This article in today’s New York Times describes the crazy new business of loan servicing. Apparently, some regulators thought a private equity driven industry, which hardly even existed five years ago, would be better than the banks at dealing with loans.
They aren’t. The frequent transfers to companies that no one has ever heard of has resulted in crazy confusion and I personally have seen circumstances similar to those described in the article. Ocwen is just a disaster to deal with. I had to threaten a lawsuit on behalf of a client just to get them to acknowledge that they were paid off in full (not all of their loans are distressed).
How the collection of loan payments became a revenue stream separate from the actual loan is inexplicable, but essentially is why the mortgage industry went wrong in the first place. Instead of lending for the profit on the interest, they are looking for profits on chopping the loan into component parts. Yet, how does a loan with a low interest rate generate more than just that 3 or 4% interest overall? This engineering is always bound to fail.