Monthly Archives: August 2014

How a $600 Servicing Error Snowballed into a $16M Jury Verdict

Here is a cautionary tale of how a seemingly minor error can end up costing a financial services company big if left unaddressed. A jury last month awarded $16.2 million in damages to a California homeowner who waged a three-year battle to block a foreclosure by the private-label mortgage servicer PHH Corp. The verdict is among the largest ever awarded in a mortgage case and $6 million more than PHH's mortgage servicing business earned in the second quarter. And, according to the plaintiff's attorneys, it all started with a $616 shortfall in an escrow account. PHH is appealing the judgment, which may eventually be reduced. But the case encapsulates many of the problems that have plagued the mortgage servicing industry in recent years -systems errors, confusing and contradictory information sent to borrowers and apparent indifference to their situations. "There was a lack of communication, a lack of policies and procedures within the company to...
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Countrywide’s Mozilo may face lawsuit over subprime mortgages

Although Countrywide Financial no longer exists, co-founder Angelo Mozilo is not in the clear as prosecutors attempt to still hold him responsible for the company’s role in the U.S. housing bubble, an article in Bloomberg stated. And he is not alone. According to the article, more than 12 months after the deadline passed to file criminal charges, U.S. attorneys in Los Angeles are preparing a civil lawsuit against Mozilo and as many as 10 other former Countrywide employees. 3 But this time, the article said the government is going with a different tactic, using a 25-year-old law that has helped the Justice Department win billions of dollars from Wall Street banks. Until now, the harshest penalty imposed on Mozilo, 75, has been a $67.5 million accord with the U.S. Securities and Exchange Commission from 2010 to resolve allegations that he misled Countrywide investors. Mozilo said he has “no regrets” about...
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Distressed sales down to lowest share since before housing bubble broke

  For the 19th consecutive month, distressed home sales fell on a year-over-year basis, declining to 11.4% of home sales in June. Distressed sales, which include both REO and short sales, accounted for the lowest share since December 2007 and a strong improvement from the same time a year ago when this category made up 15.8% of total sales. Within this category, REO sales made up 7.2% of total home sales, and short sales made up 4.2% of total sales in June. At its peak, the distressed sales share totaled 32.5% of all sales in January 2009, with REO sales making up 28% of that share. 4 “The more recent shift away from REO sales is a driver of improving home prices, as REOs typically sell at a larger discount compared to healthy sales than do short sales,”CoreLogic (CLGX) reports. “There will always be some amount of distress...
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