What’s really going on in default servicing? An insider’s perspective

Don’t you think this is pre-planned? Let’s face the facts – the so-called “original” collateral file ends up with the attorneys, who close their doors and conveniently dump all their documents…

Justice League

Mark Twain once said, “It ain’t what you don’t know that gets you into trouble. It’s what you know for sure that just ain’t so.”

Well, for legal and compliance officers representing mortgage servicers who often cite concentration risk as a justification for maintaining an expansive network of legal service providers, it “just ain’t so.”

Ironically, it is this focus on concentration risk that leads to slower case resolution and increased servicing costs overall.

Risk is inherent in all litigation. There are direct financial risks such as legal fees, court costs and other expenses incurred due to attorney action or inaction (e.g., sanctions, opposing party legal fees, refiling fees associated with lack of prosecution dismissals), along with indirect risks such as extended resolution timelines and reputational harm.

Mortgage servicers too often ignore the real risk of law firm failure. This risk, now a recurring reality in the default servicing world…

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2 thoughts on “What’s really going on in default servicing? An insider’s perspective

    • Securitization is a homeowner Plaintiff’s graveyard, especially if the attorney doesn’t understand the patented integrated software systems used by the banks to procure the collateral and take it to foreclosure and resell it. The software is “seamless automation” from birth of the application through default and foreclosure to resurrection of the dead collateral and resell it – where the process starts all over again.

      The courts don’t believe the homeowner is entitled to challenge the securitization (securities transaction) process to which they had no knowledge or disclosure; however, an in depth deposition of the bank’s IT personnel (tech) responsible for the software operation might reveal the mandatory data fields necessary to fulfill the procurement requirements which specifically include the homeowners’ social security numbers, credit score, parcel description, etc. All of which, it appears, are required to complete the entry of the collateral.

      Even with all of this information, it is important to understand how the algorithms play an integral part in the process in order to keep the liquidity of the MBS in order for the pension funds to invest.

      The USPTO patents can be found online. It appears the process starts with the 1003 loan application owned by Fannie Mae. It takes a great deal of intelligence, time and patience (not to mention cost billed to education and research) to sort through all of the integrated patents just to even get a handle on the scheme in order to do a competent deposition with IT personnel.

      In addition, dealing with securitization, it appears that the pretender lenders had pre-established agreements with investment banks and worked from credit lines. The homeowner collateral had already been pledged to the banks before the faux documents were even drafted. Is the homeowner buying a mortgage or issuing collateral?

      Quote from a mortgage broker writing mortgages in her company’s name, “I never actually owned the loan. Countrywide provided the credit line and had bought it before the documents were prepared.”

      It would appear that there were pre-existing agreements between the banks, servicers and pretender lenders established in an elaborate scheme designed to procure the collateral and “seamlessly” automate it into securities without full disclosure to all parties. Hence the question, where does homeowner participation begin, and does it really ever stop?

      And lastly, finding a judge with intellect and patience to sort through the scheme without first considering his pension and investments funds is likely another uphill battle.

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