Whether it was on purpose or otherwise, Altisource’s CEO, Bill Shepro, let the cat out of the bag on their earnings call dated 06 August 2020. At the height of institutional assimilation of mortgage field services firms — and as predicted over 19 months ago by Foreclosurepedia — there now is no mistaking the intentions of these vampire squids. Before we get to the heart of the revelations, we first need to set the stage with a proper understanding of some of the language we will be using. First up to bat is MSR. MSR is an acronym for mortgage servicing rights. MSRs are a specific arrangement where a third party promises to collect mortgage payments on behalf of a lender in exchange for a fee. Generally speaking, up until COVID shut the entire economy down, the haircuts provided by MSRs provided long term, turn key capital for hundreds of firms to utilize as collateral to finance extremely complex and spurious, at best, financial investments. And because the vast majority of people were paying their mortgages, there was really no issue — mortgagee pays MSR holder and MSR holder pays the investor. The problem that presented was that when COVID hit, forbearances kicked in and many folks simply just didn’t pay their mortgages. Holding the MSR rights included a clause that the right holder had to make the payments to the investor regardless of whether or not the mortgagee paid them. Mortgage servicing assets are interesting assets in that they are one of the few bond-type investments that increase in value as interest rates rise. Essentially, the mortgage servicer collects the monthly payment from the borrower and makes sure that the payment is routed to the investor, that the taxes and insurance are paid, and that any delinquencies are dealt with when borrowers stop paying. The servicer is then paid 0.25% of the loan’s balance per year for taking care of this.
One example of this involved a company called New Residential Investment Corp. New Residential is partially owned by Fortress which is, in turn, controlled by SoftBank. We covered the deal of New Residential buying up Chronos Solutions, Guardian Asset Management and a half a dozen other firms late last year. And many estimates peg New Residential as controlling in upwards of 35% of all mortgages out there today.
The Motley Fool had this to say about New Residential,
New Residential completely changed its business model during the months of April and May. The company was known for focusing on originating mortgages that cannot be guaranteed by the U.S. government. These loans are called non-qualified (Non-QM) loans, and they are usually targeted to self-employed borrowers who have lots of tax deductions that understate the borrower’s actual ability to make the mortgage payments. During the month of April, non-QM loans fell 10 to 15 points, and New Residential decided to exit the business. It will still originate mortgages; however, the company will focus on government-guaranteed mortgages. — Today, 60% of the mortgage marketspace is Non-QM with predictions of over 15.6 Million defaults upcoming according to a recent report by Amherst Holdings.
Altisource kicked off their Earnings Call on 06 August 2020 with several shots across the bow. Altisource directly fired a shot at Guardian Asset Management as being the straw man in the game for New Residential,
From a timing perspective, in July, we started — Ocwen started to move some of the inspection work from Altisource to Guardian which is a NRZ-owned company. And we believe that activity, so inspections moved in July and we believe the REO related work we do in field services will move over the next couple of months.
Altisource went on to admit problems with New Residential poaching their work from Ocwen,
More recently as set forth on Slide 7, Ocwen advised us that an MSR investor instructed it to move certain referrals for field services to another service provider, beginning in July with the balance anticipated to be moved over the next couple of months. Ocwen also advised us that this same investor intends to instruct Ocwen to utilize a different provider for certain other services at unspecified future dates.
We believe the MSR investor providing this direction is NRZ and that the referrals are being moved to service businesses that NRZ either owns or in which it has invested. We believe that these actions violate our agreements with Ocwen, and we are currently in discussions with Ocwen to address this matter and have reserved all rights.
All told, that work was estimated to be $58 Million,
We estimate that the field services portion of this service revenue was $58 million.
Finally, Altisource quoted a number I had never seen before. It is a napkin calculation of the value of the Mortgage Field Services Industry,
In a normal market, we estimate that for every 1% increase in delinquency rates, the addressable market for our default related services increases by approximately $700 million. Based on the increase in 30-plus day delinquency, since the beginning of the year, we estimate that the addressable market for our services has grown by over $2.7 billion.
I want those two numbers to stick in your brain until the day you die. One percent of delinquency equals $700 Million. And the current 30+ day delinquency market represents $2.3 Billion dollars. Now, each and every day National Association of Mortgage Field Services (NAMFS) member are telling you they are broke and you need to take a haircut on your work as they continue to steal your money by and through illegal chargebacks and furthering their agenda of misclassification of employees as independent contractors. In fact, since the COVID pandemic has hit, NAMFS members are paying out less and have not offered a single penny for PPE or bonuses to their essential workers. No other Industry in the US has refused to assist with PPE and essential worker pay other than NAMFS members.
I digress. As many of you know, I have cautioned about the dangers of institutional vulture capitalists purchasing up — or bankrupting out depending upon their desire — of Industry firms. Field Service Technicians are now in their most dire position ever in the history of Foreclosurepedia’s reporting. And yet they continue to bah bah like sheep heading to the slaughter. The International Association of Field Service Technicians (IAFST) has seen its largest growth rate since its founding in 2016 based, in part, upon moving its Membership from critical liability markets such as grass cuts and clean outs to new home construction, remodeling, and tenant occupied services. NAMFS, on the other side, has become so bloated with payments to its Executive Director, Eric Miller, that they face financial insolvency. Miller’s salary today consumes over NINETY NINE POINT SEVEN PERCENT of all NAMFS member dues. I want the obscenity of that to sink in for just a moment. For every dollar that NAMFS members pay in dues, Eric Miller puts NINETY NINE POINT SEVEN CENTS in his pocket! That is simply his salary, though. And as we were the only media outlet to exclusively publish the NAMFS IRS tax returns here, as many are demanding an accounting of their hard earned dollars.
The ultimate dangers of what we are witnessing include one NAMFS member embracing the sub contractors of hard working men and women. The terms Non Compete have been cast by the wayside. In fact, NAMFS members all have access to your sub contractor’s information. Aspen Grove Solutions (AGS), that great money slush fund Eric Miller forced down everyone’s throat along with Jim Taylor at Wells Fargo, releases that information to NAMFS members when someone checks in. And in the coming days, Foreclosurepedia may be forced to publicly expose those whom are potentially receiving kickbacks for onboarding sub contractors of firms all the while raiding the information from AGS. To say that this is criminal is an understatement.
Stay tuned for Part II in this Series on Institutional Mayhem coming this weekend!