Lenderama Mortgage Blog

Ocwen picks up it's marbles

We’re not going to play anymore.

No, they are not the newest addition to the Implode-O-Meter. They are still in business, happily servicing the loans that are still paying them.

Curiously, yesterday the deal to sell Ocwen collapsed. So what do you do when the negotiations for your purchase fall through?

According to my contact, (a Loss Mitigator) at noon today, Ocwen decided to stop negotiating all short sales. Period.

None at all?”, sheepishly I asked.

Not a single one. Unless it was already approved“, says he.

Here I am working on negotiating a short sale. I’m pretty sure the borrower did a Stated Income Loan. I’m pretty sure he lied about his income. (I have his taxes in hand) I’m also pretty sure he used someone else for the Social Security Number. (No, I didn’t do his loan!). And finally I’m pretty sure he has a sub sub prime loan (two subs intended). There’s no chance for a loan modification in the books for this borrower.

I asked my LM guy, “So this is going to go to foreclosure, become an REO, and Ocwen will take a bigger loss down the road?”

“Yup, That sure appears to be what they are planning!”

Ocwen, who’s shares tanked yesterday, is primarily a loan servicer.

As of December 31, 2006, OCN serviced 473,665 loans under 487 servicing agreements for over 40 clients. These clients include Wall Street firms with mortgage securitization platforms, such as Deutsche Bank, Lehman Brothers, Credit Suisse and Morgan Stanley, mortgage originators, such as Delta Funding, and governmental agencies, such as the United States Department of Veterans Affairs. Revenue from this segment comprised 80%, of its consolidated revenue, during the year ended December 31, 2006. (Reuters)

After I got off the phone I started thinking. This is all speculation on my part.

If Ocwen was the holder of the Note, they would have a financial interest in minimizing the overall losses. Accepting a short sale would minimize those potential losses. But Ocwen isn’t the holder of the Note. Some Investor is.

In a Short Sale there is going to be a loss. Ocwen will negotiate what they can, and then pass the remaining balance to the Investor. That loss will be absorbed by the investor. The key is not in the loss, but in the fee generation.  In a short sale, Ocwen can charge only a small amount of fees.

On a foreclosure, Ocwen can and will charge up the fees. The Admin Fee, Processing Fee, reloading the Stapler Fee, talking to Mueller Fee. Pretty much any fee they can come up with. These are fees they just couldn’t get with a short sale.

After the Auction, when it goes on the market as an REO… Assuming it sells for the same amount it might have had it been a short sale, Ocwen stands to make much more in fees than had they negotiated a short sale.

Oh, and who pays for the loss mitigator salary anyway? Ocwen!

I can just see the BOD saying last night, “If we can’t sell this pig of a company, we’ll fire the Loss Mitigation Department, stop doing negotiations and rack up the fees!

Of course, the REO probably won’t sell for the amount they could have negotiated the short sale for. But who cares? Not Ocwen, They’ll get their trumped up fees no matter what it sells for. It’s the investor that’s taking the hit – not them.

Ocwen is still in business. Are they not worried that by shooting their investors in the foot that they won’t be able to attract new investors to service for?

Or since the buyout fell through, is the corporate plan to make as much as they can before closing shop?

2006 Net Income: 206 Million
2007 Net Income: 38 Million
4th Quarter Net LOSS: almost 7 Million!

Just thinking…

March 13, 2008 by · 29 Comments

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29 Responses to “Ocwen picks up it's marbles”
  1. Trace says:

    Love the revenue numbers. Classic.

  2. Paul says:

    Wow, Ocwen’s no longer doing shorts??

    We’ve gotten some BIG discounts from them.

    Hopefully your LM is misinformed.

  3. Mike Mueller says:

    Paul – Nope. Not misinformed. I’ve since heard it from two other people.
    Just wait till I talk to the real estate agent and homeowner.
    The good news is that you don’t have to worry about showing the property anymore.
    What’s the bad news?
    Well…

  4. Brian LeBars says:

    Well thought out Mike

  5. Wine Dog says:

    That’s a prime slice of beef Mike. Your theorem unfortunately makes sense. It has that added lack of morality component, so I’m sure your scenario is accurate to the one thought out by Ocwen’s management. Apparently all the top business schools have stopped teaching ethics. Ocwen is just ahead of the curve.

  6. Jay Thompson says:

    Ocwen was the most painful lender to deal with in a short sale than any other I’ve experienced.

    That said, they did come WAY down. But it was excruciating…

  7. Tamerin says:

    Interesting article. If Ocwen refuses to do short sales and their lenders catch wind of this, the lender has many other servicing companies who do fulfill the purpose of a servicing company….to minimize losses for their clients…the bank.

    Like you said, if they refuse to do short sales then they aren\’t looking out for their clients best interest. IF any of their clients give a dang, they would logically move their portfolios to a more suitable & professional servicing company.

  8. P. Jackson says:

    Mike – interesting theory, and I’m not saying you’re wrong. But there is an issue of servicer advances to deal with here.

    A stand-alone servicer like Ocwen has been bleeding money for the last few quarters or so because of the drain placed upon it by massive advances tied to a historic upswing in DQs.

    Pushing files into foreclosure may rack up some fees, yes, but it also screws up cash flow. There has been plenty of speculation from the people that read Housing Wire that Ocwen is going to face some serious struggles trying to manage their float going forward.

    Just my two cents — IMHO, it’s not always about the fees when you look at operating a servicing shop.

  9. Mike Mueller says:

    Tamerin – I’ll throw in another wrinkle.

    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?

  10. Dean says:

    I’d just heard this myself from a friend of mine in Newport Beach who had closed SS’s with Ocwen. One thing we’re seeing on the note sale side is an uptick in volume as the default volume rises. We’re certainly not seeing any drop in lead volume on what we can buy from the lenders. It’s an interesting market – different than closing short sales (no deed involved, no borrower negotiations and no short sale package, just a purchase and sale agreement) – and easier in many ways. Maybe Ocwen’s realized their overhead costs per closed Short Sale deal are just too high, so they’re pushing other, more efficient, loss mit strategies, like whole loan sales.

    Dean

  11. Maria says:

    I work with banks to do Short Sales and it is a nasty and long process. It really amazing that people complain about Investors flipping properties when “Banks Flip paper” the same concept. Most banks are Insured for the whole amount of the loan with FDIC when loan is in default. Some banks are Insured by HUD and the same applies to them. When banks begin the Foreclosure process its just that a process. Banks do try to show that there care about the communities by “offering them program”. That most of all the Customer Service have No clue what’s going. And now with the info given that Ocwen also is a “Collect Agency” Talk about conflict of interest!!!
    Well lets see collect the Insurance with FDIC, Collect from Collection Agency and it’s also a ride off. Well we can see who are the professional Crooks…..

  12. one thing to factor…
    Ocwen also buys and works out distressed paper
    maybe they drank their own kool-aide and bought into the crash of 2006 and 2007.
    They now are finding in 2008, their is no money, its gone, they lost it all.

    Or do they know something we dont

    FYI, these gys are a nightmare to deal with

  13. Gina Gardner says:

    Reminds me of investors that bought federal student loans at discount and then arbitrarly revoked the deferrals in an attempt to force the students into default asap — so they could collect fast on the guaranty; increased their ROI no end….

    The whole financing industry needs an overhaul, and I’m not talking about piling on more disclosures or making it impossible to earn a fair living. My theory is that the morally correct way to do business is also the most economically viable in the long run. For example, a going concern would want a good reputation, would want its industry viewed favorably, would not want to be saddled with onerous restrictions, would not want to run afoul of the law, and would want its shareholder’s interests well looked after.

    Contrast that with a boiler room outfit that isn’t worried about repeat business or being caught out because it will change names as soon as its customers’ checks clear. And throw in Anthony Mozilo too.

    The goal of legislation should be to align business’ interest with society’s, not provide opportunities for exploitation by bad actors.

  14. Mike Mueller says:

    I plan on checking in with them on a weekly basis anyway just to make sure that if (and when) they reverse their course we’ll be able to help some people we would have turned away.

    Good points from all of you!

  15. Paul says:

    Mike, another excellent thread my friend!

  16. Jake Carter says:

    I am currently dealing with Ocwen on a SS. They service our 2nd, WaMu has the 1st. I called them after finding this post today and talked with a manager I have been working with. He said that it is true only where they service the 1st and the 2nd is with someone else. In that situation they feel they can impact their bottom line less by dealing with the property as REO and sending the customer to their collections company. When they service both the 1st and 2nd they will look at doing a short sale only if the 1st will be paid in full and the 2nd is not taking a 100% loss. In the situation like mine where they service only the 2nd they really have no choice other than to take it given the current market.

  17. Steve says:

    Since Ocwen is a servicing company, how are they explaining this asinine decision to the actual holders of these notes? Surely the investors are not on board with such an approach?

    For that matter, how can Ocwen even make an across-the-board decision such as this when they have to conform to the individual investors guidelines when it comes to mitigation?

  18. JOE says:

    This could be good news!
    Some of the mortgage investors, especially foreign have hired separate companies to negotiate their short sales already.
    So far only positive experience with these operations…they answer the phone, they answer their email. you get direct negotiator contact info instead of playing the button and wait games.
    OCWEN has historically been above the others in handling the loss mitigation negotiatoions, but my experience has been that the companies set up specially to provide this service are much more effective.
    I think this could be great news for investors on both sides, even though it may put a short term slow down on OCWEN managed loans.

  19. Paul says:

    “I am currently dealing with Ocwen on a SS. They service our 2nd, WaMu has the 1st. I called them after finding this post today and talked with a manager I have been working with. He said that it is true only where they service the 1st and the 2nd is with someone else. In that situation they feel they can impact their bottom line less by dealing with the property as REO and sending the customer to their collections company. When they service both the 1st and 2nd they will look at doing a short sale only if the 1st will be paid in full and the 2nd is not taking a 100% loss. In the situation like mine where they service only the 2nd they really have no choice other than to take it given the current market.”

    Interesting.

    I have a cleint that has a second serviced by Ocwen. We don’t have a buyer yet, but I requested he contact Ocwen directly and ask if they will do a short sale.

    He just called me back and said are sending him a short sale package.

  20. maggiemae656 says:

    “It is about the manipulation of the property, it’s about the financing fraud, and about manipulating the cash flow from occupants of the property – owners, who to Ocwen are merely the present “victims in residence” to be mined for their cash and then kicked out so that the “property” can be recycled for more of the same games – not the sale of the property, but rather the manipulation of it! The sale will cut short the game – so the game is endless by design. Simply stated: It’s pure undiluted calculated fraud. Everybody in the game gets ripped except the principals.”

    – participant in Kweku Hanson’s Class Action Lawsuit against Ocwen Federal Bank

    I am appalled that there are people discussing doing business with Ocwen. They are one of the worst of the worst.

    Please help our country by avoiding companies like Ocwen like the plague. Apparently, law enforcement will have to step in due to a general lack of concern for ethics, since there seems to be enough people still willing to participate in their fraud against citizens of the United States.

    If you don’t know what this company is all about, please do some research.

    BOYCOTT OCWEN, please…

  21. Kathleen Jamal says:

    I personally believe that someone in top management decided this unfortunate course of action. I do not believe for a moment that Ocwen had the approval or support from the 40+ investors that they provide mortgage servicing. And, no one can tell me that the institutional or private investors and insurers are okay with this decision. I full well expect these investors to move their servicing portfolio’s out of Ocwen in the months to come. These investor’s expect full mortgage servicing including the critical default mitigation components to minimize losses. I honestly do not believe their refusal to accept future Short Sales has anything to do with collecting or not collecting fees. I believe they are in financial difficulty and looking to reduce/eliminate staff expense. Just last week, a borrower provided a copy of a letter from Ocwen advising them “you are own your own” in the payment of their property taxes and hazard insurnace premiums on an “impounded loan”. I’m not even sure that this legal under RESPA rules. Another measure to reduce their corporate advances/costs. It will be very interesting to see what develops in the next few months.

  22. maggiemae656 says:

    Ocwen has been up to no good for years. If investors have not been aware of how this deviant company operates, it’s because they haven’t been interested enough to delve into the reasons for the multiple class action suits that have been brought against Ocwen.

    I suppose that once investors feel the pangs of loss that property owners have felt at the hands of Ocwen, we can finally see some possible end to their shameful behaviors. Too bad it had to take this long–no one cared about Ocwen being in the business of amassing real estate as long as the market was supporting a position of gain for the company. It’s a dog-eat-dog world, and you have to figure that anyone who will trample over the “little people” will more than likely not stop there–especially when they are given the green light through continual investments by the holders of American working capital.

  23. Thanks for the info, we are tying to work with Ocwen on a couple short sales and they just don’t seem like they want to do anything on a short sale! :(

  24. MIKE says:

    IS IT PRACTICAL TO BUY SFH REO FROM OCWEN?
    CAN THEY PROVIDE PORTFOLIOS DIRECTLY? DOES OCWEN HAVE ITS OWN REO PACKAGES OR IS IT PACKAGING PORTFOLIOS FOR OTHERS? cAN THEY TRULY OFFER REO PORTFOLIOS AT LESS THAN 45 CENTS ON THE DOLLAR?

  25. Jerry Singer says:

    Ocwen is a nasty hard to work with Company. I will not work for or with them again. I stopped working with them several years ago. Life is too short to deal with mean spirited people or companys. I did not owe them any money and they were still nasty to work with. LOL I am not sure why any investor would want them to represent them. I am going to take the trouble to ask each and everyone of them. As a good realtor I feel it is my duty.

  26. virginia styron says:

    we had been in our home for 20 years when Ocwen took it from us..I was in the hospital when they took everything we had..we had been in a chapter 13 but still they foreclosed on us after they got the chapter 13 to go up to $1300 a month.. we are on a fixed income of $1700 a month..

  27. I have been in a transaction with Ocwen for the last 10 months, I listed the property in march of 2008 and had couple of offer for 200,000 thousand, I was dealing with a call center in India they were cruel, they didn’t want to budge on the value of the home they wanted 220,000 going toward the investor, that was inconcieviable. I have the Home Still listed and its January of 2009. The listing has expired I can’t seem to help this people with this type of lenders that don’t have a good system for Short Sale Work Out.
    HELP ANY ONE THAT HAS CLOSED A SHORTSALE WITH THIS OCWEN.

  28. Ted says:

    Three contacts within three days with Ocwen on an attempted loan modification to try to help a previously work-injured woman save her home: three significently different interest rates; three different monthly payments; three different initial repayments. Two voice mails to “Managers” with no response. These Ocwen representatives are obviously on some type of incentive plan and are shooting from the hip.

    What type of individuals would do business with these people? Have you all lost your minds, or just your integrity? How much of your brother’s food can you eat in a day? It’s sad that this is how you choose to live. If you want a better world, start by cleaning you own house; it’s filthy and smells rancid.

  29. Kathleen says:

    It is becoming exceedingly clear to me that Ocwen has no intentions of considering a short sale or mitigating the investor’s potential loss. I have 2 pending cases where Ocwen has lost 4 different faxed borrower’s authorization. How can that be? I believe they are absolutely incompetent or this is purposeful. I wished the investor that owns these loans had an understanding about the sub standard servicing being provided by Ocwen. I don’t think Ocwen will be in business this time next year. Or, they will change their name like Fairbanks did.

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