June 7, 2016


By Timothy Stull (http://www.fresh-start.co)

As a 28 year veteran of the financial and credit industries, I remember the days when banks originated a mortgage and collected interest to make their fortunes.  Those days are gone….long gone…their exodus has created a giant monster, known as the “non-bank mortgage servicer.”  Don’t get me wrong, non-bank servicers have been around for a long time.  They are glorified collection agencies that typically take on distressed debt for collection activity.  In short, they normally handle collection on mortgage debt that the banks no longer want to deal with.  This recent Great Recession and Financial Crisis has caused an explosion of non-bank servicers to pop up….both large and small.  Many of these non-bank mortgage servicers /debt collectors are driven by profit and greed, instead of providing proper mortgage loan servicing.  In order to understand what motivates the greed, you need to understand the differences in business models that run non-bank servicing.  First, if the debt is controlled by an investor, the entity is limited to simply collecting funds in exchange for a fee.  That leads many non-bank servicers to distort escrow accounts, pad payment amounts and pad balances to drive more money in.  By twisting the accounting on your loan, they can drive in huge profit margins.  Ocwen, Nation Star and Selene Finance are notorious for padding the overall balance of the debt, so they can enhance the value of the debt in the free market.  For example, if the base rate of a debt is 100 and the escrow is distressed, it may command a value of 115 in the open market.  If the loan servicer can collect payments and prove performance on prior distressed debt, the value bumps even higher to 135.  Since these debts are traded in large pools of ten million dollars plus, the overall greed is driven by extreme profit margins.  To make matters even more complex, these debt are sometimes sold on a split percentage basis.  This means a chain of investors can run for an extended time line, which leads all investors pointing the finger at each other for liability.  Since investor A owns 16% (2006), investor B owns 32% (2010), investor C owns 17% (2012) and investor D owns 35% (2015), division of labor becomes a very complex issue.  The math even gets more complex as the debts are carved up on a percentage basis on each level.  Any way you look at this complex math quagmire, it is a big web of lies.

The abuses that run amuck within this sector have hit incredible levels recently.  Escrow distortion seems to be the most common complaint from home owners, since it leads to an increased payment.  For the non-bank mortgage servicer, distorting the escrow equals a big pot of gold.  If the servicer is able to collect even an average of $50 on 500,000 accounts, that equals $25,000,000.  The accounting always seems to be fixes that the $50 just vanishes….it never compounds over time.  Balance padding is another major problem for many of our clients.  Excessive legal fees and arbitrary additions to the balance are the most common problems.  Breaking apart the accounting ledgers and conducting a complex mathematical audit is the only way to beat these non-bank servicers at their own game.

Our firm has battled these non-bank servicers for nearly 15 years.  We know how they operate from the inside out, so nothing rattles us.  We know what makes them tick and how to beat them day in and day out!! Feel free to call our office with any questions at 877.297.7011 or email info@thefreshstartfirm.com.

Be Sociable, Share!

Leave a Reply