Comments on: Litton, Goldman’s id

By: hsvkitty

hsvkitty — Sun, 05 Dec 2010 22:11:12 +0000

Ah Mr. Dillon was so very right. I wonder what connections to data and insider trading might have been going on that will soon hit the fan?

Goldman wishes to dump Litton as a liability before the poopoo hits the proverbial fan and gets them even more soiled. I sincerely hope there are still some paper trails to follow.

By: Mike_Dillon

Mike_Dillon — Wed, 01 Sep 2010 17:00:02 +0000

Hang on a second, McGriffin. Take a look at the larger picture. Servicers live to generate and collect fees. Late fees, modification fees, assumption fees, interest on corporate advances, etc. They, in and of themselves, have little to no skin in the actual investment game – unless they choose to.

Servicers are also the gateway to virtually ALL of the information that matters to anyone. Data mining and predictive analytics galore. Specifically loan level information. If you know what an individual loan is doing you know what to expect in the future.

If you know what 5,000 loans are doing you can wager a fairly decent bet on the Street as to if/when those loans, and the REMIC in which they’re securitized, are going to tank.

And, since you’re the servicer, you are also in control of which loans, and subsequently the REMICs they make up, are going to tank by creating default situations i.e. holding current payments until past due, assessing force placed insurance when homeowner policies are already in place, etc.

I find it curious as hell that, at one point, Fairbanks Capital Corp. claimed that as much as 40% of it’s portfolio was in some phase of default. At that time, they claimed to service 750,000 loans. 40% of 750,000 is 300,000. USA/Curry v. Fairbanks class involved 281,1000 victims.

Take a quick look at p. 18 “Servicer Diversification” of the ABACUS 2007-AC1 flipbook sometime. Run the top 5 servicers’ names through Justia.com or PACER or even Google. Take a look at the sheer magnitude of litigation against them and what the actions claim. Different servicers, virtually identical claims. If you know what is going on at loan level, you know how to structure the CDO. You know how big the losses are going to be. You know how much money you stand to make on the other side of the fence.

Servicers aren’t worried about work force turn over rates. They don’t need to b/c there really is no specialized training that anyone needs going INTO at least the lower level jobs. Not even a college degree. Check out Hot Jobs or Monster sometime and see which servicers are hiring for what positions.

Servicers hold the keys to the hen house. Part of why this financial “crisis” is as big as it is is because everyone STILL refuses to acknowledge that mortgage servicers are part of the overall PROBLEM and have no interest in being part of the SOLUTION.

I cringe every time I use the word “crisis” in conjunction with this economy. “Crisis” denotes a sudden onset “surprise” to me. Something unforeseen and/or uncontrollable happening. This “crisis” is neither of those. And anyone that says that they never saw it coming is both selectively deaf and blind – but they are FAR from being dumb.

Mr. Salmon, I humbly suggest that you take a good look at the time frame that entities began deciding to bring mortgage servicers “in-house”. For the longest time, servicers were considered “third party” entities. Roughly 2004 everyone seemed to begin looking at purchasing servicing platforms. Credit Suisse took Fairbanks/SPS in ’05. GS grabbed Litton in ’07. Morgan Stanley acquired Saxon in ’06. Merrill purchased Wilshire Credit in ’04. What did they all realize 4,5,6 years ago?

By: MichelDelving

MichelDelving — Wed, 01 Sep 2010 03:23:01 +0000

Felix,
Goldman never, not for a nanosecond regretted buying Litton. Litton is only one of many subsidiary servicers busily manufacturing bogus defaults, “credit events” that generated obscene CDS payouts for proprietary traders shorting subprime. If you’re thinking of telling me that there are Chinese walls between trading desk and subsidiary servicers, well I’ve got a really swell barge I’d like to sell you.
All the investment banks that acquired servicers in the runup to the crisis knew they could profit mightily from mortgage servicing fraud and they did. Servicers heavily influence the disposition of the collateral of any mortgage security. Those who owned and controlled servicers knew where to place their bets. What you are looking at here is the largest insider trading scheme we have ever seen.
Look at these FTC settlements on servicing fraud and ask yourself, “Who profited?”
Countrywide Home Loans Servicing – now owned by BoA – http://www.ftc.gov:80/opa/2010/06/countr ywide.shtm
EMC Mortgage Corp. – formerly Bear Stearns subsidiary, now JPMC – http://www.ftc.gov/opa/2008/09/emc.shtm
Select Portfolio Servicing – Credit Suisse subsidiary http://www.ftc.gov/fairbanks

By: McGriffen

McGriffen — Tue, 31 Aug 2010 13:52:11 +0000

No one in the right frame of mind would choose servicing (of any type) to generate a high rate of return on invested capital. Labor-intensive + workforce turnover, technology-intensive, and not to mention outside entities make hay with their own interpretation of any rules.

Given the few servicer shops I ever visited…no thanks. Origination has to be a better game to play.

By: Danny_Black

Danny_Black — Mon, 30 Aug 2010 20:56:33 +0000

So in rapid succession we have had an article on how assuming lognormal returns gives you lognormal returns, an article about how structured product CDOs invest in structured products and now the shocking news that companies are all about making money. Maybe you could write an expose about how politicians are trying to get elected?