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Saxon Settles HAMP Class Action for $4.5 Million… A win for homeowners, LOL

April 15, 2015

A class action law suit filed against Saxon Mortgage Services/Morgan Stanley alleged that the servicer improperly denied thousands of California homeowners loan modifications through the federal Home Affordable Modification Plan (HAMP), and as a result, some lost their homes to foreclosure unnecessarily. 

No kidding?  Well, now there’s a story I haven’t heard more than a few thousand times… this month. 

A servicer improperly denied homeowners when they applied for loan modifications?  Let me guess, did the servicer lose paperwork submitted by the homeowners multiple times?  Did they tell people they failed the NPV test without providing any reason as to why they failed the test?  Did they tell some homeowners they made too much money and then later that they didn’t make enough?  Or, did they just keep asking the homeowner for additional documents over and over again until the homeowners ran screaming from their homes?

Shocking, positively shocking… or it would be, if I were writing this back in 2009.  

It’s 2015, however, and reading a story about a servicer denying loan modifications and foreclosing when they shouldn’t have is like taking a walk down memory lane.  Is Treasury threatening to withhold payments under HAMP until the servicer gets their act together and learns how to deny loan modifications for more opaque reasons? 

Did the homeowners discover that their homes had been sold when they came home one day to find investors standing on their porches trying to peer into their windows?  Did they foreclose on any homes that they turned out not to own in the first place?  How many of the homeowners were foreclosed on while they were making trial payments?

Is anyone even paying attention to this sort of story anymore?  Does anyone even care?  I mean, it’s only happened a few million times over the last so many years, so what’s the big deal?  So, the bank takes back a house after telling the homeowner that he or she has been approved for a loan modification… that sort of thing barely made headlines in 2010… today, it’s like hearing the weatherman report the weather in San Diego.  It’s sunny and 75 today… yawn.

The class was defined as “California borrowers who entered into Homeowners Affordable Modification Program TPPs with Saxon through Oct. 1, 2009, and made at least three trial period payments but did not receive HAMP loan modifications.”

Nice, so these folks were actually granted trial modifications, celebrated, then made their required three payments as agreed… and then got the proverbial rug pulled out from under them with no recourse… sorry about that, but it’s only a home… it’s not like we’re talking about something life-changing or that cost a lot.

According to a story on Law 360.com“the settlement would pay the 1,365 class members who lost their homes after Saxon denied them permanent loan modifications roughly 30 percent of the trial payments they had made.”

However, the story then reported that “Saxon would pay approximately 2,705 class members an average of $1,663 each, before accounting for attorneys’ fees and other costs,” and that the settlement represented about 15 percent of the roughly $30 million in total trial payments made by the class. 

And then it said, “All plaintiffs would receive a base award of about $184, with tiered payments going to those who lost their homes in foreclosures or short sales without being offered loan modifications.”

Now, I would normally stop and try to figure out what the heck was being said in the three paragraphs above, but honestly, I don’t actually care what the details were, or for that matter whether someone receives $1,663 or $184 for having their home taken away from them while making the payments as requested by the servicer.  If it were me, and I got a check for $184 after losing my home while making payments, I think I’d be tempted to check the Internet to see how much small pox virus or Anthrax I could purchase with my winnings. 

What’s truly incredible though is that no one will do anything to seek revenge… in fact, no one will even complain out loud.

Think about this story for a moment… a thousand homeowners, give or take, were going through the loan modification process, when they were told “Congratulations, you’ve been approved for a trial modification.”  And then they all started making their payments and just when they were starting to sleep a little better than they had in many months, Saxon sold their homes anyway.

And some are getting $184… or $1,663… or whatever. 

Well, okay then… that should take care of it, I would think.  I mean, I bought our home in 1990 for $340,000… so it’s been about 25 years, during which time we’ve probably put a couple hundred grand into it for one reason or another.  So, if someone takes it back when they shouldn’t have, I really don’t think I need more than dinner for four at an Outback Steak House to call it even… well, minus legal fees and other costs, of course.

Tumultuous Year Results in Half-Billion Dollar Loss for Ocwen

April 15, 2015

After a rough year highlighted by legal issues and repeated shedding of servicing rights, Atlanta-basedOcwen Financial Corporation today reported a half-billion dollar loss in 2014. The company lost $4.18 per share for a total write-down of $546 million, one year after reporting a $310 million profit.

Announcement of the loss hardly comes as a surprise. The firm announced in early February that it was anticipating a loss in its then-coming earnings report. That announcement was followed by a spate of sales of servicing rights to several firms. In the past three months, Ocwen has sold its $9.8 billion mortgage servicing rights portfolio, and later another $25 billion in MSR to Nationstar Mortgage, a subsidiary of Nationstar Mortgage Holdings$45 billion worth of Agency home loans to JPMorgan Chase; and $9.6 billion worth of servicing rights to Green Tree.

Amid this financial crash diet, Ocwen was the focus of an investigation by the Office of Mortgage Settlement Oversight, which alleged that Ocwen did not comply with terms of the National Mortgage Settlement of 2012 and is seeking almost $2 billion in damages. Ongoing regulatory scrutiny and nagging allegations of servicing violations triggered the removal of Ocwen from Morningstar Credit Ratings' Alert in February.

During 2014, Ocwen incurred $728 million in preliminary normalized expenses, which include $420 million of "goodwill impairment" and $186 million in legal and settlement expenses.

Despite the recent turmoil, Ocwen's president and CEO, Ron Faris, said he expects his company to have a profitable 2015. "I am encouraged by the progress Ocwen has made so far," Faris said. "We currently expect to … meet all of our ongoing financial and servicing obligations."

Faris said the sales this year have generated substantial cash flow and that extending the company's $1.8 billion advance receivable facility, which begins amortizing in October, will help put the company back in the black next year and beyond. Ocwen also announced that it would "continue meeting our regulatory requirements, execute on our plan to reduce our GSE servicing exposure, continue to comply with our debt covenants, and maintain our current servicer ratings," according to Tuesday's statement.

"We have already significantly advanced our Agency MSR sale strategy at attractive prices, entered into an amendment with Home Loan Servicing Solutions that provides more stability for the company, and reduced our 2015 refinancing risk," Faris, said. "We are optimistic that the investments we have made and are making in these areas reduce significantly the substantial risks associated with non-compliance with laws and regulations and improves our service to homeowners, which will ultimately result in better overall returns to our shareholders."

Report: Short Sales, REO Experience Largest Increase in Three Years

April 9, 2015

Author: Brian Honea April 6, 2015

The percentage of short sales and REO sales jumped by 2.2 percentage points in the first quarter of 2015, the largest increase since the first quarter of 2012, according to data released by Clear Capital on Monday.

Three years ago, the last time distressed saturation rate experienced an increase that large, nationwide distressed saturation hit a peak of 38 percent. For Q1 2015, the distressed saturation was reported at 19.8 percent nationwide with the largest share in the South at 23.2 percent. The smallest share was in the West at 13.7 percent.

All four regions – the South, the Northeast, the West, and the Midwest – saw an increase in distressed saturation rate in Q1 from the fourth quarter of 2014, according to Clear Capital. The largest increase was in the Midwest, at 3.8 percentage points. The rise in distressed saturation comes on the heels of home price moderation that began in 2013 and continued throughout 2014.

“The rise we’re seeing in distressed saturation across the board is another sign that the legacy issues from the housing collapse are still being processed today, and suggests that homeowners are still trying to find a foothold in a slowly improving economy,” said Alex Villacorta, Ph.D., VP of Research and Analytics at Clear Capital. “The judicial process has clearly delayed the processing of many distressed homes, and as a result the steady, and in some areas, high proportion of distressed activity is showing signs of dampening overall growth rates. Historically, we have observed distressed saturation increase during the winter months, but given the other headwinds already blowing against the broader market, this will warrant close monitoring once the traditional home buying season returns.”

Florida, which has been the state hit hardest by the foreclosure crisis, had a distressed saturation rate of 30.6 percent in Q1, more than 7 percent higher than any other state in the Southern region. Orlando had the highest distressed saturation rate in Q1 out of the top 50 metro areas with 37 percent. Florida is a judicial foreclosure state, where the process must pass through the courts to be complete.

“The uptick in distressed saturation and drastically moderating prices in the past year could mean that there is a backlog of shadow inventory hitting these judicial markets,” the report said. “If the supply continues to increase faster than demand, this area could see prices continue to fall, creating more uncertainty in overall home prices yet also potentially offering a housing bonanza with deals for investors and traditional home buyers alike.”

Investors who sought low prices on distressed inventory with a high return on investment took advantage of opportunities in Q1. With an absence of traditional homebuyers, investors reduced high distressed saturation rates by creating more demand, thus driving up home prices in key recovering metros, according to Clear Capital.

The Clear Capital report suggests that that the uptick in foreclosure rates in Q1 indicates that there is an abundance of distressed inventory still available, but the slow pace of the judicial foreclosure process is likely to obstruct the flow of distressed inventory.

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