After defaulting on nearly half a billion dollars in loans, Mortgage Contracting Services (MCS) has been sold — yet again. Caroline Reaves, the longtime CEO of MCS, is now, once again, at the helm of this Ship of Fools. I mean how many times can you run a company into the ground before investors call for your head on the pike? Or, is it precisely for that reason; is it precisely for the pump and dump, that she has been able to remain? Reaves, whom has had a storied history of overseeing botched mergers like the purchasing of Asset Management Specialists (AMS), which nearly destroyed MCS almost a decade ago, seems just not to get it. And while rapper Lil John has been signing deals up and down the coast of the US, it would appear he knew to steer far away from this mess. Lil John’s commercial selling the $3 Lil John sandwich for Jimmy John’s seems on par for how lipstick continues to be slapped on the pig at MCS. In reality, Connecticut based Littlejohn & Co., one of two investors purchasing MCS, has no relationship with the rapper. It is an interesting segway, though, into the insane Mortgage Field Services Industry. And to date, no one appears to be forthcoming on what the new name for the company — if any — or the fund will be. I reached out to Littlejohn for comment and this is what they had to say,
Paul – I represent Littlejohn and have received your message. The firm declines to comment.
Note to MCS PR firm: You should have put Luxembourg based — and I would guess a front for BNP Paribas — Lynstone SSF Holdings Sàrl, the other firm involved in the MCS purchase, as the lead in for your Press Release to avoid the segway and pun, just saying. Not sure if you paid attention to how many hands were in this latest deal, bur rest assured that before the boots on the ground, doing the work, make one red cent, those people will be paid! Regardless, it is a sad, downward spiral much like the end of an era for the local circus coming to town.
Foreclosurepedia has predicted the acquisitions and bankruptcies of each and every top tier National Association of Mortgage Field Services (NAMFS) member — months in advance. MCS is no different.
Look, Littlejohn, et al., play in the world of debt financing. I mean I can dig risk parity. I understand the concept of investment volatility especially when attempting to look at the forest from the trees. The story isn’t really about them, though. It is not even a Black Swan moment because anyone familiar with the English language could have performed some basic due diligence on this. Fact of the matter is that the writing was on the wall for MCS — and has been since 2017. Look, even American Securities, MCS’ former step parent, reduced the relationship to one paragraph, which chronicled nearly half a billion dollars in default,
During the partnership with American Securities, Mortgage Contracting Services (MCS) provided critical specialized services for mortgage servicers and originators across the mortgage lifecycle. The company provided field services such as inspections and property preservation for mortgages in default and real estate owned properties.
In this Wild West era of debt consolidation and Darwinesque survival of the fittest, the Wall Street Journal presciently released an article in January of this year delivering the death knell entitled, American Securities Bet On Rising Mortgage Defaults Turns Sour. I mean you know it is dire when Reaves was forced to announce on the front page of MCS, that they have new ownership. That has never happened before throughout their history. This is like a dive bar attempting to clean up its image. To truly understand how far into the gutter MCS has found itself, they are now partially controlled by a firm whom is throwing lifelines to Weight Watchers. You cannot make this shit up. I suppose, though, three dollar inspections and Weight Watchers might have similar niche segment followers, I mean who knows? Here is what we do know,
In the heyday of the 2008 Subprime Crisis, Caroline Reaves bet the farm on the purchase of AMS. The only problem was that Foreclosurepedia reminded the US Department of Housing and Urban Development (HUD) that if MCS retained AMS’ HUD Management and Marketing (M&M) Field Service Manger (FSM) contracts, it would violate a little, then known, clause entitled 188.8.131.52. So, the TDR Capital cum Concentric Equity Group purchase of MCS went south before the ink even dried.
A big problem was, though, that Reaves was spending money much like a drunk sailor on leave. First up was Reaves’ purchase of a new castle wherein she could lord over the serfs. DMagazine put out a fluff piece in 2016 attempting to rosy up the steaming pile of shit that was percolating,
But Mortgage Contracting Services is proof that one person’s lemons can be another’s lemonade. This past summer, MCS moved its headquarters to a 120,000-square-foot facility in Lewisville, nearly doubling the size of its former home in Plano. The new digs can accommodate 720 employees, up from 450.
What DMagazine failed to report was that the 2013 deal wherein London’s TDR Capital and Chicago’s Concentric Equity Group entered into for the purchase of MCS — AMS had already been brought in — and VPS Holdings was a shitshow, of epic proportions, from day one. And none of these big boys were amused that they got caught with their pants down. By 2017, they had washed their hands of the mess after embalming the pig with outrageous debt and American Securities picked up where they left off. Instead of simply acknowledging that her company was in financial trouble, she went on a hiring spree taking on millions of dollars in debt and benefits for a C Level that looked a hell of a lot like golden parachutes being packed for a D Day landing. The problems didn’t end there, though. Plagued by litigation — including a case pertaining to patents — MCS became the red headed step child.
Enter Midland Mortgage and MidFirst bank. MidFirst bank, sued Reaves and MCS several years back. According to federal court documents exclusively obtained by Foreclosurepedia,
On or about May 22, 2009, MidFirst and Defendant MCS entered into a Field Services Agreement (the “Agreement”) under which Defendant MCS would provide MidFirst real estate services relating to properties undergoing various stages of foreclosure by MidFirst.
MidFirst stated that, Defendant MCS engaged in conduct that resulted in damages (collectively the “Damages”) to MidFirst involving at least 83 properties. MidFirst went on to say that the damages represented $1,630,000. MCS finally settled the case. It didn’t end there, though. For years, Reaves decided that she was above the law. In fact, in multiple high profile employee misclassification cases filed in federal court, MCS was forced to pay settlements in the millions of dollars to contractors whom were employees. Granted, Reaves never admitted outright to the claims, her stroking of the checkbook told the tale.
Reaves has attempted to buy MCS’ way into success over the years. In 2016, Reaves purchased Epic Real Estate Solutions and Lenders Title Solutions. Reaves then went on to buyout Carrington Home Solutions’ preservation division in 2017. And most recently the purchase of M&M Mortgage simply displayed the fact that Reaves couldn’t build a successful network and sought to buy out her competition.
In 2006 and 2007, the company spent more than $30 million building and rolling out an internal technology system that essentially automates most of the company’s interactions with clients and vendors.
Curious what that $30 Million dollars bought? Glad you asked. Earlier this year, all of MCS’ databases and IT collapsed for nearly a week. So much for the praises heaped upon them by Mark Budd, a partner at TDR Capital, the London private equity firm. In fact, only Ed Delgado, president and CEO of the Dallas-based Five Star Institute, appears to have hedged his bets. Oh, and what ever caused that catastrophic IT collapse? Well, to this day, nothing has been transparent with respect to it. It is par for the course at MCS, though.
The #EpicFail for Reaves and MCS came home to roost in June of this year when Reaves and MCS defaulted on nearly half a billion dollars of debt. Reaves had, once again, had proven that her purchasing of accolades from small time publications were nothing other than spin, spun out of thin air. While the small time swindling of Labor — MCS is now charging back people for inspections as far back as 2015 — was easy to keep track of, the façade of incompetence was shining through like a beacon of light for legitimate investors such as American Securities whom owned MCS not a handful of weeks ago. Here is how bad Moody’s put it,
SP MCS Acquisitions Corp’s Ca CFR reflects elevated leverage, weak liquidity and profitability, and the lack of free cash flow generation … [W]e view its capital structure as untenable.
Caroline Reaves had proven that in less than 90 days under the COVID crisis, her inability to keep MCS financially solvent has been instrumental in reducing a once prominent company to its current state. I mean how do you completely destroy the credit and reputation of a company in 90 days or less? Gotta be a record there somehow?! And remember, MCS is the only firm — at least that we have access to — that went belly up and told their creditors to bugger off in our Industry at this level. It is almost like the sad tale of prostitution in how MCS keeps making the rounds, putting the lipstick on, only to be bent over the eternal benchmark of debt. There are no heroes coming to the rescue of the street urchin MCS and Reaves have become and there is no prince whom will kiss the lips of the toad. In fact, the haggard and withered debt ridden corpse of MCS will lie in the streets with festering pustules much like a scene from when the Plague swept Europe — only awaiting self immolation.
For those of you out there still working for MCS we wish you the best. Rock on, as they say, and good luck going down with the captain. It is like how the virtual conference for NAMFS this year required everyone to pick an Avatar and they all look like how Anonymous invaded the Sims like game Habbo Hotel and announced, Pool’s Closed.
As most of you know, I don’t dabble a whole lot in policing the Industry anymore. Currently, I am working with large firms and financial institutions on new construction, rehab and restoration, and direct-to-government contracting. If you would rather be paid, paid substantially higher, and paid on time feel free to give me a shout out. For the rest of you, I do — honestly — wish you the best! And if my opinions have motivated you to think a little harder about whom you do business with, why not consider buying me a cup of coffee or become part of the Family by selecting a Product below!
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