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Rcwhalen
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Is is just possible that the low recovery rate is due to fraud? Does the term "true sale" suggest any possible areas for future research? What would Justice Louis Brandeis say about the "sales" performed by Lehman, from Repo 105 to the subprime RMBS? http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2399614 Best, Chris
BigBub1, I have never made a loan, so I will defer to you on the details. But I work with a lot of loan officers, lawyers and receivers, so my sources are not to be dismissed. Also, I think we can agree that the BIG DUMB BANKS are irrational, as your post suggests. The point of my post, which nobody seems to have actually read, is about NONBANKS. A nonbank lender/servicer has real clients and must pay real money for capital and funding. Thus they tend to behave rationally. The TBTF banks lose money, have a zero cost of funds and are otherwise ungovernable, thus they do really stupid things. The pre-crisis non-banks were in the same bucket. You are right that default servicing generates more money, but it is much more costly. Also, default servicers tend to fund NPLs via investors, not equity capital, so they are very much under focus in terms of ROI. And keeping the family in the house, preserving the asset and maintaining cash flow is the best ROI, correct? I worked for the largest buyer of NPLs in the US, so please don't dismiss my experience out of hand. Or are you one of these arrogant people who has all of the answers? Finally, I worked at the Fed of New York in Sup & Reg, then a number of investment banks. No commercial banks thank God. Owned a bank rating agency for 10 years. The folks at FDIC know me well. Best, BTW, sorry to misspell Dr. Levitin's name but can't edit the comment. ;(
Yes, it is your fault that millions of Americans can't get a loan Mr. Levitan. It is interesting that Mr. Levitan has to resort to character assassination and personal attacks in his supposed rebuttal. In fact, the only thing that has changed in the world of mortgage servicing is the cost thanks to Dodd-Frank and the CFPB. I have worked in the financial services industry for three decades and most recently for one of the best special servicers in the business, so excused me for sticking to the facts. While it is true the there is a lot of fraud and irrational behavior in the markets, particularly from the big banks, the fact remains that keeping the family in the home, protecting the asset and the cash flow, are the optimal strategies. Pro-consumer activists like Mr. Levitan want desperately to believe that the irrational behaviors are the rule, but in fact most of the special servicers such as OCN, NSM and WAC all try to keep the debtor in the house when possible. That is the best way to make money. There are just SO MANY cases--no single measure can apply, so everyone is committing fraud from time to time and everyone is frustrated by the frauds of others. Sadly, I don't think Mr. Levitan understands finance well enough to appreciate the point in my article, but unlike him and the other intolerant fascists who populate the liberal spectrum of American politics, I at least respect his right to have an opinion. Obviously Levitan does not. Chris Whalen PS; Further reading. http://www.zerohedge.com/contributed/2014-03-26/political-history-%E2%80%9Ctoo-big-fail%E2%80%9D Posted by: rc whalen |
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Mar 30, 2014