For years, the rush to the bottom in acquisitions by Mr Cooper with Xome, Caliber with Hudson Homes – Northsight and New Residential with Altisource – Chronos – Guardian has been a full speed ahead endeavor. In fact, there is no argument when it comes to the desire to control the entire lifecycle of the US mortgage market. And fueling this has been, at least recently, access to nearly unlimited quantities of close to zero percent money. With razor thin margins, loan after loan after loan has been financed to purchase up large swaths of the mortgage sector from the origination and servicing side all the way down into the gutter of the field services end of the spectrum.
A mortgage servicing right (MSR) provides a mortgage servicer with the right to service a pool of residential mortgage loans in exchange for a portion of the interest payments made on the underlying residential mortgage loans. Advances are required capital outlays by the servicer to fund missed payments from delinquent borrowers and foreclosure-related expenses.
And it was balls to the wall, damn the torpedoes, up until the coronavirus (COVID) hit — or so the Wall Street gangbangers would have you believe as they continue to drop terms like Main Street into each and every speech which Larry Kudlow is cranking out from the White House pitch deck. More on that in a moment, though. You see, our story begins when President Donald J Trump signed a TWO TRILLION DOLLAR piece of legislation known as the CARES Act. And inside of the CARES Act there was a provision entitled Section 4022 which basically said that anyone with a federally guaranteed mortgage could flip the middle finger at the system and put their payments on hold during the COVID pandemic. In essence, 4022 says that mortgagees may take a 180 day pause from payments and then take up to yet another 180 days off after that. And get this, the only legal requirement to trigger that was the homeowner stating that they needed to. The CARES Act was praised by everyone, Republican and Democrat alike. The only problem was that for the first time in the history of Wall Street gangbanging, Wall Street itself was getting fucked up the ass.
Much of the consternation pertaining to the CARES Act surrounded the fact that only federally insured mortgages were eligible for the hiatus in payments. No one is arguing that homeowners whom are unemployed, due to no fault of their own, need help. Many were simply saying that this provision should extend to all mortgages.
There is no doubt that whomever cobbled this tome of legislation together had no fucking idea how the surreal netherworld of mortgage servicing works as Matt Taibbi put in a recent newsletter quoting a financial analyst. And for those of you in the Foreclosurepedia Nation whom remember the Whistleblower Lawsuit filed against US Bank and Five Brothers, it sounds eerily like how the US Department of Housing and Urban Development (HUD) thought that every foreclosed property had a differently keyed lock instead of the ninety nine cent keys which powered only eight different key codes. Look, before the ink even dries on a typical mortgage, it has already been packaged up with tens of thousands of others into a securitized offering and then scattered across the New York Stock Exchange like so many breadcrumbs no longer seen in front of the local bakeries now shut down across the United States.
Enter the MSR. The MSR, or Mortgage Servicing Rights we mentioned earlier, are the actions taken by middlemen like New Residential, Caliber, and Amherst by collecting mortgages, skimming their percentage off the top, and then rolling that payment over to the one actually holding the mortgage such as Wells Fargo, Fannie Mae, or another institution. And while this may seem like a logical and necessary activity, these firms are about as bottom-of-the-barrel as they come. There have been millions upon millions of complaints filed on these leaches and tens of thousands of lawsuits filed over the past decade. Even the US Government has stepped in and hit both the financial institutions as well as their MSR holding counterparts with billions of dollars in fines.
Anyone whom tells you that the COVID pandemic was the trigger for margin calls within both financial institutions and non bank servicing hedge funds alike is full of shit. From September, 2019, through January 2020, the Federal Reserve pumped out $215 Billion a day in nearly zero percent interest loans to keep the casino running. The grand total of the Fed Chairman Jerome Powell’s conjuring money out of thin air came to a combined total of over SIX TRILLION DOLLARS in less than four months.
The financial collapse was already in the cards. The COVID pandemic merely accelerated the financial doomsday device. I digress. With the margins so thin for these non bank servicers, antiquated technology and wet nosed kids manning the terminals in offices were the hallmark of the day. As we are seeing with respect to the collapse of our nation’s unemployment systems, so to is a dependency upon 20th Century technology plaguing the MSR sector. Even more horrific, though, the blue skying of property preservation firms in sales backed by loans underwritten with the guarantees of these razor thin margins now spells catastrophe on the horizon. Two examples stand out as egregiously shocking to the mind. The first was the tortured pimping of Mortgage Contracting Services (MCS). MCS, as you recall doesn’t really exist in anything except name. They became MCS – AMS Subholdings after the purchase of Asset Management Specialists (AMS). And in a larger deal hammered out between TDR Capital and Concentric Equity Group, MCS was sliced and diced up through UK based VPS Holdings. With mountains of debt laid on their shoulders, the beleaguered MCS was finally brought back, quietly, into the US under the American Securities label with a monumental debt load today of nearly half a billion dollars. Let that sink in, for just a moment. Before MCS pays a penny to Labor, they are servicing nearly FIFTY MILLION DOLLARS in interest, alone, to cover their nearly HALF A BILLION DOLLARS in debt!
The blue skying of Northsight Management to Hudson Homes, though, is what gave the Mortgage Field Services Industry pause. Hudson, part of John Grayken‘s Lone Star funds, was tasked with bringing the final component of gangbanging into the 21st Century. Grayken controlled the funding side, he acquired Caliber to handle the MSR side, and in a scene straight out of the Matrix, he wanted to control the morgue of the asset cycle to liquefy the homeowner and bring the asset back online immediately. The only problem was that Northsight was pitched as a firm with both the managerial experience and boots on the ground to be the final link in the asset lifecycle. It was a fiasco.
Within months of acquisition, Northsight lost the Fannie Mae contract. And closer scrutiny identified the need to clean house from top to bottom. After being blue skied that Northsight could take over the former Ameritrust now ResiPro accounts, the back peddling ensued. Probably the single most identifiable aspect of the deal was the onboarding of Bill Roach. Many remember Roach’s infamy with the oversight of the complete breach of Assurant Field Asset Services’ database of Field Service Technicians, Realtors, and their asset pool in the single largest dumping of Personally Identifiable Information (PII) presumably in the history of the Industry. And many today still subscribe to the belief that this was an inside job.
Today, Northsight is playing second string fiddle to ResiPro begging for scraps as the Fort Worth office continues to dump money, hand over fist, into the Roach Coach up at their Ohio office — just a stone’s throw away from Safeguard Properties. Praying that the casino’s pit boss will allow just one more throw of the dice, the reality is that their latest round of demanding 3.4 percent of total invoice to be paid to Northsight for Labor’s payment is proof positive that the collapse is underway. Paying someone to pay you for services which you rendered? I mean what in the fuck!
Look, National Association of Mortgage Field Services (NAMFS) members tend to rely on lines of short-term financing — whether from financial institutions or through illegal chargebacks and schemes like Northsight’s above. And NAMFS members tend to be financially insolvent under margin calls. Pay when paid is how the last NAMFS President, Justis Smith, ran Rowe Enterprises into the ground and out of business. Calling these vultures and attempting to get clarification of a work order — let alone where the fuck your money is — is virtually impossible. And that is no accident.
So, most of this is old news. Why is it so serious today? Glad you asked. You see, while homeowners will have the ability to skate — more on that in a moment — no one else does. Firms like New Residential, Caliber, Quicken Loans — you name it — must still make the monthly payments to the end mortgage holder or fund. And most of these firms have neither the ability to pay nor are capitalized at such a level as to shop their debt. And it gets far worse as these firms are now outright lying and threatening homeowners in order to pull their own fat out of the fryer. Here is how David Dayan, at the American Prospect put it in an article entitled, Unsanitized: Mortgage Servicers Trying To Steal Homes, Again,
So when I started hearing from borrowers that they were being told that they could apply for three months forbearance (a deferment of their loan payment), but would have to pay all three months back at the end of the period, my ears pricked up. Others have heard this as well, like this Wall Street Journal reporter and Lisa Epstein, one of the subjects of my book Chain of Title, who writes for a subscription-based website called The Capitol Forum. Both found AmeriHome Mortgage, a private equity-backed firm, telling customers about a lump-sum payment immediately due at the end of three months, and this isn’t limited to them. (I’ve heard from Wells Fargo customers as well.)[.]
It is pure, unadulterated bullshit. Even the telephone script which Freddie Mac has published spells this out. Homeowners are allowed 6 months with an additional six months, if necessary. Second, there is no legal mandate for an immediate payment upon the lifting of the moratorium as Industry pundits like Dave Stevens would like to infer. Stevens, a seven year MBA President and former FHA Commissioner is at loggerheads with the current FHA Commissioner Mark Calabria. Foreclosurepedia covered this, in depth, in April. Calabria recognizes that the casino which Stevens has overseen, for decades, is crashing down. The reality is that Stevens and his pack of ranging mongrels proved Chicken Little right. Stevens is demanding to stick his and the collective MSR nose at the public funds trough because of his impotence and inability to get their shit straight. It is a Come to Jesus moment for them; the reality is that there is No Room At The Inn and the Manger is preoccupied with a legitimate need. And it gets better because the reality is that nobody on the MSR side of things wants loan modification or assistance to the homeowner. Why? It has been well known, for over eleven years, that servicers make FAR MORE MONEY on a foreclosure! Matt Taibbi sums it up nicely in his Newsletter,
On April 21, FHFA announced they were coming to the rescue: servicers would no longer need to come up with six months of payments. From now on, it would only be four:
Today’s instruction establishes a four-month advance obligation limit for Fannie Mae scheduled servicing for loans and servicers which is consistent with the current policy at Freddie Mac.
Which was fine, except for one thing: from the standpoint of most of these woefully undercapitalized servicing firms, having to cover four months of payments is not a whole lot easier than covering six. “It still might as well be ten years for these guys,” is how one analyst put it.
Financially insolvent firms abound in the MSR sector. And with respect to our Industry, that percentage is astronomical. Moreover, though, the once endless flow of Labor has now dried up. First, most NAMFS members are having difficulties paying and paying on time — MSI is a prime example. Second, most Field Service Technicians are being asked to perform three dollar inspections in the most deadly of settings under the COVID pandemic. Our Industry is the ONLY Industry whom refused to give additional pay for essential workers. In fact, even as NAMFS members obtained Payroll Protection Program (PPP) funds, they continued to furlough workers and even cut pricing in the Industry by and through draconian application of chargebacks and pay reductions. They have done such at their own peril and here is why,
Most Field Service Technicians have a family member now on unemployment. And that unemployment check represents roughly $3,200 per month, give or take, depending upon state. Additionally, most Field Service Technicians, themselves, are now eligible for unemployment for the first time in the history of the US. And those claims are now rolling in like a crimson tide upon NAMFS members triggering audits by state labor agencies.
Yeah, that final sentence is what has our Industry’s collective asshole puckered up so tight you can’t get a stick pin through it. Multiple rulings are being handed down by state labor agencies that Field Service Technicians are misclassified employees — and not just in California. Really, though, this is a byline of what Foreclosurepedia predicted for over a decade. No, the final nail in the coffin is that the wool over the eyes of the sheeple has finally been removed. What do I mean by this, you ask?
To date, most Americans got $1,200 and that is it because let’s not even bullshit around and say that unemployment has even kicked in let alone the $600 per week add on. Meanwhile, the Hudson – Amherst – MCS – New Residential rape artists got TRILLIONS. That is not a typo. And the PPP loans? Yeah, right. As Dayan continued to put it, “The system crashed because banks lined up so many loans that missed out on round one. If you didn’t have your application in weeks ago you aren’t getting this money. That’s what’s creating the political headlines; if there was enough to go around nobody would care much about the Lakers. The PPP being oversubscribed is ridiculous, because the Federal Reserve has already committed to indirectly taking on the loans, and could absorb the costs on their balance sheet.”
Overworked, underpaid, and fucked straight up the ass is how Labor is today — again. And yet another invasion of the body snatchers is coming down the pike to snatch those homes up just like in the 2008 Crisis. The BIGGEST difference is that many folks are never going to return to work for years. This go around, the ability of NAMFS members to force inspectors to peek in windows and take photos is liable to be met with the barrel of a gun if not outright with cross contamination and a death sentence from COVID itself. And as if that wasn’t enough to really communicate precisely how fucked up things have become enter the storms as we predicated as early as November of last year. That’s right. This year’s Hurricane season is shaping up to be one of the most active in recorded history.
As a footnote, lawmaker’s took how the Wall Street Gangbang was going on seriously. Here is a letter to Bank of America. All large institutions received the same,