Remember that obstinate computer from Stanley Kubrick’s 2001: A Space Odyssey — HAL 9000 — a machine with a will of its own? No matter how hard astronaut Dave tried to get those pod bay doors opened HAL refused to comply. Well, Houston resident Chris Wyatt thinks he’s discovered HAL’s mortgage doppelganger in an Ocwen computer platform known as REALServicing and like HAL it seems to just as obstinate when asked by homeowners for information regarding critical stuff like amounts due, escrow, payment histories, et al. Mortgage servicing is big, very big business impacting tens of millions of Americans who pay their monthly vigs to a variety of servicing companies; some owned by the Mega-banks themselves and others, like Ocwen, unaffiliated and known as non-bank servicers. Collectively, they’ve also been at the heart of a number of investigations following 2008’s sub-prime meltdown — notably, revelations of fraudulent “robo-signing” — taking regulatory heat for stoking a foreclosure crisis that’s ravaged communities from coast to coast (some have yet to recover). Wyatt, a soft-spoken Texan, knows the world of mortgage servicing intimately; he also knows where the bodies are buried. For close to a decade he was a senior executive at Litton Loan Servicing — part of his job involved approving loan modifications — that is, until thousand pound investment elephant, a/k/a Goldman Sachs, acquired the company late 2007. Goldman’s imprimatur suddenly became part and parcel of a new strategy: short term profits trumped loan modifications (too costly). In other words: bring on the foreclosures. After bumping heads over foreclosure-first policies with bosses at Litton and Goldman — and possessing a conscience; a quality rarely found in the financial services industry — Wyatt packed it in, leaving the firm in 2010. He found his true passion: advocating for homeowners and, with that, started to blow the whistle. A disclosure: I know Wyatt since his days as an executive at Litton Loan. In that capacity he approved a loan modification for my wife and myself shortly before the firm was taken over by Goldman Sachs: our modification was then voided. Since 2011, Ocwen Loan Servicing — as successor to Litton Loan Servicing — has been trying to foreclose — so far, unsuccessfully — on the writer’s home in Westchester County, New York. Wyatt’s current target of disaffection is Ocwen Financial. With upwards of a million homeowners in their mortgage portfolio Ocwen has engendered some extreme regulatory vetting. Last April the firm became a target for some 31 state regulatory agencies (including the District of Columbia) which began issuing cease and desist orders. The Consumer Financial Protection Bureau — never a friend of Ocwen — also weighed in suing the company for grave indiscretions that ran the gamut from failing to respond to complaints; failing to credit borrower’s payments, and, worse still: illegally foreclosing on homeowners. These regulatory efforts were designed to prevent Ocwen from acquiring new mortgage servicing rights (”MSR’s” in the lingo); the equivalent of keeping Dracula away from needed sources of human blood. Homeowners had, in effect, become stand-ins for astronaut Dave in 2001: A Space Odyssey. Ocwen’s level of communications with the folks they serviced was reduced, according to regulators, to the level of “I’m sorry Dave, I’m afraid I can’t do that…” Connecticut put it this way in their cease and desist order: Now, Wyatt is not just a critic of Ocwen, he’s also an Ocwen victim with his own tale to tell. After a fire damaged his Houston area home in 2016 he filed an insurance claim and received a check; which, following standard procedure, had to be co-signed by the servicer of record: Ocwen. This should have been done in a timely manner because insurance company policies include depreciation clauses. The longer you wait after the initial repair estimate — contractors factor in price increases that go beyond the claim amounts — costs of repairs increase proportionally. Claim amounts, including depreciation, are usually good for a year so if you ain’t got that check co-signed and returned then the repairs ain’t gonna happen unless you want to crack open the piggy bank; which Wyatt wasn’t willing to do. Compounding the problem were health concerns caused by mold that had formed in the damaged areas. What he did do, though, was record his calls with Ocwen representatives who offered nothing short of obfuscation: documents had disappeared, they told him, or couldn’t be found. Wyatt re-submitted. Again, these documents seemed to disappear into the REALServicing ether. One operator put him on hold; allegedly to search the system further. After a silence of more than ten minutes she returned — on a speaker phone (a privacy no/no in a roomful of other operators, who can clearly be heard in the background) — and claimed she was now out to lunch. So what, Wyatt muses, are the chance that homeowners serviced by Ocwen in hurricane ravaged communities stand to get their insurance proceeds in a timely manner? Not great. (Wyatt is recording complaints from fellow frustrated Harvey-Hit Texas homeowners which he intends to post on-line). Ocwen’s response to regulatory strangulation has been a full-court press; assuring the folks that applied the garrote that all was being dealt with and that includes taming the Hal-like sensibilities of the REALServicing software program. To date 22 states have bought into the promises. All mention the REALServicing problem. The state of Idaho, for instance, memorializes this in fine print: On November 1st, Ocwen announced that it had plumbed the mortgage cosmos and found some new and very amazing software that goes by the cosmic moniker: Black Knight LoanSphere MSP. With much fanfare Ocwen spokesperson, John Lovallo, announced in Housing Wire, that this wasn’t an overnight scramble but the result of a “multi-year” search and that Black Knight would, in essence, turn RealServicing’s HAL into a very reasonable C.H.O.M.P.S (the friendly robot dog). Wyatt, who knows the intricacies of mortgage servicing platforms (he was trained in the use of Litton programs, Lsams and Radar) finds real problems and potential legal liabilities in this changeover. Citing the December, 2014, consent agreement with New York’s muscular Department of Financial Services, Wyatt feels Ocwen was less than enthusiastic about making meaningful changes: Now, changing over to a new system ain’t as easy pulling the plug on HAL and exporting the data elsewhere. There are significant concerns, according to Wyatt: I offered some of Wyatt’s concerns to aforementioned Ocwen spokesperson, John Lovallo, for comment. I received no response. There are some keeping the faith that Ocwen can pull through; one, in particular — John Devaney — with a significant equity investment is all bullish; painting a rosy future for the firm. In a phone call with me he repeatedly asserted that Ocwen — with a policy of principal write-downs and loan mods — is the best thing for homeowners since sliced bread. He also tried to make the case that the homeowner-unfriendly Mega-Banks shouldn’t escape regulatory wrath: His reaction to the carpet beating administered to Ocwen by regulators? I’d venture the strong opinion that the tens of millions of Americans who are serviced by both big bank and non-bank servicers do deserve better. What’s needed, according to Wyatt, is a new paradigm; a sort of 2001 “space baby” resurrection and rebirth for an industry that should be putting the needs of homeowners at least on par with those of investors. Perhaps a peek at the small entrepreneurial efforts initiated by companies like American Homeowner Preservation (which I wrote about for American Banker) may be worth a look-see. While only dealing with a fraction of the number of mortgages held by the Big Boys there may be a workable seed that once planted may someday put the bloom back on the homeowner’s rose. Joel Sucher is a co-founder of Pacific Street Films (together with Steven Fischler) and has written for a number of platforms including American Banker, In These Times, HuffPost and Observer.com. Currently he’s crashing two memoirs: one based on his experiences arriving in the US via the Displaced Persons Act; the other on his nearly half-century in the world of documentary film.
