Chris Adams, McClatchy Newspapers, Gets It! Servicers Suck!

The press is certainly changing their view of what’s going on with loan modifications, no question about that.

And by George, I think he’s got it!  Chris Adams, a writer for McClatchy Newspapers has a headline today that reads: Firms Are Getting Billions, But Homeowners Still in Trouble, and I feel like celebrating… like doing the “Oh What a Feeling” Toyota jump, if you remember the television commercial from years back.  I feel like I could moonwalk.  Not in public, or anything, but in my mind I’m moon-walking like MJ.


Chris Adams’ article starts with the following:

The federal government is engaged in a massive mortgage modification program that’s on track to send billions in tax dollars to many of the very companies that judges or regulators have cited in recent years for abusive mortgage practices.  The firms, called mortgage servicers, have been cited for badgering, manipulating or lying to their customers; sticking them with bogus fees, or improperly foreclosing on them.

Those of you that have read my column for some time should know exactly how I’m feeling right now.  Let’s see… cloud nine comes to mind.  Maybe not quite euphoria, but it’s in the ballpark.  Chris goes on to say:

The reliance on such companies points to an ironic paradox for federal regulators: Cleaning up the nation’s financial crisis often rewards the firms that helped create the mess. Those Wall Street banks and mortgage servicing companies argue that they’re best positioned to repair the damage they’ve helped cause.

Is that what they argue?  That they’re “best positioned”?  I’m quite sure they do.  I bet they’re “best positioned” for lots of things that involve money and them controlling it.  Go on Chris, my boy…

To make matters worse, the Government Accountability Office, Congress’ watchdog, has said that the Treasury Department hasn’t done enough to oversee the companies participating in what’s known as the Home Affordable Modification Program, which emerged from the bank bailout bill Congress passed last fall.

I’ll say.  That they haven’t done enough, I mean.  Chris quotes Irwin Trauss, an attorney who represents low-income homeowners for Philadelphia Legal Assistance as saying that Bank of America, at least through July, told homeowners that they couldn’t participate in the program when they should’ve been allowed to do so, and he alleges that Saxon Mortgage forced one of his clients into bankruptcy without providing a valid reason for turning down her modification request.  According to Trauss:

“Servicers look for reasons to avoid making the modifications when they are most needed, rather than for opportunities to make them.”

You don’t say.  Do tell… Does he mean that the servicers don’t want to modify loans?  I can’t believe that.  And here I was sure that they wanted to modify mortgages, but they were just overwhelmed.  And what about those incentives?  Is he saying that the servicers don’t care about the $1500 offered by the Obama Administration for modifying a loan?  I find that hard to believe.  I mean… $1500 is a lot of money, right?

Chris introduces us to a couple, Donna and Ronnie Fruia, of Troutman, N.C., who he explains learned firsthand how difficult it can be to get a loan modified.  You should read it for yourself, but just so you know, it’s about Citi Financial and the last line of their story is: “I know if the banking commissioner hadn’t gotten involved, it wouldn’t have happened.”

He then explains that loan modifications are time consuming and that it may be easier and less expensive for servicers to foreclose than to try to keep someone in their home.  He quoted someone who said that servicver employees often see their job as being akin to a bill collector, and that “some have been known to hang up on callers if they started to get tough questions.”

Chris quoted Iowa Attorney General Tom Miller as saying that by September 2008, as the economy went into freefall, the mortgage industry’s efforts had been “profoundly disappointing.”

“Too many homeowners face foreclosure without receiving any meaningful assistance by their mortgage servicer, a reality that is growing worse rather than better,” said a report from the State Foreclosure Prevention Working Group.

And he quoted the assistant Iowa attorney general, who said that:

“The mortgage industry has responded to this crisis with a series of half steps based on a notion that a turnaround in the housing market was just around the corner.”

Okay, everybody just freeze right there.  Hold everything. This is the first time I’ve read this sentence, and after reading about the crisis every single day for a year, it’s hard to find a sentence I haven’t already read in one form or another.  What a time not to be able to use the phrase “F#@k Me”.


Is this even possible?  Is that what this group of remedial readers have been thinking?  You want to know something?  It crossed my mind once or twice, but I let the thought go because it seemed that no group of people could possible be that stupid.  But… maybe not.  We are talking about the mortgage industry, after all, and if any industry is capable of that kind of breathtaking stupidity, it would have to be the mortgage industry, right?  I’m not trying to be mean or unfair, and I will certainly admit that I’ve met some brilliant and wonderful people in the mortgage industry, but come on… you know what I’m saying.  It’s an industry with highs and lows that make the Andes look like Kansas.

I think Madigan just might have something here… they’ve been acting in this half ass way because the idiots that run the mortgage servicers actually thought, and probably still think, that the real estate market is coming back sometime soon.  Oh, dear Lord, if it wasn’t so incredibly poignant, it might just be the funniest thing I’ve ever heard.

It starts the mind a-reelin’ doesn’t it?  I wonder if the banks think they’re going to be solvent again sometime soon too?  Do you suppose these clown princes of finance actually think that they’re out of the woods and won’t have to be thrown into receivership after the midterms are over?  Seriously?  Is it even possible?  Do you suppose they think that none of their buds are going to jail at some point… you know… for breaking the world with their bullshit?  They must know, right?  No?  Oh my God… too funny.  Things are looking up indeed.  I was feeling kind of down about the whole deflationary collapse thing for a while there, but just thinking that these guys think they’ve gotten away with this is lifting my spirits big time.

Chris… I’m going to be reading a lot more of your stuff buddy boy.

The article then talks about the Treasury’s mortgage modification program, pointing out that investors, servicers and homeowners all get to share in the $20 billion that the federal government estimates it could spend to keep homes out of foreclosure.  $20 billion?  Wowie zowie… not a whole $20 billion.  That’s almost as much money as Citigroup lost last March.


Chris points out that the GAO has found that the Treasury Department wasn’t doing enough to monitor the process, stating that in a July report, the GAO said that the department had “significant gaps in its oversight structure,” and was short-staffed in the office monitoring the modification program.  And check out these pearls of precious wisdom:

As of July — eight months into the program — the Treasury had filled fewer than half the positions in a key modification office.

“Treasury cannot identify, assess and address risks associated with servicers that lack the capacity to fulfill all program requirements.”

Treasury said it’s beefing up its review procedures and also said it recognizes many of the problems and has been working to correct them. “Clearly, we’re not there yet,” said Seth Wheeler, one of the Treasury officials who oversees the modification effort. “Clearly there’s still inconsistent application of the program, even though we have made progress.”

Now… here’s where it gets really good.  And I’m going to do something I don’t usually do, lift a significant portion of Chris’ article so I can comment on it.  It’s just that good.

Several companies in the Treasury program have been cited by judges or regulators for having engaged in improper behavior with their customers.

They include Select Portfolio Servicing Inc., a Utah-based company formerly known as Fairbanks Capital Corp.; Countrywide Home Loans Inc., now a unit of Bank of America Corp.; Carrington Mortgage Services LLC, based in California; Saxon Mortgage Services Inc., a unit of Morgan Stanley; EMC Mortgage Corp., now a subsidiary of J.P. Morgan Chase & Co.; and Green Tree Servicing, a Minnesota company.

Ocwen Financial Corp., a Florida-based company that services more than 300,000 mortgages nationwide, could receive more than $200 million in TARP payments.


“Ocwen has screwed up my finances so bad you can’t believe it,” said Brad Rhoton , whose rental properties in the Houston suburbs are part of a nationwide lawsuit against Ocwen. “It’s been the most maddening process you can imagine.”  Rhoton’s lawsuit charges that Ocwen constantly misapplied Rhoton’s mortgage payments and tacked on unnecessary fees and insurance, causing his accounts to fall behind.

So far under the Treasury’s modification program, Ocwen has started trial modifications in 8 percent of potential mortgages — below the national average and well below some other servicers.

Paul Koches , a company spokesman, said the number is misleadingly low.  Ocwen, he said, has set rigorous standards in documenting its modifications and is therefore likely to have a far higher share of its modifications stick than other companies. He said that Ocwen undertook its own loan modification program in 2007 and has beefed up its staff substantially since then.

As for the suits against it, Koches said they represent a fraction of the firm’s customer base, and many were copycat lawsuits that tried to paint Ocwen with the same brush as other mortgage servicer firms. He said the company continues to vigorously defend itself against lawsuits.

Over the years, Ocwen has lost other lawsuits and has been slapped down by a federal judge for its conduct.

In one Texas bankruptcy case, for example, a federal judge blasted Ocwen after it tried to pass the cost of a $1,000 sanction onto the customer it was cited for mistreating. When the judge found out, he said, “Ocwen’s course of conduct in this proceeding bordered on the outrageous.” He fined the company an additional $27,500.

Are you reading this?  This is just toooooooo much, don’t you think?  Watch out bankers… I told you… you’re not going to stay on top of lies you’ve been telling forever.  This is America baby, and eventually the press finds its balls.

The case was far from isolated, however. A jury in Galveston, Texas, ordered the company to pay $11.5 million, and one down the coast in Corpus Christi ordered it to pay $3 million for unfairly foreclosing on homeowners (both cases were then settled in the appeals process for undisclosed amounts).

In both cases, the plaintiffs were on the edge financially, and so when Ocwen added extra fees to their accounts they quickly fell behind.

That was part of their strategy, plaintiffs’ attorneys said. One of the key witnesses before both juries was a former Ocwen account officer who said the company trained its sights on customers who had substantial equity in their homes. In those cases, the company had the most to gain if customers lost their homes in foreclosure.


“We didn’t treat the people very well, but the money was pretty good,” the former account officer, Ron Davis, testified during one of the trials. (Davis couldn’t be reached for further comment.)

The motive, he said, was simple: force people into foreclosure as a way to earn higher bonuses.  “We would call the customers and ask them what bridge they were going to live under,” Davis testified.

Shut up. Shut up. Shut up.  I may not recover from this.  I could end up with a permanent smile.

Ocwen lost that lawsuit. A Texas jury found that the company engaged in “fraudulent, deceptive, or misleading” tactics that it called “unconscionable.” The case involved an elderly Texas woman the bank tried to evict from her home even after a local judge had ordered it not to. The jury awarded her $11.5 million , which was reduced to $1.8 million , according to Ocwen’s Securities and Exchange Commission filings; the case was settled during appeals.

Outside the courts, federal regulators in 2004 approached Ocwen to request that the company enter into a formal supervisory agreement under which it promised to improve its customer service. It required, for example, that Ocwen beef up its ombudsman to take customer complaints; adopt a “borrower-oriented customer service commitment plan”; take reasonable actions to see if homeowners already have hazard insurance before adding it to customers’ accounts; and regularly report to federal regulators about outstanding customer complaints.

Koches of Ocwen said the agreement was merely an attempt to formalize many of the steps the company was already taking — and that the company and federal regulators wanted to avoid the kind of problems other firms had experienced.

Oh did they now… I’ll bet they did.


Later that year, however, Ocwen took steps to ensure that such regulatory decisions wouldn’t come again.

It successfully petitioned to have itself removed from oversight by the Office of Thrift Supervision, thus ending the supervisory agreement hatched just months before, according to Ocwen’s regulatory filings.

Ocwen said it removed itself from OTS oversight for business reasons unrelated to the supervisory agreement and that it continues to follow the intent of the agreement.

Okay, that’s enough.  Now I’d like to wrap things up by reprinting a sentence that appeared above, but I think makes for a very good capper.  Here it is:

Ocwen Financial Corp., a Florida-based company that services more than 300,000 mortgages nationwide, could receive more than $200 million in TARP payments.

That’s it and that’s all.  Go get ‘em Chris baby.  Reel them in and filet them.  As to my readers… please tell me you know what to do with this article.

Mandelman Out.


P.S. Oh yeah… I wrote an article similar to Chris’ some months ago… just for the record and all.

Suits Filed Against Sleazy Servicers – Treasury Knew

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