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It never ceases to amaze me that we have allowed the Fair Isaac Company, founded by those erstwhile snake oil salesmen - Bill Fair and Earl Issac, to become THE standard for ascertaining creditworthiness. If ever a company needed regulating it's FICO with its "secret sauce" credit scoring OUIJA board. If only more bankers had thrown FICO sales staff out the door as I used to on a regular basis in the 80s we wouldn't be saddled with the absurd notion that a private company can tell us who's a good mortgage risk. They are as much a part of the economic downturn as Neg Am loans and deregulation. I will never forget their sales people trying to convince me that their 3 digit "score" was more meaningful than the 7+ year credit history I could see on a credit report. More than interesting that in 1995 both Fannie and Freddie "recommended" the use of FICO scores and the company's stock surged thereafter. Must be a money trail there if anyone actually wants to figure out who we should blame.
Some food for thought. As I've been rehashing the discussions among Messrs. Andelman, Cox, Levitin and Whalen one story that keeps coming to mind is that of the blind men trying to describe an elephant. That's not to say any of them are blind however they appear to have some very different sources of information that are influencing their respective viewpoints. Since I know both Mr. Cox and Mr. Andelman personally I find their disagreement to be quite disconcerting however, given the same split between Messrs. Levitin and Whalen it now seems to me that the "differences" are far more the result of wholly different sources of information than any fundamental disagreement (or at least I so hope). I know, for example, that Martin has ready access to the "higher ups" at a number of the financial services companies under discussion. I also know that Tom has spent, literally, years litigating with many of these same companies. It occurs to me that the difference may simply be the result of who's doing the talking on behalf of the servicers. In the case of Mr. Cox (and myself) it is always either low level employees or, more commonly, attorneys employed to defend the servicer in litigation. In that setting it is beyond clear to me that both Mr. Cox and Prof. Levitin are absolutely right. When I contrast that with the very high level employees with whom Martin (and I presume Mr. Whalen) speaks and from whom Martin is able to obtain excellent results I suspect I have uncovered the ultimate source of the "disagreement." Martin's success in obtaining loan modifications is unparalleled in my experience whereas Tom's success has taken the route I and many, many consumer attorneys have traveled to wit, an adversarial one. With this in mind I have a suggestion for both Martin and Mr. Whalen - try working with a homeowner seeking a modification without revealing your involvement. Listen in on the phone calls they make and the level of service homeowners receive. I'd also suggest that you make your contacts available to Prof. Levitin and Tom Cox and that you first let them know you're sharing the information. My strong suspicion is that the responses everyone will get from the previously "unused" sources will prove extraordinarily educational for all parties. After all, few things can do more to resolve differences than the truth itself.
BTW - you're quite right about the annoying inability to edit. Most software engines used for comments allow edits but, to be fair, few things are more mercurial than those based on software.
I appreciate your response Mr. Whalen. I would point out however that the low cost of funds to FDIC insured banks is relatively recent and, indeed, is a large part of the reason they've behaved so stupidly. I will add that the failure to adequately regulate the insured institutions is one of the largest factors in the nightmare that we have endured the past several years. In my days I worked for, inter alia, Aames Financial which at one time had a very large servicing portfolio which ultimately was viewed as quite a cash cow and was therefore an early casualty in the pre-implosion days. In my travels I spent a fair amount of time working with the FRB of San Francisco, particularly Mr. David Vandre. Unfortunately I have also litigated quite heavily against both Ocwen and Nationstar and found them to be the exact opposite of what you suggest. While you may be asserting they have effectively "changed" it is hard for me to believe this has happened out of any realization it is more prudent to modify. I personally represented a number of homeowners who could have paid modified mortgage payments only to have them utterly and totally refuse to work with myself or my client. Thus, while my experience is necessarily anecdotal it is also consistent with that reported to me by literally dozens and dozens of consumer attorneys. Frankly I do wish it were otherwise and would hope what you assert is now or soon to be true however that is simply not what I and my colleagues have experienced. Since most of them work for non-profits their reports are not some function of income (or the lack thereof). Perhaps your disagreements with Dr. Levitin are traceable to the same sort of source of information. Regards!
BTW Mr. Whalen - why don't you do ALL of the readers a favor and tell us about the federally insured institutions for which YOU worked. I only ask since your commentary, indeed your entire skewed view of the financial services industry, more than suggests you've NEVER worked anyplace where FDIC insurance was either obtained or required.
Mr. Whalen, I have personally documented or reviewed over 25,000 sets of loan documents, posted thousands and thousands of loan payments, serviced loans for 3rd parties and handled all related accounting activities. I'll put my 27 years in the trenches of loan operations against your 30 years of blowing hot air as one of the countless "Senior Managers" whose idiocy I always had to work hard to overcome. Your ongoing implicit suggestion that servicers don't make money on defaulted loans is evidence you know absolutely nothing about the nuts and bolts of the business. PORTFOLIO lenders try to modify if possible. SERVICERS, by definition, are NOT LENDERS. Having "serviced" loans including spending time working for financial services companies that tried to turn servicing into a relatively high profit division let me assure you, with your non-existent experience actually servicing loans, drafting documents, performing due diligence, that DEFAULTS = MONEY. In fact, default servicing generates MUCH more income than the servicing of loans that are current. I don't care WHO you worked for because one thing you make abundantly clear is that you have NEVER actually worked with individual loans on a day to day basis.
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Mar 30, 2014