The New York Post recently published an article about a troubling phenomenon that I have not seen anywhere else in the mainstream press, and that is the rise of nonbank servicers (NBS) handling home mortgages. I ran into this first a number of years ago with Ocwen Home Servicing. Ocwen got slapped pretty hard in 2012-2013 by the Consumer Financial Protection Bureau & the California Attorney General, agreeing to pay fines and penalties of several billion dollars.
The New York Post article points out that nonbank servicers have gone from 7% of the market in 2012 to 25% in 2015. I would guess that at this point the NBS share of mortgages that are in foreclosure or preforeclosure is probably around 50% and rising. This is important because the NBSs are not subject to the terms of the national mortgage settlement. This is important because as a general rule a company holding a mortgage has no duty to modify to prevent foreclosure. The national mortgage settlement created a framework for evaluating applications for mortgage relief, standards for granting relief, and prohibited moving forward with foreclosure while a mortgage relief application was pending – a practice called “dual-tracking”. Other than the mortgage settlement, the only real mandates for modification come from the rules of the mortgage insurers, and those are a joke. There are state laws that attempt to impose penalties for unfair practices in mortgage servicing, but there are more holes than fabric in the patchwork quilt of state laws.
The big daddy these days among the nonbank servicers is Caliber Home Loans. Caliber is starting to draw some scrutiny for the way it is servicing loans, and it has been the subject of numerous complaints by consumers whose applications for mortgage relief were either mishandled, ignored or both. Caliber is the servicing arm of Loan Star Funds, a private equity firm that if you believe the New York Post article is worth $60 billion. Lone Star Funds got this big because they buy troubled mortgages at a discount, usually from insurers who already covered the initiating bank’s losses, entities like FHA, Freddie Mac and Fannie Mae. If you have a loan that was bought by LSF9 Master Participation Trust. That’s a Lone Star fund. Sometimes Lone Star doesn’t buy the loan from the guarantor, it buys it from the actual lender. I have received complaints that the homeowner’s mortgage was sold by the original mortgage company to LSF9 where the foreclosure took place and then back to the original mortgage company. In my opinion, that is a whitewashing scam that is designed to get around the rules of the National Mortgage Settlement. If you had a Wells Fargo loan that was sold to LSF9 Master Participation Trust or had its servicing transferred to Caliber Home Loans, you should pay attention to what happens to it after the foreclosure sale. You may have a very narrow window to make your complaints count and perhaps bring a legal claim between the time the home is sold to the lender after the foreclosure and the time you are forced to vacate. If this has happened to you, you need to file a complaint with the CFPB and your state attorney general. Find yourself a NACA consumer advocate lawyer at www.consumeradvocates.org.
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