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The country's fastest-growing servicer reports a solid second-quarter profit, strong operational metrics and plans for an even more ambitious expansion.
August 14 -
Ginnie Mae is considering raising minimum net-worth requirements for issuers of its mortgage-backed securities after being deluged with applications from small mortgage banks. Disruptions in the mortgage market prompted the rush.
August 13 -
While Bank of America is shedding mortgage servicing rights en masse, dozens of small- to medium-sized mortgage firms have been contemplating keeping the new MSRs they create instead of selling their loans.
February 3
Two former executives at Washington Mutual, who paid fines to the Federal Deposit Insurance Corp. last year for the thrift's "reckless" lending practices, are eyeing a return to mortgage lending.
David C. Schneider, who in August was named chief executive of specialty servicer Vericrest Financial, hired his former boss Stephen Rotella in September to a four-member advisory board. The board was created to provide "insight and recommendations," on the nonbank servicer's strategy including plans to get back into residential lending, Schneider said in an interview.
Originating loans "has been at the forefront of our discussions," Schneider said. Though Vericrest, which is owned by the private-equity firm Lone Star Funds, is focused on servicing now "over the longer term we'll think about whether originations is something that makes sense to us," he added.
Schneider is the former home loans president at Washington Mutual and Rotella is WaMu's former president. They
Schneider and Rotella both rigorously denied wrong-doing in WaMu's collapse, claiming they made prudent decisions based on information they had at the time, and even made efforts to ratchet back subprime lending.
"The industry went through a significant challenge and we've all learned from that and been a part of it," Schneider said.
The settlement agreement did not prohibit Schneider and Rotella from further participation in the banking industry, though Schneider said he opted to go with a nonbank because the largest servicers are scaling back. Though mortgage servicing is still concentrated in the hands of Bank of America (BAC), Wells Fargo (WFC) and JPMorgan Chase (JPM), banks
"Servicing portfolios are moving out of the hands of larger servicing shops, and it's important that private capital come into the servicing space," Schneider said.
Schneider gave no timetable for when Vericrest, with $6.5 billion in servicing assets, might expand into loan originations but the recent appointment of Rotella to the board suggests it is moving in that direction. In addition to Rotella, Vericrest's advisory board also includes Donald J. Bisenius, a former executive vice president at Freddie Mac who
Laurie Goodman, a senior managing director at Amherst Securities Group, says the move illustrates the revolving-door nature of the lending industry.
"Origination is a profitable activity and a lot of these guys had mortgage expertise and this is the best way to redeploy it," she says.
She even suggested that there wasn't much of a problem with the WaMu executives' return: "Like a reperforming loan, there has to be some rehabilitation," says Goodman. "Most people with specialized knowledge of mortgages were blemished."
WaMu, the largest bank failure in U.S. history, was the sixth-largest bank when it collapsed in September 2008, and was sold at a fire-sale price of $1.9 billion to JPMorgan Chase (JPM).
In December, the two former Wamu executives along with Kerry K. Killinger, WaMu's longtime chief executive, settled the FDIC's allegations of negligence for $64.7 million.
Schneider paid $50,000 in cash as part of the agreement and gave up a claim to $5.8 million in compensation; Rotella paid $100,000 and forfeited an $11.5 million claim. Most of the payments came from directors' and officers' liability insurance policies paid for by the thrift.
Of course, plenty of players who were criticized for contributing to the mortgage meltdown but never faced any charges have returned in major roles, most notably Stanford Kurland, who
Schneider was head of servicing and default at JPMorgan Chase, where he played a role in the national mortgage settlement. He described Rotella and Bisenius as "people with in-depth knowledge of mortgage banking. They are truly mortgage banking experts."
Schneider used a baseball analogy to describe the current state of the mortgage market.
"We're in the 3rd or 4th inning so we have several innings left to go," he says. "This is a process that can't happen overnight. Moving portfolios is complex and it will probably take a couple of years. We're seeing signs of life in the housing market and we're hopeful those signs will continue. It's hard to tell and really say it with great certainty."
