Yesterday I wrote about mortgage loan servicer Ocwen stopping all short sale negotiations.
I proposed that Ocwen might be taking a self centered approach by forcing the homeowner into default in order to maximize the fees it can collect. I lost sleep last night thinking about the far reaching implications involved.
BUSINESS IS WAR!
Or so some say. This theory most aptly applies to your competitors. Beating your competition is business 101. Read Ocwen's Code of Ethics, specifically page 13 if you are in doubt. I don't agree, but I can understand that.
What about your clients? Do you treat them like you do your competitors? Of course not. Not to debate the concept in depth here but that's how Ocwen is treating it's clients.
Who are Ocwen's clients? They have two. The homeowners that Ocwen services and the Note Holders that Ocwen collects mortgage payments for. Ocwen has a page for it's Clients: LINK
SCREWING THE HOMEOWNER
You are a homeowner. You didn't go to Ocwen to get your loan but the payment servicing was sold to them. You find yourself in trouble and can't make your payments.
You have options. We explain 7 of these other options available to everyone of our short sale clients. Typically one of them would be to sell the property for what you can, which might be less than what you owe. This is a short sale. Unfortunately for you, Ocwen has closed that door!
While a short sale wasn't your only option, it might have been the best. Chances are ,of the remaining 7 options, the last one might be the only one that works. That's letting the home go to foreclosure. That's what Ocwen is forcing you into.
SCREWING THE NOTE HOLDER
The Note Holder has employed the servicing to Ocwen. It's part of what a servicer does. They collect payments. I would think Ocwen would have a fiduciary responsibility to best preserve the value of the portfolio the Note Holder has entrusted them with.
By refusing to entertain any short sale offers, they are forcing more homeowners into foreclosure. That process is costly. To recoup any money the Note Holder will have to sell the property as an REO (bank owned). Everyone knows that the net loss resulting from an REO is much higher. That's why you hear that banks don't want your property. That's also why they'll happily negotiate a short sale. It's better to take a smaller loss in a short sale now than to take a larger loss later.
OCWEN HAS MOTIVE
I suggested yesterday that Ocwen is taking this course of action because their plans to sell the company fell through. I proposed that they can collect more in fee income by forcing the home into foreclosure. The greater loss by the resulting REO will not be Ocwen's. It all transfers to the Note Holder.
Last night I realized there was more. When a loan starts to get behind, Ocwen's servicing people will call the homeowner to remind them that they missed their payment. When it gets severely behind, the loan file is sold to a collection company. Did you know that Ocwen also runs a collection company? That's right. The Ocwen Recovery Group
From their front page...
To make your loans worth more, it is critical to collect as much of your assets as possible - to recover more! Since 1988, Ocwen has focused on making loans worth more. We started by working on improving the liquidation rate of non-performing assets. We studied high performing collectors and utilized psychologists to determine best practices and then embedded this knowledge into our technology, recruiting and training programs. In 2007, Nationwide Credit, Inc. joined Ocwen, establishing Ocwen as the 5th largest collection agency in the nation. By implementing these best practices into our wholly owned global delivery centers, Ocwen and Nationwide Credit, Inc. have created the only proven "Global Collections Platform".
Is Ocwen's new plan to drive more collection contracts to their other company?
It certainly is a growth industry right now.
Just thinking...
Mike - Interesting thoughts. Hmmmmm, I don't like this at all. That's my take. The whole philosophy of 'Business is War' is one that I understand, but I really think that causes situations like that we are experiencing now is Greed. How much is too much? Greed trickles down from the top of the mountain and slowly drips down to the valleys and chaos ensures. Then again, I believe every problem contains its own solution....
Mike, thanks for sharing this information with us. I need to do some more research on this.
Ocwen's got some bad karma going with their decision not to process short sales.
Mike, you do such a great job of bringing us the knowledge aspect on these issues. I am trying to blog responsibly about how our short sale negotiations are going, but we are not very knowledgeable about the servicing conditions of some of these loans. If the loan is serviced by Ocwen, how will we know? We just contracted with a Short Sale internet service to help us with negotiations and that should provide us a better resource on track records on these lenders and who's doing what. It too big for tacit learning on an individual basis. We can't cover the logistics well enough to truly represent the client's best interest. It's costing us, but should be worth the increased capability we can offer our client. I am so grateful for the work you do.
I just found out from a friend who's been trying to sell a property that OCWEN will not do anything further on the short-sale. Unfortunately the existing approval expires on Wednesday and the buyer needs another week. The trustee sale is Monday. SORRY - NO EXTENSION!
Mike, I agree with you. I can see them in the BoD meeting deciding that if they can't sell the company then the answer is to fire loss mitigation and jack the fees for REO work and collections. Makes perfect sense to screw over both the consumer AND the investor in the interest of making more money........grrrr......
Mike, I appreciate the substance of your points, but I'm a little confused about one thing.
Could you explain to me REAL difference between the consequences of (a) short-sale and (b) simply walking away from the home. From an owner's perspective, I don't see much difference.
Since California's anti-deficiency statute would prohibit creditors from getting a deficiency judgment, what's the difference whether the bank agrees to take the property back at a discount or not? Is the credit "hit" significantly different than a foreclosure or deed in lieu?
David Martin
Great article Mike!
David, the credit and tax differences can be very significant for the borrower/home owner between short sale and foreclosure.
Unfortunately, OCWEN has chosen a very Machiavellian business practice. Outsource your financial file to India and refuse a short sale when it is in the best interests of their clients, the public good, and just the right thing to do. Rather, they are picking up a higher payment themselves or able to delay reporting of their losses by pushing foreclosure.
We have 3 properties in inventory that are with Ocwen. One just needed an extension on the short sale. No. Another was in escrow after a verbal recommendation for approval from a loss mitigator in Florida. No. And a third is just DOA after a resubmit with a new buyer. NO!
Ocwen says they will do a loan mod, but then comes up with unacceptable terms. Then, we just need the seller to be on the phone, and that get's nowhere. I even see complaints from their REO agents on late payment and poor communication.
To consider that Ocwen ships your most sensitive financial info to India where a good bribe is anything over $5 dollars is horrific. To our knowledge, they service Bear Stearns/J P Morgan and VA loans. So, you get a VA loan, are called up to serve in Afganistan/Iraq and your finances go to a very nice person in India. I'm hoping that a few Senators and Reps have loans through the VA with OCWEN. That is the only way I see things changing.
And yes Mike, I remember a story about how with some loan servicers, they get paid more to foreclose than to settle the loss earlier and for a smaller loss. So, I expect that OCWEN will eventually have to learn from the victims of their foreclosure mill. They already have class action suits against them. And, homeowners have a nasty habit of abusing the house venting their frustration against unreasonable lenders.
OCWEN in the end will reap what they sow.
I wish it were otherwise.
OCWEN is now doing short sales once again. After speaking with them on a 2nd lien, I asked if they were going to start negotiating shorts on 1st liens and was told that they started again 2 weeks ago. I called back on one that was left in limbo when they stopped them. They evaluated it with me on the phone, said it was a good offer and sent it to upper management for final approval. They expect to have written approval within 3-5 business days.
Thanks for the great information regarding Ocwen Mike. Do you know when they stopped doing short sales?
I totally agree with you ..they are just jerks. They have poor customer service too. I have a second on a rental property and they became the new servicer except no one told me since they sent the notice to the rental property instead of my po box. My understanding is that they can't report you late if your account is sold and you don't receive a notice. Guess what? Yup, they did it anyway and when I disputed it, they said "NO". Now I have to dispute it through the credit bureau.. OCWEN just SUCKS plain and simple. They don't like to follow the normal rules or play with the other children.
Great article Mike!! The real kicker is OCWEN's slogan is "Helping Homeowners is What We Do". Hmmm, Really?! I have a client that is having difficulty and they won't even offer him any options because he is only 2 months behind on his payments.
OCWEN's list of options:
1 - pay the mortgage
2 - foreclosure
Ken, I closed one with OCWEN a couple of weeks ago. The seller had the 1st and 2nd with OCWEN and owed a total of $515,000. Their appraisal value was $350,000. We closed for $291,000.
I've got one closing next week. The seller owes OCWEN about $325,000. Their appraisal value is $260,000. We're closing at $240,000.
Instead of telling everyone what CAN'T be done...why don't you get out there and try doing something instead?
Mike, have you heard of anymore updates with Ocwen and the acceptance of Short Sales? I have a new client that I'm getting and she kept getting the run around from Ocwen. I contacted them to try and get some general information on short sales and when "greeted" by the first person they simply told me that they're not doing short sales. I then requested the Loss Mitigation Dept and a Manager. The Manager told me that they are doing them and will review each account to determine if they'll do them. To me that sounds like how any short sale would be processed. The account status, sales offer and BPO would have to be analyzed to determine if they'd approve. Perhaps they want to run some away and that by telling the vast majority of the people that they don't do them, then they won't put up a fuss and they'll just go away - maybe?!
Christopher - Mike is correct. The reason you got it done is because all the money was owed to OCWEN. Otherwise you're screwed......I know this first hand. They will not entertain a short sale that involves another lender.
I've done a short sale with OCWEN when money is also owed another lender. Yes, they'll do it. And it was approved by OCWEN 1 week after I sent in the offer. They proactively called me with an approval. This just happened about 2 weeks ago. Never say never!
Then consider yourself lucky. I'd been working on one for nearly 4 months when Ocwen shut the door in mid-March.
I ran into the same thing. If OCWEN is the 1st lien holder, your seller has to exhaust all options...they have to speak with OCWEN directly about a workout, and if no agreement can be made, then they'll consider a short sale. If that's been done, and the buyer you had in March is still willing to buy, then it will get wrapped up pretty quickly. If they've moved on, then you just have to find a new buyer. Best of luck!