The Housing-Mortgage Thing: How Gross Is Too Gross?

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Because of my living situation here, I periodically check up on the housing industry to gauge when I might expect the mortgage stormtroopers to show up and throw me out.

When I first got here I did a bit of public-records research, and discovered that the mortgage on this property was being serviced by Litton Loan, LLC, then the mortgage-servicing arm of Goldman Sachs. [Cue Darth Vader theme.]

Then in late summer, Litton was acquired by another company, Ocwen Financial, for something like $235 million in cash, in exchange for $38.6 billion in unpaid principal. The sale was approved on condition that Litton forgive a few million dollars in loan principal to 143 New York state residents, and a promise not to engage in anymore robosigning asshattery.

So now Ocwen evidently holds the title to this property. So what is Ocwen? Oh — only possibly the most corrupt and disgusting corporate entity to ever exist.

Since the purchase of Litton from Goldman Sachs, Ocwen seems to be on a shopping spree. They’ve since purchased Saxon Mortgage from Morgan Stanley — according to HousingWire.com, “Ocwen receives $26.6 billion in mortgage servicing rights and $12.9 billion loans Saxon subserviced for its parent company Morgan Stanley. Ocwen paid $59.3 million for the rights to service these mortgages and agreed to pay an estimated $292.2 million in servicing advances due to Saxon.”

HousingWire.com also reports that, “The company also agreed to a deal with Aurora Bank to acquire roughly $1.9 billion in servicing rights on commercial mortgages. Ocwen said it expects the deal to close by the end of May.”

So what’s going on with this? Wouldn’t it be überstupid for a company like Ocwen to deliberately acquire the defaulting subprime messes of Goldman Sachs, Morgan Stanley, and Aurora Bank? Who would pay hundreds of millions of dollars for stinking piles of shit? You would think no one sane, but in bizarro Financialistan, you would be wrong.

The business model here is actually a tried-and-true one. Ocwen is a collections agency, just like the collections agencies that come after you for unpaid bills of various sorts. They’re just doing it with peoples’ life savings & retirement investments.

Look at the numbers: on the Saxon deal, Ocwen is paying out a total of $351.5 million for $39.5 billion in outstanding mortgage debt. Someone correct me if I’m wrong, but that’s about 11¢ on the dollar. If Ocwen can collect 11¢ on the dollar from all those people whose loans it’s now handling it’ll break even; if it collects 12¢ on the dollar, it’ll be making a huge profit on its purchase. And just like any other collections agency, it’ll make most of its money by slapping massive fees on those who actually do try to pay up. Do you think Ocwen will be able to collect at least 12¢ per dollar on its debt purchases? You bet it will — most ordinary people still consider paying their debts to be a matter of honesty and personal integrity.

On its face this business model isn’t especially evil, at least not in my opinion. In theory, this model means that a company can profit on bad debt while simultaneously giving debtors a break. It doesn’t start getting evil until you realize that Ocwen’s profits rely directly on fucking people over. Look at this horrifying headline, also linked above:

Ocwen profit drops as servicer makes deals for mortgage rights

Are you fucking kidding me?

So what exactly are these “mortgage rights” with which Ocwen must dispense in order to raise profits? Here are a few examples:

For me personally, in my situation here at the squat, I’m inclined to think that Ocwen isn’t going to give a rat’s ass about this property. It isn’t concerned with the physical assets underlying the bad loans, because it isn’t a real estate company by any stretch of the imagination. It is a collections agency. But unlike agencies that collect on things like credit card purchases, which can repossess your stereo and sell it at auction, it’ll cost Ocwen more to repossess & auction off a house than it would to simply write it off as a loss. I’m having a hard time seeing how Ocwen might profit from amassing an army of foreclosure stormtroopers, and even more how local law enforcement has any motivation at all to cooperate with throwing people out of their houses.

And then there’s the whole issue of tying up the courts, which is another nightmare altogether.

The more I read about this stuff, the more I wonder why anyone still cares about participating in the Fincialistan gulag. If I had any assets, I would convert everything to cash regardless of penalty fees, buy the bare minimum of what I’d need to get by, and blow off every debt for which I could not be arrested. Who needs the bullshit??

3 Responses

  1. Matt says:

    “…correct me if I’m wrong, but that’s about 11¢ on the dollar.”

    You’re wrong. Unless I’m having a bad maths day, that’s less than one cent on the dollar. :-(

  2. R Smith says:

    So, does this mean you get to stay for a while? They just seem to be trading paper and don’t care about the actual properties.

    • Paula says:

      I hope that’s what it means! This place is far from perfect but I’ve come to really consider it “home.”

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