor. Of course no one brings it up and everyone just laughs at how incompetent the bank is.
I've actually had some experience selling pools of "scratch & dent" loans, some of which are scratched and/or dented from the lender's perspective, not the borrower's.
Accidentally charged the premium for 12% MI coverage instead of 35%? Well, once that's on the federal TILA disclosures and the loan is closed, it's really hard to fix it. So the investor just puts up with lower yield, as the additional premium gets paid out of profits, not by raising the borrower's payment. The loan is "S&D" because the borrower was undercharged, not overcharged.
I also remember a loan (ugly thing) where the correspondent lender (luckily not me, I got to put it back to the correspondent) typed .275% as the ARM margin instead of 2.75%. I demanded that this get corrected, which meant having the borrower initial the correction. Borrower, not surprisingly, refused to do so. Oooops.
Of course lenders work hardest to prevent errors in the borrower's favor. This isn't about some sort of "equivalence" argument. It is, though, to speak to Uncle Festus's point that in times o' trouble, mistakes of all kinds increase as lenders are desperate to keep recovery costs as low as possible.
Having worked for large Banks,Tanta's explanation makes a LOT of sense.I expect a lot of large servicers will reluctantly deal with the fact that the cash cow has CJD.As far as individual loan Brokers disappearing,yes,of course.Their purpose was to "take" some of the risk for a fee that would be charged to the borrower,and allow those higher up the food chain to claim "We had NO IDEA this was going on" and to act as a "straw" counterparty "look,our contract specifies that Flakke MTG inc HAS to buy this back if there is a problem,so there is NO RISK to us"
"Attorneys" is correct.
"Attornies" is both wrong, and stupid looking.
(Sometimes it really is that simple!)
Anyway, many of us prefer "lawyers." Nice, strong Anglo-Saxon root, instead of that pretentious Law French.
And lawyers like to have Evidence when they walk into court. It helps with the whole proving your case thing.
In theory, a supersized servicer ought to be able to achieve some legitimate efficiencies of scale. Really large-scale, cutting-edge document management systems, for instance, may only be practical investments for the big boys. But there's the rub; CFC's strategy was not efficiency of investment in processes, but of disinvestment in it.
I recall a case about 7 years ago were a State's Ag requested a certain percentage of the hard copy mortgage records from a lending institution of records as a double check on the electronic copies they already had. The lender had to admit that they couldn't find some of them. I think it was somewhere between 1 and 2% of the requested number.
There was no thought that it was anything shifty going on: just plain sloppy record keeping.
In theory, a supersized servicer ought to be able to achieve some legitimate efficiencies of scale. Really large-scale, cutting-edge document management systems, for instance, may only be practical investments for the big boys.
Of course they should. And they do. You can question whether this efficiency of scale is worth the risk that the very fact of scale creates, of course.
Part of my trouble with a lot of "document management systems" I've seen is that they do, actually, work great at storing and retrieving documents. At any minute of the day or night, you can request and get an image or copy or even the original of any document you need.
Pity that the damned document has the wrong numbers on it, and had when it got put into the "document management system."
A great deal of what we're finding now, I am afraid, is that we have very efficiently processed a bunch of crappy documents. That's because while there are these giant efficiency-of-scale servicers, there are jillions of little escrow services and title attorneyz and pissant mortgage brokers who hose the stuff up in the beginning. What the big servicers haven't wrapped their operations around is deep due diligence on the intake side. That's because they have always believed that they could put back any booboos.
A very large bank I know of instituted one of the first optical scanner "document imaging" programs when that technology became widely available. It worked so well on their pilot program that they immediately bought a second and third workstation (very expensive hardware at the time) and hired a big squad of temps to run every file they had through the machine. This got their whole file room "online" very quickly, and of course they were able to cut costs for physical file retrieval and physical file retrievers (staff).
Turned out they had just expensively optically scanned thousands and thousands of pages of duplicate copies, blank pages of reversed documents, missing reverses of double-sided documents, slip sheets/file dividers, and misplaced menus for the local take-out Chinese emporium. Because the machine operators weren't looking at what those papers were that they pulled out of the files, and wouldn't have known what they were supposed to say if they had.
Anyway, the bank ended up with literally thousands of CD-ROM "files" full of garbage. But dammit, it only took a few seconds to pull up that garbage on your PC.
Wait until the second lien holders start suing with claims that their position was wiped out in part due to invalid claims of the first note holders.
You assume that Countrywide is the first lien holders. With all of the fraud going on to get the loans pushed through I could imagine Countrywide isn't in first place.
CFC is recognized as having some of the best technology in the industry. I don't think they're any more sloppy than say Chase or Wells. They're just so freaking big and they don't have the capital to handle a big disruption. Consolidation has reduced costs but concentrated a lot of the risk.
Tanta, I know what you mean. In my (ahem) decades-long career, I have seen a spreading contagion of superficial answers to hard questions, flash over substance, self-promotion over hard work, and generally, stepping over dollars to pick up nickles. I am afraid that we have cut our final corner, and are now entering into the Age of Consequences.
Incidentally, I'm not as frustrated as you by overly simplistic stories about lenders and servicers being unable to prove they own the loans. No, we haven't seen too much of that yet. But given the utter, utter shoddiness of business practices over the last few years, I'd be surprised if that didn't happen eventually.
To my knowledge, we don't have a federal law in this country that regulates the servicing, servicing fees and disclosures on these loans to the same degree that RESPA does.
rich | 11.28.07 - 11:33 am | #
Rich,
You know not whereof you speak.
RESPA requires disclosure of closing costs. It does not regulate the level of closing costs. It does not regulate servicing or servicing fees at all. You can look it up.
Incidentally, I'm not as frustrated as you by overly simplistic stories about lenders and servicers being unable to prove they own the loans.
Oh, I absolutely agree that there will be cases ultimately dismissed with prejudice because someone couldn't prove ownership.
I'm frustrated because there seems to be an assumption that this is caused by servicers sneaking around in the dark of night with pantyhose over their heads stealing mortgage loans.
No, they truly bought these loans in a real mortgage loan sale, and they really do have excellent reasons to consider themselves the party entitled to collect the payments.
The trouble is that they did cut corners when it comes to filing assignments and such.
Issuers should be the ones flipping out here, since they are the ones who are going to cover this for investors who won't get principal back.
However, some people will tell themselves that these FCs "wouldn't really be happening" if the servicers weren't cheating.
That's the part that frustrates me. CFC may be unable to foreclose on your home if it can't prove it owns your loan (and there is no proven owner to collect in its stead). But that doesn't put enough money in your checking account to make house payments.
A lot of the uproar seems centered in OH. Why? Well, it's a judicial FC state--as far as I know you can still get by with plenty of sloppy in the DOT states. But also, it's in terrible economic recession. There will be a lot of opportunties for servicers to display their competence or lack thereof in OH. Even a borrower who wins the incompetence lotto and gets to keep his house still doesn't get magically awarded a well-paying job, too.
So what's the next step? What I like about this blog is that it looks beyond the obvious. Let's see,.. bull market for lawyers (isn't it always?),...even bad attorneys will start winning cases by exposing the incompetence of the paperwork,...the lenders/creditors will need to hire teams of lawyers to sift through the paperwork,...boredom will set in,...they'll start surfing the web,...hits galore for CR,...no real work being done,...Class Action Lawsuit!
Bingo! I wonder if it's already in the works? I have no idea what the legal grounds this will be based on, I'm only going with my gut feeling that whenever there's trouble, we get class action suits.
Fascinating stuff - Managing trailing docs has always been like herding cats. It can be done but requires a certain degree of experience and skill. Helps to know what a cat looks like before you begin to try managing it. (see the quote on Optical Imaging Systems-what a hoot!)
Sloppiness has been around a long time to varying degrees - now we have a couple of courts calling BS on the practice. Good thing overall, and a few borrowers in FC will hit the jackpot. At the end of the day, lessons will be learned and payscales for back shops will go up. And about time too.
I work in default servicing, and on the legal side of things. I've been here since, oh, 1992 or so. I guess that makes me a grizzled veteran these days, seeing as most of my contemporaries long since moved on when things dried up in the early part of this decade.
It certainly is a nice notion think servicers, or the trustees/investors who retain them, will go back to actually caring about "value", as opposed to simply lasering in on the cost part of the equation.
But I really don't see it ever happening. I do foresee servicers shoving any additional costs down the food chain to the extent that they can get away with doing so. That's just standard SOP in the servicing business, particuarly for the 800 lb gorillas - either implicitly or explcitly, they more or less use their vendors and business partners as a form of insurance for all kinds of risk (including legal risk).
Is it right? Absolutely not. Will it change? Not unless and until a new breed of managers, SVPs, and the like are trained and brought into servicing operations.
"Attornies" looks odd (and the definitive spell-checker source says it's misspelled). However, if we are entering the land of alternate spellings "piffull" is preferred-- as in "full of piff".
Tanta!
Gary!
You get what you pay for...
But the whole point of financial innovation was to pass the papers as fast as possible--following rules and reading of paperwork was unnecessary, in fact, undesirable.
BTW, if discussing the topic gets tiresome, does someone want to opine on "attornies" v. "attorneys"?
Remember that you can't just appeal to a style guide. I still like "Treasuries," so there.
For the record, I have always written "attorneys," but I just saw "attornies" in a newspaper (not on line) and thought I'd throw it out to see if the Grammar Police showed up.
Que three hundred blogs with the headline "NYT reports that you don't have to repay your mortgage if you got it from Countrywide!!!"
I'm shocked they would do that! This really great that the judges caught this, it might mean do to increased cost they go out of business a little sooner. I feel really bad.
jo6pac
Thanks Tanta for keeping us informed on this matter.
I've always used "attorneys."
the word "piffle" is underused.
Tanta,
You don't have to spend so many words. Gretchen's story this a.m. is about one thing: alleged abuses involving mortgage-related fees, especially those imposed after bankruptcy or foreclosure filings.
It is a big story about a big subject, and it could be racketeering; i.e., systematic fraud. If Countrywide is investigated and these same fees are found to have been massively imposed, it will be curtains for CFC because their reputation won't survive, even if their balance sheet does.
This latest one sounds like a case of it being a floor wax and a dessert topping. They can be both sloppy and corrupt. They aren't mutually exclusive.
Okay, countrywide is scum, we can all agree on that much.
Rich. Come on. Please.
In your average bankruptcy, there is no discernable difference between charging $1,000 and charging $1,000,000. You're still going to get maybe $700.
We are talking about bankruptcies. Nobody's overall profitability is dependent on squeezing blood out of the small percentage of one's turnips who file BK.
There is, however, a whole lotta money to be made in outsourcing your legal work to some low-bid firm who doesn't even bother to show up for the hearing. Universalize that strategy to your whole operation--including all work on good old performing loans whose escrows get screwed up every year and whose transfer letters get lost and so on--and you have a cash cow.
But by all means, let's get excited about calling this a criminal enterprise. It leaves a whole deeply flawed business and economic model untouched, while shifting focus to the "bad apples." I'm sure a lot of people have a real interest in seeing it this way. I do not.
They can be both sloppy and corrupt.
Certainly. I happen to think that, at some level, "sloppy" is "corrupt."
But it's the kind of conspiracy that happens in broad daylight and can be read in detail in financial statements and analyst conference calls. So I guess it's not the "sexy" kind of corrupt.
I'm an attorney . . . attornies is not a word.
Then again, dreamz is not a word either, but has gained currency in some circles.
I wouldn't bet on systematic fraud. I would expect the greater scrutiny to raise the costs of maintaining the biggest servicing portfolion in the world.
Deconsolidation looks safer to me now because so much of the risk is concentrated in a small # of parties. Some of those parties don't appear to have capital addequate enough to manage this risk.
Existing Home Sales Fall Again
AP
Existing Home Sales Fall Again
Wednesday November 28, 10:07 am ET
By Martin Crutsinger, AP Economics Writer
Existing Home Sales Fall for Eighth Straight Month in October
WASHINGTON (AP) -- Sales of existing homes fell for the eighth consecutive month in October, with median home prices falling by a record amount. Analysts blamed the worsening housing slump on the serious credit crunch that hit in August.
The National Association of Realtors reported that sales of existing single-family homes and condominiums dropped by 1.2 percent last month to a seasonally adjusted annual rate of 4.97 million units.
Mike Dillon can personally relate to this blog post.
His 'foreclosure' saga:
http://www.getdshirtz.com/
Tanta, from your perspective it might be about the cost of competence in the lending business.
From my perspective it's all about having the facts and evidence before walking into a federal court and making a claim against anyone for any reason. I'm naive enough to hope that federal judges are our last line of defense.
Easy credit is already history anyway.
In the age of computer processing it ought to be easy to be precise and descriptive in the handling and explanation of fees, charges and billings. Instead, the opposite seems to be happening at all sorts of businesses and services. CFC, or anybody else, has the chance to make processing more efficient by properly understanding the systems and implemented and automating them. However, that is not the mentality at work there.
I work in architecture and it is amazing how integrated building design and drafting software has added a whole new level of precision to sloppiness.
Attornies did rather leap off the page. But I'm reminded daily the syntax of my youth is no longer quite 'of the moment'.
Agree with Tanta @ 10:06.
They cut corners everywhere except broker commissions and executive comp. Everything else got f*ck-all, and keep the money rolling in. These new efficiencies were a facade, and behind the facade was a rotten pile of crap. Unfortunately for CFC et al, the BK judges peek behind the facade.
This industry has to be turned upside down. No outside brokers. Fiduciary responsibility. Regulation like banks. Exile for Mozillo to Devil's Island.
Don't you have lackeys to check your spelling for you?
Tanta,
The investigation Gretchen is describing is not about shoddy legal work. That's just CFC's lame excuse.
It's about whether or not illegal fees were imposed by servicers.
In today's world, fees are imposed by computers. And computers are programmed by humans based on policies set by management. If the investigators can trace the chain up to management and prove it, CFC is screwed in the same way that Global Crossing and Worldcom were. Not because they are financially weak. Because they were unscrupulous. This story has a long way to run, as did Global Crossing and Worldcom.
Easy credit is already history anyway.
I disagree. The Easiest of the Easy, the Big Obvious Easy, is history. You know, "Teh Subprime."
The "easy" that has become something like a middle-class American birthright? We haven't even started looking at that yet.
That's why I keep trying to bring the conversation back to overall operations, not BKs or FCs or "those subprime people." The same sloppy practices that damage people in BK also keep mortgages cheap to your high FICO downpayment-making taxpayin' native born citizens who put subsidized gas in their cars, too.
integrated building design and drafting software has added a whole new level of precision to sloppiness.
Great line. Part of what's going on here, though, is just that--as long as we let the courts act like courts and not rubber stamps for businesses--the exciting technology has to produce results that can be compared to the low-tech records of the consumer. Eventually, the borrower gets his day in court in which he can display things like cancelled checks. That forces the servicer to go find that date in a large transaction record and figure out what happened. Once you determine, say, that the payment wasn't posted properly, you're left having to reverse back 100 trans lines to get to the day in question, repost the payment correctly, and then repost the 100 transactions (to adjust interest and fees and such on the correct balance).
My experience with a lot of servicing platforms is that that reversal-correction process is incredibly difficult. There are often policies in place that don't allow anyone but senior managers with sooper dooper access codes to do such things, and there are punishments in store for whoever posted the thing wrong to start with. So it's often "better" to let the problem stay there and hope the judge won't notice.
Again, I am hardly defending these practices. But unintended consequences of "data integrity" measures are not exactly the same thing as good old-fashioned fee gouging. They are therefore harder to ferret out and do away with. You have to have the political will to force companies to operate responsibly.
The Napoleon quote, once again: "Never ascribe to malice, that which can be explained by incompetence." The extraneous fees may be the story, but it's just as likely that they were imposed by sheer bureaucratic mistake than by deliberate intent. If CFC has been layering on fees against someone who, by definition, doesn't have any money, that doesn't sound like an effective way of making money as much as it sounds like a stupid mistake.
Until I see a dismissal with prejudice this all looks like judges setting strict rules in anticipation of a flood of foreclosures. N.B. Dismissed with prejudice doesn't let the borrower off the hook, it will probably mean the plaintiff will have to sell the loan to someone who can establish provenance. An expensive lesson nonetheless. Wait until the second lien holders start suing with claims that their position was wiped out in part due to invalid claims of the first note holders.
We are attorneyz,making the moneyz
"In your average bankruptcy, there is no discernable difference between charging $1,000 and charging $1,000,000. You're still going to get maybe $700."
Tanta, I am not sure I understand this comment. In BK processs, the servicer get pay ahead of the noteholder. So if the servicer overcharge their fee, it should get the full amount. So essentially by overcharging, servicer is picking the pocket of the noteholder which is what it is supposed to work for. Are you implying the judge will limit the cost?
If CFC has been layering on fees against someone who, by definition, doesn't have any money, that doesn't sound like an effective way of making money as much as it sounds like a stupid mistake.
Rich wants to claim that these are just, well, "illegal" fees. As if there were some clear law somewhere that says exactly what a fee amount should be, kind of like there are posted speed limit signs, and if you exceed that you're busted.
Um? What law are you referring to, Rich?
One of the fees, btw, that BK judges have shown some dislike of is the "payoff quote fee." I share their dislike of that, and have been bitching about those fees for years on end.
Newsflash: everyone who refinanced a loan in the last 10-15 years paid a payoff quote fee!
Now, that's where you make money: charging this fee to people who are paying off their loans with refi proceeds. You don't make much trying to get some percentage of it out of a BK repayment plan or FC liquidation.
I'm missing something here but don't these companies get something like 1/2 percent to service mortgages?
Billing, collections, etc. is not rocket science. Maybe not as uniform as payroll, but every business has this sort of stuff.
They are just going to have to earn their servicing fees. You can't retroactively go back and reprice the stuff, it has to be built into the original cost.
Go forward, companies with good systems and efficient back offices should be doing the service work. Why not?
If they are larding on fees which would put some debtors under (and was documented in the WSJ a few weeks ago), then they deserve to be punished.
There is a right and a wrong way to take out costs -- and I would bet that the lenders that did it the right way also did a better job of underwriting loans.
rich, you're wrong again.
Gretchen threw up the word "illegal!!" to sell her article. Fine. That doesn't mean it was illegal, though.
There's still this messy thing called a "burden of proof" - which, one can only note sardonically, is a one-way request for you. It's OK for you to demand it of others, but when it's shown that you're categorically wrong, you hide behind facetious "journalistic" spin.
case in point: Countrywide is probably illegally obtaining the loans from the FHLB by overstating their value.
I'd guess they're simply vastly incompetent with the actual servicing side of the business. Unless you can find incriminating emails or the like, it's really tough to conclusively show their servicing is intentionally bad.
the problem I have with a lot of this is that the "sloppiness" and "accounting errors" seem to only occur unidirectionally, coincidentally helping the company and hurting the consumer.
I know several people who have had their payments posted incorrectly (late, wrong amounts,etc) which led to fines and a huge hassle to turn around.
I've never met anybody who had a mistake in their favor... you know like an incorrect double payment, or a wipe-out of the loan by accident.
there just seems to be an assymetry of "mistakes"
I'd just like the big corporations to be as vigilant with our needs as they are with theirs.
In BK processs, the servicer get pay ahead of the noteholder.
I think you're thinking of foreclosure. In Chapter 13, the noteholder gets paid ahead of unsecured creditors.
Go back and read the details of the two cases again. In one, CFC claimed a huge negative escrow balance (that would have to mean there are bills paid to a taxing authority or insurer) and a big NSF fee.
In the other, CFC says a payment was not made, and the borrowers said it was.
There are, presumably, ways to establish the facts, and that's what the subpoena is all about. As far as I can tell, only a small part of the single "missing payment," plus most of the NSF fee, would actually be money in CFC's pocket, unless you assume that it totally made up the escrow charges--it is simply lying about having paid tax/insurance bills on behalf of the borrower--and it plans to pocket an entire monthly payment (not just its servicing fee).
So, OK, maybe that's the deal here. However, that doesn't seem likely to me.
Is that a big NSF fee? Yep. Are big NSF fees "illegal"?
"...Tanta, from your perspective it might be about the cost of competence in the lending business.
From my perspective it's all about having the facts and evidence before walking into a federal court and making a claim against anyone for any reason. I'm naive enough to hope that federal judges are our last line of defense..."
Easy credit is already history anyway.
sportsfan | 11.28.07 - 10:16 am | #
I'm in agreement here. After the fact legitimization of a flaw'd (my contribution to the spelling component of this thread), contract must not be allowed by the courts. What's the underlying meme? We're too big to have to prove ownership of a debt? If the big boys can't prove, under the Rules of Evidence, that their reason for seeking relief from the court is legitimate, then eff them. Of course, the allegedly injured party will extend the process by seeking continuances to infinity, but the Courts should deny these requests. Justice delayed is justice denied, after all.
Furthermore, any attempt to retroactively get the paperwork in order should be glommed onto by the attorneys(ies) for the borrower, forcing the paper trail be validated with documentation back to the point of origination (the settlement table), where the sales price, interest rates, and all other components of the original transaction would be renegotiated.
The letter of the law is exactly that. Are we supposed to have sympathy for the devil?
gee, after rich's incredible insights into the government fisc yesterday, I'm surprised his assertions here aren't getting more respek.
(snark)
Are we supposed to have sympathy for the devil?
What is it, exactly, that makes you think my post is about "sympathy" for CFC?
I am not saying that it's "okay" to charge inaccurate or excessive fees to borrowers in BK.
I am saying that it is likely not an organized conspiracy; it's likely an effect of a bad business model.
However, I do not think it's somehow less wrong if it's not a criminal conspiracy. I think, in essence, it's "more wrong" if it's the result of a perfectly legal way of doing business.
People who instantly reduce any issue to "which side do you feel sorry for" are not, in my view, very helpful. This is not a soap opera.
As a bankruptcy attorney, my take on this is that Countrywide's sloppy conduct isn't all that unusual. What I think is unusual is that the U.S. Trustee's office spent time and energy on it. Note that the "trustee" isn't the Ch.13 trustee, who is an individual charged with administering the payment of claims, but the "U.S. Trustee" which is a "watchdog" agency overseeing the entire bankruptcy system. The U.S. Trustee system is comprised of hundreds of locally-administered offices and, candidly, the quality of the staff varies widely from office to office. Typically a situation like this would elicit a shrug from the U.S. Trustee's office, as they would tell the debtor's lawyer that "you seem to have the situation taken care of." My guess (just that) is that in this case someone in the local U.S. Trustee's office became a bit more zealous than the norm, but I would be very surprised if anyone in the Washington office had any clue that this had happened or there was any change in policy nationally (or even locally).
My experience during the aftermath of the S&L mess was that the portfolio and asset managers constantly sought to reduce costs by hiring cheaper counsel and "standardizing" the fees and process. This approach drove everyone nuts. As a flood of cases hit the bankruptcy courts the judges became increasingly irritated with this practice of trying to do things on the cheap, which forced everyone else in the system to do the real work (like calculating the debt, digging out the real documents, etc.). I expect the same will happen here (and particularly if the law is changed to allow Ch.13 cramdowns, in which case there will be a tsunami of filings). I am sure that there will be more stories like this, but my take is that this isn't all that unusual or shocking (and you could find dozens of similar situations involving student loans, car loans, etc., without looking too hard).
And I did catch "attornies" as soon as I saw it!
A general question to the board:
Has anyone ever had a payment incorrectly done in their favor
I agree with most everything Tanta says... in terms of the idea that this is likely more sloppy business as opposed to an actual "evil" corporation... and also that this is a bigger problem than simply having a bad egg out there...
but I'd feel better about this theory if anyone has ever had an error in their favor
Has anyone ever had a payment incorrectly done in their favor
Certainly. This happens nearly 100% of the time that somebody else gets the not-in-your-favor payment processed.
I have spent a lot of years in this business. Very very rarely, a misapplied payment is simply embezzled or otherwise claimed by the bank.
In most cases it just gets applied to the wrong account. So Yearning's account shows past due, and Tanta's account shows paid ahead!
The thing is, when you're talking mortgage loans, when Yearning complains, this can be identified and fixed and Tanta never even realizes that it happened.
And yes, I have seen situations in which the wrong loan was paid in full when refinance proceeds were applied to the wrong account.
Fixing that problem sucks big time. One thing you're likely to find is that the recipient of the mystery payoff doesn't call the NYT to complain.
"...People who instantly reduce any issue to "which side do you feel sorry for" are not, in my view, very helpful. This is not a soap opera..."
Tanta | Homepage | 11.28.07 - 11:09 am | #
Did I mention feeling sorry for anyone? No. You are correct - it's not a Soap Opera, but it's not Boston Legal, either.
I believe I wrote of the rule of law and Rules of Evidence. Sorry if it wasn't "helpful." If I was running for office, I'd think I've been swiftboated.
Once this whole enterprise (the housing/credit bubble) reaches the courts, the fast dealing should end. If you come before the court with unsubstantiated allegations (especially when you are required by law to keep accurate records, should the need for litigation arise), your case should be summarily dismissed with prejudice.
Playing fast and loose is what got us here. Wanting the courts to favor the side (both sides) that apparently engaged in the negligence and profited (or sought to profit) from that negligence is adding insult to injury (to the nation's economy - not to an aggrieved party to the litigation).
For all I care, everyone involved in the borrowing or lending that led to the current troubles can loose their freekin' shirts. My only concern is that my uninvolved money is being tainted and devalued by the actions of the "players".
Please try not to read into my posts, ot to misstate my points. I have trouble defending that which is no mine to defend.
cool...
so I concede.
I just wanted to make sure the "mistakes" weren't unidirectional.
It's surprising a person of your legal experience would compare mortgages to student loans, car loans, etc. To my knowledge, we don't have a federal law in this country that regulates the servicing, servicing fees and disclosures on these loans to the same degree that RESPA does.
but I'd feel better about this theory if anyone has ever had an error in their favor
That happened to me in Monopoly once - thanks community chest!
Well, I think student loans are pretty highly regulated. My point was that where there are "mass" collection operations of relatively small dollar debts, you find lots of sloppiness and confusion. Indeed, the most commonly screwed-up claims are often filed by taxing authorities. I guess my point is that at the level this case occurred the talent level is more Homer Simpson than astronaut.
If I was running for office, I'd think I've been swiftboated.
And if you were Jesus Christ, you could also think you had been sacrificed for the sins of others.
Fortunately, this is just a blog comment debate, wherein "I believe you misunderstood my point" is usually the first tactic. Normally we don't escalate to charging libel until well into the exchange.
Did I mention feeling sorry for anyone?
Well, you used the phrase "sympathy for the devil." Were you just rockin' out to the Stones? Hey! My bad.
Back in the S&L crisis days, I got an extra interest rate reset in my favor after the loan had changed hands. This was also back in the days when arm resets were decreases. I suppose this doesn't count. And I didn't call to complain. It might have amounted to a thousand or two. I was paying about 8%. I don't feel guilty.
And, yes, I have seen many instances in bankruptcy cases where the bank makes an error in the borrower's favor. Of course no one brings it up and everyone just laughs at how incompetent the bank is.
Yes. I was rockin' out to the Stones.
What do you mean by, "IF" I were JC?
Misstated, not misunderstood.
Yes. Your bad.
No problem.
I've actually had some experience selling pools of "scratch & dent" loans, some of which are scratched and/or dented from the lender's perspective, not the borrower's.
Accidentally charged the premium for 12% MI coverage instead of 35%? Well, once that's on the federal TILA disclosures and the loan is closed, it's really hard to fix it. So the investor just puts up with lower yield, as the additional premium gets paid out of profits, not by raising the borrower's payment. The loan is "S&D" because the borrower was undercharged, not overcharged.
I also remember a loan (ugly thing) where the correspondent lender (luckily not me, I got to put it back to the correspondent) typed .275% as the ARM margin instead of 2.75%. I demanded that this get corrected, which meant having the borrower initial the correction. Borrower, not surprisingly, refused to do so. Oooops.
Of course lenders work hardest to prevent errors in the borrower's favor. This isn't about some sort of "equivalence" argument. It is, though, to speak to Uncle Festus's point that in times o' trouble, mistakes of all kinds increase as lenders are desperate to keep recovery costs as low as possible.
Having worked for large Banks,Tanta's explanation makes a LOT of sense.I expect a lot of large servicers will reluctantly deal with the fact that the cash cow has CJD.As far as individual loan Brokers disappearing,yes,of course.Their purpose was to "take" some of the risk for a fee that would be charged to the borrower,and allow those higher up the food chain to claim "We had NO IDEA this was going on" and to act as a "straw" counterparty "look,our contract specifies that Flakke MTG inc HAS to buy this back if there is a problem,so there is NO RISK to us"
Webster's Ninth New Collegiate Dictionary:
Attorney pl -neys
Treasury pl -suries
Countrywide pl - "we've spent all our money getting a tan, can't pay for proper paperwork" ies.
"Attorneys" is correct.
"Attornies" is both wrong, and stupid looking.
(Sometimes it really is that simple!)
Anyway, many of us prefer "lawyers." Nice, strong Anglo-Saxon root, instead of that pretentious Law French.
And lawyers like to have Evidence when they walk into court. It helps with the whole proving your case thing.
A quibble.
In theory, a supersized servicer ought to be able to achieve some legitimate efficiencies of scale. Really large-scale, cutting-edge document management systems, for instance, may only be practical investments for the big boys. But there's the rub; CFC's strategy was not efficiency of investment in processes, but of disinvestment in it.
I recall a case about 7 years ago were a State's Ag requested a certain percentage of the hard copy mortgage records from a lending institution of records as a double check on the electronic copies they already had. The lender had to admit that they couldn't find some of them. I think it was somewhere between 1 and 2% of the requested number.
There was no thought that it was anything shifty going on: just plain sloppy record keeping.
In theory, a supersized servicer ought to be able to achieve some legitimate efficiencies of scale. Really large-scale, cutting-edge document management systems, for instance, may only be practical investments for the big boys.
Of course they should. And they do. You can question whether this efficiency of scale is worth the risk that the very fact of scale creates, of course.
Part of my trouble with a lot of "document management systems" I've seen is that they do, actually, work great at storing and retrieving documents. At any minute of the day or night, you can request and get an image or copy or even the original of any document you need.
Pity that the damned document has the wrong numbers on it, and had when it got put into the "document management system."
A great deal of what we're finding now, I am afraid, is that we have very efficiently processed a bunch of crappy documents. That's because while there are these giant efficiency-of-scale servicers, there are jillions of little escrow services and title attorneyz and pissant mortgage brokers who hose the stuff up in the beginning. What the big servicers haven't wrapped their operations around is deep due diligence on the intake side. That's because they have always believed that they could put back any booboos.
A very large bank I know of instituted one of the first optical scanner "document imaging" programs when that technology became widely available. It worked so well on their pilot program that they immediately bought a second and third workstation (very expensive hardware at the time) and hired a big squad of temps to run every file they had through the machine. This got their whole file room "online" very quickly, and of course they were able to cut costs for physical file retrieval and physical file retrievers (staff).
Turned out they had just expensively optically scanned thousands and thousands of pages of duplicate copies, blank pages of reversed documents, missing reverses of double-sided documents, slip sheets/file dividers, and misplaced menus for the local take-out Chinese emporium. Because the machine operators weren't looking at what those papers were that they pulled out of the files, and wouldn't have known what they were supposed to say if they had.
Anyway, the bank ended up with literally thousands of CD-ROM "files" full of garbage. But dammit, it only took a few seconds to pull up that garbage on your PC.
Wait until the second lien holders start suing with claims that their position was wiped out in part due to invalid claims of the first note holders.
You assume that Countrywide is the first lien holders. With all of the fraud going on to get the loans pushed through I could imagine Countrywide isn't in first place.
from Fitch today:
As the mortgage lending industry continues to make the mortgage process faster and less expensive, the occurrences of fraud continue to grow.
other startling findings:
Lack of Disciplined Underwriting Increases Defaults and Allows Fraud
http://www.fitchratings.com/corporate/reports/report_frame.cfm?rpt_id=356624§or_flag=3&marketsector=2&detail=
Although not on a mortgage, I have had mistakes in my favor. In my experience they are often as much as pain to get corrected as ones that are not.
CFC is recognized as having some of the best technology in the industry. I don't think they're any more sloppy than say Chase or Wells. They're just so freaking big and they don't have the capital to handle a big disruption. Consolidation has reduced costs but concentrated a lot of the risk.
Tanta, I know what you mean. In my (ahem) decades-long career, I have seen a spreading contagion of superficial answers to hard questions, flash over substance, self-promotion over hard work, and generally, stepping over dollars to pick up nickles. I am afraid that we have cut our final corner, and are now entering into the Age of Consequences.
Incidentally, I'm not as frustrated as you by overly simplistic stories about lenders and servicers being unable to prove they own the loans. No, we haven't seen too much of that yet. But given the utter, utter shoddiness of business practices over the last few years, I'd be surprised if that didn't happen eventually.
To my knowledge, we don't have a federal law in this country that regulates the servicing, servicing fees and disclosures on these loans to the same degree that RESPA does.
rich | 11.28.07 - 11:33 am | #
Rich,
You know not whereof you speak.
RESPA requires disclosure of closing costs. It does not regulate the level of closing costs. It does not regulate servicing or servicing fees at all. You can look it up.
Incidentally, I'm not as frustrated as you by overly simplistic stories about lenders and servicers being unable to prove they own the loans.
Oh, I absolutely agree that there will be cases ultimately dismissed with prejudice because someone couldn't prove ownership.
I'm frustrated because there seems to be an assumption that this is caused by servicers sneaking around in the dark of night with pantyhose over their heads stealing mortgage loans.
No, they truly bought these loans in a real mortgage loan sale, and they really do have excellent reasons to consider themselves the party entitled to collect the payments.
The trouble is that they did cut corners when it comes to filing assignments and such.
Issuers should be the ones flipping out here, since they are the ones who are going to cover this for investors who won't get principal back.
However, some people will tell themselves that these FCs "wouldn't really be happening" if the servicers weren't cheating.
That's the part that frustrates me. CFC may be unable to foreclose on your home if it can't prove it owns your loan (and there is no proven owner to collect in its stead). But that doesn't put enough money in your checking account to make house payments.
A lot of the uproar seems centered in OH. Why? Well, it's a judicial FC state--as far as I know you can still get by with plenty of sloppy in the DOT states. But also, it's in terrible economic recession. There will be a lot of opportunties for servicers to display their competence or lack thereof in OH. Even a borrower who wins the incompetence lotto and gets to keep his house still doesn't get magically awarded a well-paying job, too.
So what's the next step? What I like about this blog is that it looks beyond the obvious. Let's see,.. bull market for lawyers (isn't it always?),...even bad attorneys will start winning cases by exposing the incompetence of the paperwork,...the lenders/creditors will need to hire teams of lawyers to sift through the paperwork,...boredom will set in,...they'll start surfing the web,...hits galore for CR,...no real work being done,...Class Action Lawsuit!
Bingo! I wonder if it's already in the works? I have no idea what the legal grounds this will be based on, I'm only going with my gut feeling that whenever there's trouble, we get class action suits.
...and Tanta will get more solicitations to act as an expert witness.
How shocking.
A judge creating work for lawyers.
Fascinating stuff - Managing trailing docs has always been like herding cats. It can be done but requires a certain degree of experience and skill. Helps to know what a cat looks like before you begin to try managing it. (see the quote on Optical Imaging Systems-what a hoot!)
Sloppiness has been around a long time to varying degrees - now we have a couple of courts calling BS on the practice. Good thing overall, and a few borrowers in FC will hit the jackpot. At the end of the day, lessons will be learned and payscales for back shops will go up. And about time too.
I work in default servicing, and on the legal side of things. I've been here since, oh, 1992 or so. I guess that makes me a grizzled veteran these days, seeing as most of my contemporaries long since moved on when things dried up in the early part of this decade.
It certainly is a nice notion think servicers, or the trustees/investors who retain them, will go back to actually caring about "value", as opposed to simply lasering in on the cost part of the equation.
But I really don't see it ever happening. I do foresee servicers shoving any additional costs down the food chain to the extent that they can get away with doing so. That's just standard SOP in the servicing business, particuarly for the 800 lb gorillas - either implicitly or explcitly, they more or less use their vendors and business partners as a form of insurance for all kinds of risk (including legal risk).
Is it right? Absolutely not. Will it change? Not unless and until a new breed of managers, SVPs, and the like are trained and brought into servicing operations.
Call me jaded.
"Attornies" looks odd (and the definitive spell-checker source says it's misspelled). However, if we are entering the land of alternate spellings "piffull" is preferred-- as in "full of piff".