I have a foreclosure client who has a loan that was bought by LSF9 Master Participation Trust. This is a weird case in a lot of ways, but when I Looked for information on LSF9 Master Participation Trust, I found from a Google search that it seems that a lot of problem loans from different servicers got swallowed up in this trust (which is serviced by Caliber Home Loans, Inc. That’s not necessarily bad, as long as whoever buys an interest in the trust knows the true status of the loans and as long as the new servicer competently handles the loans.
Here’s a blurb that I found on the web:
Lone Star Funds Lone Star Funds is a private equity firm that “seeks investment opportunities in developed markets that have suffered an economic and/or banking crisis.”24 The firm submitted winning bids for every pool offered in the June 2014 DASP auction, with a weighted average bid of 77.6 percent of the properties’ value.25 The 2014 fund that invested in the DASP loans, Lone Star Fund IX, has an investment period of 40 months.26 In July, Lone Star bought $500 million in nonperforming residential mortgages from JPMorgan Chase & Co.27 Lone Star Funds owns Caliber Home Loans, a full-service mortgage company and special servicer28 led by Joe Anderson, former Senior Managing Director at Countrywide Financial Corporation, the poster-child of the predatory, discriminatory29 subprime mortgage boom and overheated, destructive mortgage-backed securities markets that fueled the current housing crisis.30 Standard and Poor’s Ratings Services (S&P) has ranked Caliber Homes as Above Average as a US residential special and subprime mortgage loan servicer.31
source: http://homesforall.org/wp-content/uploads/2014/09/HUD.DASP_.RTC_.v15.pdf
So LSF9 Master Participation Trust is a pool of distressed mortgages put together by Lone Star funds. The mover and shaker behind Lone Star Funds is a billionaire named John Grayken. LSF9 ws the high bidder in an auction of $3.8 billion in loans that the FHA had insured. According to Bloomberg News:
June 20 (Bloomberg) — Lone Star Funds, the private-equity firm founded by billionaire John Grayken, submitted winning bids for $3.9 billion of soured home loans sold this month by the Department of Housing and Urban Development.
It was the first time that a single bidder won each of the pools of loans offered in such a sale of debt previously insured by the Federal Housing Administration, HUD said today in an e-mailed statement. Dallas-based Lone Star’s bids on the 16 pools auctioned on June 11 averaged 77.6 percent of the estimated current prices of the homes and 65.8 percent of the unpaid loan balances, HUD said.
Source: http://www.bloomberg.com/news/articles/2014-06-20/lone-star-wins-3-8-billion-of-bad-fha-loans-at-auction
What this means is that if LSF9 bought your mortgage, they likely only paid $65.8% of the loan balance which was 77.6% of the value of the house. (You see, these loans were upside down, but they aren’t based on what Loan Star Funds paid. In other words, Loan Star Funds and its subsidiary has room to cut you a deal on a modification and still make money. Will they? That’s going to be up to them. (This also means that the FHA may has paid the original owner a big chunk of money that came out of your mortgage insurance. Assuming the new owner doesn’t discount the principal of the loan, the benefits of this write-down go to the rich investors behind the Lone Star Funds. Not only that but if you work out a deal to get the loan caught up at the previous rate and terms, Lone Star gets a windfall. Let’s say you had a loan at 4% APR, if Lone Star only paid 65.8% of the principal, that’s an effective rate of over 6%. If you had an 8% subprime loan, that’s an internal rate of return of over 12% for Lone Star. Elizabeth Warren is right, the game is rigged.)
A large portion of the loans in LSF9 appear to be from Chase, bought in a $500 million bulk deal.
My client’s loan was a Citimortgage loan. Based upon the information that I’ve gathered, it appears Citimortgage sold its interest to LSF9 Master Participation Trust while the loan was subject to a foreclosure lawsuit originated by Citimortgage. Instead of discontinuing the lawsuit, or substitutiong LSF9 Master Trust as a plaintiff, Citimortgage has continued the lawsuit under the representation that it is the owner of the loan without notifying the court that the ownership has changed.
If you are in the midst of a foreclosure proceeding and your servicer gets changed to Caliber Home Loans, it may mean that your loan has been sold to a Lone Star affiliated trust. If that happens your foreclosure case should not go through under the previously filed paperwork. At the very least the change in ownership should be disclosed, and it may trigger another opportunity to modify your loan. It also might be an unfair debt collection practice by the firm that is filing the foreclosure suit. If you have this happen to you, contact me or find a local NACA consumer attorney near you at www.NACA.net.
UPDATE 3/14/2017
Since I wrote this blog post a year and a half ago, it has been by far my most popular post, with over 14,000 hits. I have also gotten emails from lots of frustrated people trying to deal with LSF-9. Most of these have either been people who are either trying to buy LSF9 properties or who are facing foreclosure on an LSF-9 mortgage. I have this to say about each category:
IF YOU ARE FACING FORECLOSURE ON A MORTGAGE OWNED BY LSF9 Master Participation Trust, or maybe LSF8 or LSF10 or whatever, get advice from an experienced consumer lawyer IN YOUR AREA. To find one in your area use the
National Association of Consumer Advocates’ Find an Attorney page. I can’t represent you if you are not a resident of Indiana.
IF YOU ARE TRYING TO BUY A PROPERTY OWNED BY LSF-9 AND CAN’T FIND ANYBODY TO CONTACT, good luck, I can’t help you. You can write to Caliber. You can write to the lawyer handling the foreclosure case. You can write to Lone Star Funds, the parent company, at the address below which I took from
their website.