Layers Of Contracts Tied To Your Mortgage Equals Hidden Fees

The link below and excerpts are from  Ocwen Financial’s 10-K SEC filing for fiscal year 2012. Here, Ocwen provides in its “Risk Factors” a detailed explanation of how it handles borrower “delinquencies” as a servicer. It’s no surprise that servicers continue to advance payments of principal and interest during periods of alleged defaults. However, the details provided by Ocwen reveal layers of contracts and liabilities tethered to the borrowers that are nowhere spelled out in the mortgage contracts and notes themselves.  Are these hidden “late fees” legal in your state? I’d ask your local attorney.

 

Ocwen describes how it utilizes securitization (i.e. “Match Fund Liabilities”) (HIDDEN CONTRACTS) and revolving credit facilities (MORE HIDDEN CONTRACTS) to finance its advances of principal and interest on behalf of delinquent borrowers. Ocwen also utilizes highly skilled “consultants” who command “higher compensation” for negotiating forbearances or loan modifications (MORE HIDDEN CONTRACTS). Ocwen defines all of this as “operating expenses.” Delinquent loans increases Ocwen’s operating expenses, and these increases are “somewhat offset by increased late fees for loans that become delinquent but do not enter the foreclosure process.” 

 

If you look at a typical mortgage and note, you will not see any of these hidden side contract liabilities disclosed within the mortgages themselves as required “late fees.” I believe this is all discoverable information. How do these late fees break down? Who’s getting paid for these increased late fees? Are these increased operating expenses due solely to an individual borrower’s delinquency, Ocwen’s business contracts and dealings with outside parties, or a combination of both? Who exactly is the “highly skilled consultant who commands higher compensation,” and how exactly is that “compensation” collected and applied? 

 

As Ocwen admits, collectability of borrowers’ loan payments “is generally not a concern.” Why? Because everyone will extract their pound of flesh from the carcass of the foreclosed and liquidated property down the road after having burried homeowners with insurmountable hidden late fees, all of which are financed like credit cards. Its like Wimpy’s famous line – “I’ll gladly pay you Tuesday for a hamburger today.”

 

https://www.sec.gov/Archives/edgar/data/873860/000101905612000280/ocn_10k.htm

 

P.11 – Risk Factors:

 

Delinquencies. Delinquencies have a significant impact on our results of operations and cash flows. Delinquencies impact the timing of revenue recognition because we recognize servicing fees as earned which is generally upon collection. Delinquencies also impact float balances and float earnings. Non-performing loans are more expensive to service than performing loans because, as discussed below, the cost of servicing is higher and, although collectibility is generally not a concern, advances to the investors increase which results in higher financing costs. Performing loans include those loans that are current and those loans for which borrowers are making scheduled payments under loan modifications, forbearance plans or bankruptcy plans. Loans in modification trial plans are considered forbearance plans until the trial is successfully completed or until the borrower misses a trial plan payment. We consider all other loans to be non-performing.

 

When borrowers are delinquent, the amount of funds that we are required to advance to the investors on behalf of the borrowers increases. We incur significant costs to finance those advances. We utilize both securitization (i.e., match funded liabilities) and revolving credit facilities to finance our advances. As a result, increased delinquencies result in increased interest expense.

 

The cost of servicing non-performing loans is higher than the cost of servicing performing loans primarily because the loss mitigation techniques that we employ to keep borrowers in their homes and to foreclose are more costly than the techniques used in handling a performing loan. Procedures involve increased contact with the borrower for collection and the development of forbearance plans or loan modifications by highly skilled consultants who command higher compensation. This increase in operating expenses is somewhat offset by increased late fees for loans that become delinquent but do not enter the foreclosure process. In comparison, when loans are performing we have fewer interactions with the borrowers, and lower-cost customer service personnel conduct most of those interactions unless the loan is deemed to be at risk of defaulting.

 

Bill Paatalo
Oregon Private Investigator – PSID#49411

BP Investigative Agency, LLC
Office: 1-(888)-582-0961
bill.bpia@gmail.com