At the beginning of last year, Foreclosurepedia began reporting upon our belief that consolidations would begin, in earnest, by the latter part of 2018. Nationstar’s rebranding as Mr Cooper, in 2017, began a most interesting journey into the dismantling of monolithic firms such as Mortgage Contracting Services (MCS) and Safeguard Properties (SGP), the latter of whom has already been dabbling around with changing their image. Nationstar’s acquisition of Assurant Field Asset Services, vis-à-vis Xome, a Nationstar subsidiary, absorbed Assurant’s millions in federal jury verdicts handed down against them for employee misclassification, is telegraphing the single source theme. Nationstar is now capable of handling, from cradle-to-grave, an asset’s lifecycle. That is only half of the story, though, as you will find out here in a bit.
Earlier today, BB&T announced their purchase of SunTrust. The purchase seems to continue a trend toward a monopolization of the US financial system leaving only a few like Wells Fargo, Bank of America and JPMorgan Chase. And as banking regulators have been neutered and Maxine Waters is nothing more glamorous than manageable panhandler, the reality is we are most assuredly on the precipice of a major calamity.
Waters has personal ties to the banking sector via her husband’s ownership stake in, and former directorship of, One United Bank, an African-American-owned and managed company that is certified as a Community Development Financial Institution and registered with the Federal Deposit Insurance Corporation.
So, no one is afraid of the Big Bad Wolf. And as seen to the right, the Mortgage Field Services Industry is partying like never before. From the outside looking in, though, I do not believe it is a celebratory party. If nothing else, it is probably a morning after event. And by the looks of things, Foreclosurepedia is not alone. Asset counts are at historic lows and the ivory tower of debts are monumental.
DS News recently released an article authored by Aspen Grove Solutions CEO Sean Ryan which showed a rare breaking with the ranks among National Association of Mortgage Field Services (NAMFS) members. Ryan kicks off his piece to say that Minority Females and Labor are being underpaid,
Servicers are frustrated by their vendors, and the troops in the field are often not paid enough to do quality work. Problems persist throughout the supply chain, and many servicers are struggling to manage it all. Consequently, default servicing leaks money across the entire process.
Ryan, in no uncertain terms, is admitting that NAMFS members are incapable of meaningfully handling assets,
Vendors retain asset owner and servicer data — the tools a servicer needs to survive the jungle. Vendors decide when to carry out work. Vendors apply the investor rules. Any oversight and sign-off processes that do exist are fundamentally inefficient and deficient in oversight and control. As the industry continues to consolidate, it may prove very difficult to retrieve the data from vendors that leave the industry. Servicers often are required to train their own internal staff to work on multiple vendor systems, which are difficult to mine for data when claims are made and can trigger antagonistic encounters with vendors over timing, money, services, and other issues.
The article goes on to point out the how’s and why’s of what is wrong with the Mortgage Field Services Industry. What was surprising about it — and it obviously is a pitch for their failing background check software — is that Ryan would actually put words to paper which attacked the very Association whom lines his pockets. Was it wise? Well, portions of Ryan’s statements are drawn from what Foreclosurepedia has stated for nearly a decade now. And other portions are drawn from what the Five Star Institute’s Ed Delgado has said for at least two years. Here, Ryan simply mimics that which Delgado proposed a year earlier,
Implementing standard forms, processes, measurements, and metrics across the supply chain means that data becomes normalized, useful, and measurable.
Coming on the heels of announcements from MCS that their phone center had collapsed as well as Wells Fargo’s entire online system had cratered, the archaic and rotten infrastructure of a twentieth century technological backbone is showing its true colors. It is a far worse house of cards than anyone might comprehend. And I know from the vantage point that I have with respect to both Labor and Management.
The collapse of Primestar caused a cascade normally not seen in the Industry. While many were hung out to dry, Primestar was finally forced to begin making payments lest they suffer the same fate as National Field Network (NFN). In fact, while lack of payment is a terrifying reason enough to leave the Industry, the fact that there are only several Order Mills left and none of them are truly capable of handling the extremely low volume ought to strike fear into those whom are projecting the future needs in the next crisis.
The question that presents is how well the Industry will be capable of responding to the next crisis. In light of the precarious financial environment firms like MCS are currently harboring, I am not hopeful. Moody’s has been explicitly clear in their 6 negative ratings of MCS in the last 14 months— ASP MCS Acquisition Corporation was formed by American Securities LLC to facilitate its acquisition of MCS Group Subholdings, LLC (“MCS”) after the purchase of Asset Management Specialists (AMS). At that time, the debt was over THREE HUNDRED MILLION DOLLARS. Today, it eclipses almost FIVE HUNDRED MILLION DOLLARS. Here is what Moody’s had to say about the MCS portfolio only a few months ago,
MCS’ Caa1 CFR broadly reflects pressures on the company’s liquidity, very high financial leverage, a concentrated customer base with limited business scope, and exposure to low rates of US home mortgage loan delinquencies. Moody’s expects debt/EBITDA will continue to rise, increasing above 8x over the next 12-18 months. Moody’s expects low rates of mortgage delinquencies and low default rates to result in ongoing organic revenue declines. Strength in the housing market has contributed to low vacancy rates, which also pressure the company’s field service activity levels. Customer concentration is a substantial risk to the business, according to the rating agency. In March 2018, the company lost a top customer, a noteworthy adverse development for its underlying credit profile. Notwithstanding lower margins for this former customer, the loss of this business puts pressure on the company to offset lost earnings via additional cost reductions and business wins. Further pressing the need to reduce costs or win new business, during June 2018 the company received notice from another large customer that it would proportionally reduce volumes with its field service providers to bring these activities in house.
There are no other National entities whom are capable of paying other than pay when paid. The financial solubility of this Industry is rapidly approaching a National Security concern and is deteriorating by the minute.