Tag: mortgage servicing

  • Servicing Matters

    Posted by

    Katie Porter

    I am so pleased to offer the following post by Carolina Reid, a premier housing researcher at UC Berkeley, about her excellent study of how mortgage servicers matter in creating home-saving opportunities. Welcome Carolina to Credit Slips.

    By now we’re all familiar with a plethora of Wall Street financial acronyms, from ABSs to CDOs and CDSs. But what about MSRs (mortgage servicing rights)?  Until a year ago, I had never heard of MSRs, so I was surprised to find out that the rights to collect my mortgage payment are traded on Wall Street, much in the same way mortgage backed securities are traded. And, as a borrower, I have very little control over who purchases the servicing rights to my mortgage, despite the fact that it is usually the servicer who decides whether to offer a loan modification or start the foreclosure process if I become delinquent. Borrowers can’t “shop around” for the best servicer – you get who you get (but maybe you should get upset).

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  • What do bankruptcy mortgage servicing and ebola have in common?

    Posted by

    Katie Porter

    A long long time ago in this same galaxy, I wrote what may be Credit Slips' most popular post: What do bankruptcy mortgage servicing and phone sex in common? Today, I bring you a new comparison: bankruptcy mortgage servicing and ebola. At the outset, let me be very clear that ebola is a tragic health care crisis. I do not mean to minimize those deaths and illnesses with a comparison to mortgage servicing–although to be sure, poor mortgage servicing has tragic financial consequences.

    Here is the basic analogy. Ebola has a high kill rate. Similarly, screwed up mortgage servicing can be the death knell for homeownership. Ebola is currently epidemic in West Africa, just as the foreclosure crisis made mortgage servicing a top-line policy problem. And despite the publicity, both ebola and foreclosure–as epidemiological matters–are rare. This is one of the reasons that investment and research on both problems has lagged behind more common occurrences such as, respectively, malaria and mobile banking. We have known about the risks of ebola for years, yet the global community is still struggling to find fixes. Again, in parallel, it has been twelve years since Hank Hildebrand wrote "The Sad State of Mortgage Service Providers," and six years after Tara Twomey's and my research on mortgage servicing errors in bankruptcy hit the front pages of newspapers. While improved, bankruptcy mortgage servicing is still a threat to a healthy bankruptcy system.

    Screen Shot 2014-09-24 at 10.27.33 AMMy favorite recent case in point:  In re Williams, in which a couple filed a second bankruptcy solely to save their home–the exact reason for their first bankruptcy. (At least you can only get ebola once!) The Williams alleged that Ocwen had not properly serviced their mortgage during their first bankruptcy. Ocwen pursued a foreclosure after the debtors had completed their chapter 13 plan and refused to accept debtors' payments. Its proof of claim alleged 28 missed payments and an arrearage of $43,388.82.  U.S. Bankruptcy Judge Brendan Shannon (Bankr. Del.) ultimately found the debtors owed only $16,164.24 (12 payments) and ordered Ocwen to pay the costs and fees of the debtors' second bankruptcy filing and litigation with Ocwen. In describing the situation, Judge Shannon, said that the bankruptcy servicing created an "ensuing mess [that] is "dispiritingly predictable." The system was bogged down with a second case, the debtors threatened and stressed by a second foreclosure, and Ocwen spent its resources on a second round of litigation (instead of helping homeowners get loan modifications.)

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  • The Mortgage Settlement’s Big Day

    Posted by

    Katie Porter

    Today, October 2, is the last day for the nation's five largest mortgage companies to implement the servicing reforms in the National Mortgage Settlement. As California Monitor, I issued my first report to highlight one of the most important changes–restricting dual tracking. Dual tracking is the name given to the race between foreclosure and loan modifications. Because banks control both processes, beyond some specified waiting periods by state law, many families lose the race to get a decision on whether they can save their home with a loan modification. Restrictions on dual tracking are key to avoiding preventable foreclosures and creating fundamental fairness in the foreclosure process.

    The report gives some data on dual tracking to bring visibility to this
    issue. After the jump, I report some bad news and good news on how the
    Settlement implementation reforms are going. 

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  • Mortgage Servicing Paper

    Posted by

    Adam Levitin

    Credit Slips Guest Blogger Tara Twomey and I have a new paper out on mortgage servicing in the Yale Journal on Regulation.  It's long, but it tries to present a comprehensive overview of the economics and regulation of the servicing industry, as well as an argument that servicing suffers from a serious principal-agent problem.  We hope it will be a useful resource for those dealing with servicing and working on foreclosure-related issues.