Why is the foreclosure/short-sale/loan mod process all mucked up? From the N.Y. Times:
http://www.nytimes.com/2009/07/30/business/30services.html?_r=1
“For many subprime servicers, late fees alone constitute a significant fraction of their total income and profit,” said Diane E. Thompson, a lawyer for the National Consumer Law Center, in testimony to the Senate Banking Committee this month. “Servicers thus have an incentive to push homeowners into late payments and keep them there: if the loan pays late, the servicer is more likely to profit.”
She cited Ocwen Financial, which reported that nearly 12 percent of its income in 2007 came from fees to borrowers.
“It frustrates me when I see the government looking to the servicer for the solution, because it will never ever happen,” said Margery Golant, a Florida lawyer who defends homeowners against foreclosure and who worked in the law department of a major mortgage company, Ocwen Financial.
“I don’t think they’re motivated to do modifications at all. They keep hitting the loan all the way through for junk fees. It’s a license to do whatever they want.”
As a home slides toward foreclosure, mortgage companies pay for many services required to take control of the property and resell it. They typically funnel orders for title searches, insurance policies, appraisals, and legal filings to companies they wn or share revenue with. Ocwen established its own title company, Premium Title Services, in part to keep more of the revenue from foreclosures, said Ms. Golant, who helped start it.
Even when borrowers stop paying, mortgage companies that service the loans collect fees out of the proceeds when homes are ultimately sold in foreclosure. So the longer borrowers remain delinquent, the greater the opportunities for these mortgage companies to extract revenue — fees for insurance, appraisals, title searches and legal services.“It was hugely profitable,” she said. “Premium Title would charge for the title when it got transferred to Ocwen, then charge again when it got transferred to the new buyer, and then sell title insurance. It was easy money.”
Mortgage companies not only gain this extra business through their subsidiaries, but also collect reimbursement for the payments when the houses are sold.
The investors who own bad mortgages accept whatever is left. Investors typically do not notice how much they give up to the servicers, because fees are embedded in complex sales.
“It’s under the radar,” Ms. Golant said.
Ultimately, the benefits of delinquency erode incentives for mortgage companies to dispose of troubled loans quickly, say experts, allowing distressed houses to decay and fall in value — a fact of little interest to the servicer.
“At the end of the day, it doesn’t matter what the house sells for, because they don’t take that loss,” said Ms. Golant. “Meanwhile, they are collecting all these fees.”
Ocwen is running their REO department out of India. According to one realtor, the asset managers can barely speak English, let alone know how to sell properties.
Jim,
Again, this is great information on the granualar level. I always wondered the ramification of the Making Homes Affordable plan where it makes provisions for lendors to ‘forgot’ second loans in order to move forward with the mod. I was never able to find the ‘soon to be released’ document stating how much the gov’t would pay the investors and servicers for those secondary loans on behalf of the deadbeats. Seems like the machine is consistanlty churning out policies, regulations and legislation with no real change. This is more of the same unfortunately.
Interestingly the Washington Post has an entirely different theory. They break the distressed borrowers into three categories.
#1 Borrowers who will foreclose w/o the loan-mod, but can sustain the payment w/the loan-mod.
#2 Borrowers who will re-distress even after the loan-mod.
#3 Borrowers who will self-cure.
The article says that loan modification only makes sense for #1.
Click on my name for the full article.
Suprise, Suprise, Suprise. The bank is not your friend.
The banks want to squeeze every last penny out of you.They are not your friends at all.Face it the banks own most of us.
OK, here’s a job listing I found for Ocwen. I think this explains a lot:
Ocwen Financials – 23rd to 24th July 2009 – Bangalore – Voice process
We would like to invite the eligible applicants for Associate level position for a Voice process in our BPO division.
Interview process : 1st round is 12 minutes aptitude test with 50 questions and only when test is cleared we will consider the candidate for further process i.e. HR discussion, Voice and Accent test.
Contact person : Umesh / Rajatha
Position : Associate
Process : Voice process only
Shift : Only Night Shift
Experience : 0-1Yr
Education : BA, BCom, BBM, BBA, BHM, BSc
(computer science,MBA, BCA, MCA, BE/BTech graudates and candidates who have appeared earlier need not apply)
This position reports directly to the Senior Manager REO Sales and maintains responsibility for the following :
1. Support the REO properties sales process for assigned regions in the United States ? including accurately updating property listing information for the asset in the appropriate Multiple Listing Service, assisting in creating marketing materials, coordinating buyer tours, notifying buyers or buyers agents that their offer has been rejected, checking contracts for accuracy and completeness, answering questions about the property.
2. Coordinate with internal Ocwen departments to determine signage requirements, lock-box services and maintenance requests
3. Interact effectively within Ocwen Senior Management, clients and perspective purchasers
4. Answer inbound calls and voice mails from customers, real estate agents, and the general public regarding the management and sale of residential properties
5. Responsible for one call resolution for disputes, complaints and concerns
6. Monitor multiple e-mail accounts and provide same day response
7. Research top priority items by providing detail investigation of complaints and disputes
8. Produce written resolutions and/or summaries quickly
9. Ability to discern matters that require escalation to Supervisor
10. Timely completion of all work assignments and projects
11. Responsible for additional duties as assigned, including various special projects
12. Maintain strong team alliance, ability to work with co-workers to meet and achieve team and department goals
Key Result Areas :
-Manage a minimum HRD of 50 properties for sale
-Achieve 100% on review and acceptance of real estate sales contract documentation
-Attain same day response on e-mails and voice mails
-Maintain 24 hour response on calls or e-mails left after business hours
-Achieve 100% accuracy on Multiple Listing Service data input
Qualifications :
-Ability to perform in a fast-paced, constantly changing environment with accuracy under tight deadlines
-Excellent customer service skills
-Exceptional investigation abilities
-Demonstrated excellence in written and verbal communication
-Strong multi-task expertise, self-discipline, and attention to detail
-Proficiency in data processing, Microsoft Office – including Word, Outlook and Excel
-College preferred, minimum of 1 year responsible work experience necessary
-Knowledge of Real Estate transactions, agency relationships and Real Estate Owned protocols desirable.
Desired Candidate Profile :
1.Applicant Should be a Graduate.
2.BA/BCom/BBM/BBA/BHM/BSc
3. Should have good analytical and Communication skills.
4. We donot consider BSc Computer Science/BCA/MCA/MBA/BE/BTech
5. Should be willing to work in complete night shift.
6. Candidate who have appeared in the last 5 months need to apply again.
Oh yeah, in this case “BPO” stands for “business process outsourcing” and not “broker price opinion”
wow I always thought that was a job that was safe from offshore outsourcing…
There is a forth category:
#4 Borrowers who will NOT foreclose w/o the loan-mod because they can sustain the payment, but want a loan-mod anyway 😀
Woohoo! Moral hazard for everyone!
Oside,
there is no job that is safe from offshore outsourcing. As long as the dollar is stronger than the rupee or Renmimbi, there is no safe place.
This is not meant to scare you, but if you’re just now figuring it out, relax. You can always call your helpful friend Raju for some advice.
Chuck Ponzi
Ocwen also attempts to use a handful of brokers for the whole state of CA. I think the big guy in So Cal is David Judd. I cant imagine how thin his margins are or what deal he cut. Or maybe he is just an employee of the servicer.
AK,
That’s a pretty amazing job announcement, on so many levels. I wonder how much it pays.
How is this person supposed to inform buyers and agents about the property, other that what’s already listed on the MLS or in public records? And they’re supposed to coordinate tours, too? From India??? 🙁
This article explains a lot of foot dragging, where neither investor or borrower is receiving value for services. But the outsourcing is so mindblowing it overshadows the outrage of another consumer debacle, does it ever end?
“there is no job that is safe from offshore outsourcing. As long as the dollar is stronger than the rupee or Renmimbi, there is no safe place.”
That’s not true. Here’s a short list:
Plumber
Electrician
Carpenter
Teacher
Doctor
Auto mechanic
Gardener
Hard to fix my kitchen sink or perform open heart surgery on me from Bangalore.
Now, if the job involves typing at a computer and talking into a phone, or assembling small portable objects, that’s quite different.
They’re working on the international heart surgery part.