Elvera
Carrollton,#2Consumer Comment
Tue, February 18, 2003
Hi, I thought I pass this on. I found this in the Ft. Worth Star Telegram, but the story originated in the Charlotte Observer. *********************** Posted on Sun, Feb. 16, 2003 Money Store changes direction Wachovia turns profit with revamped version of its subprime lending unit RICK ROTHACKER Staff Writer In June 2000, First Union Corp. took a nearly $2 billion charge against earnings to shut down The Money Store Inc., its troubled subprime lender. But more than two years later, the Charlotte bank is turning a profit with the remnants of the unit, which made home mortgage and home equity loans to borrowers with spotty credit. A new entity called HomEq Servicing Corp., now part of Wachovia Corp., no longer originates new loans, but instead collects and administers old Money Store loans and Wachovia home equity loans. In recent months, it also has signed up clients who want to outsource the collecting of subprime loans. Wachovia, which merged with First Union in 2001, is still dogged by a number of lawsuits lingering from The Money Store's past, however. In the past two quarters, the company has used part of a Money Store-related tax break to settle litigation and beef up legal reserves. Wachovia considers its new approach less risky because it's not making new subprime loans, which have a higher potential for default than other loans. These loans also have drawn class-action lawsuits and government scrutiny for high interest rates and fees. Citigroup Inc. and Household International recently agreed to multimillion-dollar legal settlements after allegations of abusive practices. Charlotte's Bank of America Corp. exited the business in 2001, citing inconsistent earnings. "What was a horror story that ended in June of 2000 is turning into a great opportunity out here," said Art Lyon, president of Sacramento, Calif.-based HomEq. First Union bought The Money Store, perhaps best known for late-night commercials starring sports stars Phil Rizzuto and Jim Palmer, for about $2.1 billion in 1998. Like many banks at the time, it saw the potential for more fee income, cross-selling of other products and a new pool of loans that could be packaged and sold to securities markets. But officials quickly discovered the company wasn't as profitable as they had projected. Borrowers were paying off loans early as interest rates dropped, and competition in the industry was fierce. A few months after the acquisition, First Union lowered its earnings estimates, citing a change in the way Money Store profits were recorded. In January of 1999, Lyon, then chief financial officer of First Union Mortgage Co., was part of a team sent to Sacramento to rehabilitate the unit. He said he found disgruntled employees and a heavy exposure to potentially bad loans for First Union. A year and a half later, First Union Chief Executive Ken Thompson, now CEO of Wachovia, shut the unit down as part of one of the largest charges against earnings in corporate history. About three-fourths of the 4,000 Money Store employees were laid off. At HomEq, launched shortly after the shutdown, Lyon's first move was to add First Union's home equity loans to The Money Store portfolio, giving the unit a more stable mix of loans. He also automated old Money Store systems and instituted new collections practices. The Money Store used to call all late borrowers after 30 days, but HomEq tries to identify problems earlier and work with customers who are having short-term problems, Lyon said. "In subprime, there are borrowers that experience problems and you work with them," he said. "There are also those who try to tool the system, playing creditors off each other. We are more aggressive with these." HomEq now has about 1,100 employees in Sacramento, Boone and Raleigh. In Boone, the company has Appalachian State students working a late shift, calling borrowers on the West Coast. The unit collects and administers a total portfolio of 300,000 loans valued at $27.5 billion. More than 90 percent of the portfolio is old Money Store and Wachovia home equity loans. Recently, the company has been expanding beyond servicing its own loans by signing up four undisclosed clients -- two major Wall Street loan aggregators and two smaller loan originators -- that want to outsource these functions. Receiving the highest residential servicer marks from two ratings agencies in September has helped attract clients, said Lyon, who is in talks with other potential customers. The unit now contributes a small, undisclosed portion of Wachovia's profits and has designs on competing with larger subprime servicers such as Fairbanks Capital Corp. "It would have been too optimistic to believe what we have done," Lyon said. "Two years ago, I thought there was more bad news to come out of this operation." The servicing of subprime loans, though, isn't without risk. Consumer advocates have mostly focused on problems with the origination of loans, which they deem predatory when fees and interest rates become excessive. But servicing also can be a concern, these advocates say. For example, servicers can harass borrowers with calls at work, be slow to credit payments or charge unexpected fees, they said. This is more of a concern in subprime lending, they said, because problems with late payments and foreclosures are more likely than with traditional loans. "Servicing of subprime loans is the next frontier in the battle against predatory lending," said Matthew Lee, executive director of Inner City Press/Community on the Move, a nonprofit consumer group in New York. HomEq follows the Fair Debt Collection Practices Act, which regulates how borrowers can be contacted, and screens the loans it services for other companies, Lyon said. "If you take such a sizable write-down as the Money Store, you are not in the business of taking risk," he said. Wachovia is familiar with the troubles that can come with subprime lending. In a regulatory filing in November, Wachovia said a number of Money Store borrowers filed lawsuits in 2000, 2001 and 2002, alleging violations of federal and state lending laws prior to the 1998 acquisition. Some cases in Mississippi were settled prior to going to trial last year, while others are being "vigorously defended," according to the filing. One of the Mississippi suits obtained by The Observer describes a home-improvement scheme in which plaintiffs allege they were charged for substandard home-improvement work. The complaint accuses The Money Store of having knowledge of a contractor's scheme and failing to follow its own internal guidelines. A Wachovia spokeswoman said the company does not comment on litigation. Last month, attorneys for a borrower filed a suit in U.S. District Court alleging The Money Store violated California law by charging a borrower behind on mortgage payments for attorney letters and other expenses. Wachovia is also fending off a 1999 suit by shareholders who allege that the company misled investors about problems with The Money Store acquisition. A third amended complaint was filed in October in U.S. District Court Western District of North Carolina. The company, in the November regulatory filing, said the suit has no merit. In the past two quarters, Wachovia has used part of a Money Store-related tax break to deal with some of its lawsuits, setting aside more than $160 million to settle suits and bulk up reserves. Wachovia was eligible for the tax break because it was able to put a value on its Money Store loss by selling to an undisclosed investor about 20 percent of the remaining operation. Joe Kolar, a Washington attorney who advises financial services firms, said subprime lending lawsuits can persist for years because of varying statutes of limitation. Eventually, the liability will dwindle as the loan portfolio is paid off. But Kolar said he's not surprised Wachovia would settle some cases. "People," he said, "like to get this stuff behind them." ***************** End of story - sorry it is so long - but very revealing! Like who merges with whom, *beef up lawyers*, shareholders, investors, *people with spotty credit*, check out those sentences in the story. Look past the *newspaper talk* and see what they really mean! Well, somehow, profits must be made$$!! (I mean this in a very sarcastic way, in case there are any doubts!) This story could explain why you have to suffer so much.
Lee
Marshville,#3Consumer Comment
Mon, February 17, 2003
I agree with Michael on this one! You should call! Loss Mit will request a sbstantial down payment to enter the "Agreement". An additional amonut will be required monthly along with your regular monthly payments for a predetermined period of time in order to bring your mortgage current! Your status will be placed in abeyance (suspense) at this point. Accruing fees should cease during this period of time! READ THE FINE PRINT! I RECOMMEND AN ATTORNEY TO READ IT! The reason that I say this: I worked an agreement through Loss Mitigation. It was an (18) month "Agreement". $2,100 dollars down and $1,285.oo per month. Tough to do, but my house was at stake! On the final payment of the "Agreed TERMS", HomEq told me that I was in "Default". REASONS: 1)Accruing late fees 2)Corporate Fees 3)Attorney Fees 4)New Computer System that recalculated my "Original Agreement" 5)The manner of which the Payments were applied I know what you are thinking Micahel---not true! NEVER MISSED A PAYMENT--ON TIME EVERY TIME--NOT FOR (18) MONTHS BUT FOR (20) MONTHS! Proof is with (20) months of Western Union statements with MTC Tracking Numbers. Still does not matter to HomEq. Bottom line, although my contract specifically stated the abeyance and how the funds were going to be applied, HomEq still had the right to change the contract according to them without notification! Oh, by the way, I am the same guy that has not received a monthly statement since July 2000 from First Union Mortgage--never had the pleasure of seeing a HomEq statement, if in fact they exist!
Lee
Marshville,#4Consumer Comment
Mon, February 17, 2003
I agree with Michael on this one! You should call! Loss Mit will request a sbstantial down payment to enter the "Agreement". An additional amonut will be required monthly along with your regular monthly payments for a predetermined period of time in order to bring your mortgage current! Your status will be placed in abeyance (suspense) at this point. Accruing fees should cease during this period of time! READ THE FINE PRINT! I RECOMMEND AN ATTORNEY TO READ IT! The reason that I say this: I worked an agreement through Loss Mitigation. It was an (18) month "Agreement". $2,100 dollars down and $1,285.oo per month. Tough to do, but my house was at stake! On the final payment of the "Agreed TERMS", HomEq told me that I was in "Default". REASONS: 1)Accruing late fees 2)Corporate Fees 3)Attorney Fees 4)New Computer System that recalculated my "Original Agreement" 5)The manner of which the Payments were applied I know what you are thinking Micahel---not true! NEVER MISSED A PAYMENT--ON TIME EVERY TIME--NOT FOR (18) MONTHS BUT FOR (20) MONTHS! Proof is with (20) months of Western Union statements with MTC Tracking Numbers. Still does not matter to HomEq. Bottom line, although my contract specifically stated the abeyance and how the funds were going to be applied, HomEq still had the right to change the contract according to them without notification! Oh, by the way, I am the same guy that has not received a monthly statement since July 2000 from First Union Mortgage--never had the pleasure of seeing a HomEq statement, if in fact they exist!
Lee
Marshville,#5Consumer Comment
Mon, February 17, 2003
I agree with Michael on this one! You should call! Loss Mit will request a sbstantial down payment to enter the "Agreement". An additional amonut will be required monthly along with your regular monthly payments for a predetermined period of time in order to bring your mortgage current! Your status will be placed in abeyance (suspense) at this point. Accruing fees should cease during this period of time! READ THE FINE PRINT! I RECOMMEND AN ATTORNEY TO READ IT! The reason that I say this: I worked an agreement through Loss Mitigation. It was an (18) month "Agreement". $2,100 dollars down and $1,285.oo per month. Tough to do, but my house was at stake! On the final payment of the "Agreed TERMS", HomEq told me that I was in "Default". REASONS: 1)Accruing late fees 2)Corporate Fees 3)Attorney Fees 4)New Computer System that recalculated my "Original Agreement" 5)The manner of which the Payments were applied I know what you are thinking Micahel---not true! NEVER MISSED A PAYMENT--ON TIME EVERY TIME--NOT FOR (18) MONTHS BUT FOR (20) MONTHS! Proof is with (20) months of Western Union statements with MTC Tracking Numbers. Still does not matter to HomEq. Bottom line, although my contract specifically stated the abeyance and how the funds were going to be applied, HomEq still had the right to change the contract according to them without notification! Oh, by the way, I am the same guy that has not received a monthly statement since July 2000 from First Union Mortgage--never had the pleasure of seeing a HomEq statement, if in fact they exist!
Michael
Charlotte,#6UPDATE Employee
Fri, March 15, 2002
Of course you should contact Loss Mit.....do you want to save your home or not? Loss Mit can help you..