NYDFS reportedly looking into Caliber Home Loans

Inquiry seeks information on handling of delinquent mortgages

The New York Department of Financial Services is reportedly looking into how Caliber Home Loans handles distressed mortgages and the lender’s origination practices for borrowers with less-than-perfect credit profiles, the New York Times reported Monday.

In the report, Matthew Goldstein writes that the NYDFS, New York’s top financial regulator, is seeking information as part of an “early stage investigation” into Caliber’s mortgage business.

From the New York Times:

The New York regulator made the request in a letter sent a week ago to Caliber, said the person briefed on the matter. The regulator told Caliber it was investigating multiple complaints from consumers in New York and wanted information related to the firm’s procedures for handling distressed mortgages and foreclosures.

The regulator is also asking for information about mortgages Caliber has begun writing to borrowers who have filed for bankruptcy or been foreclosed on but are repairing their credit histories. Caliber is one of the few mortgage firms that has begun making so-called nonprime loans nearly a decade after the start of the housing bust.

As Goldstein notes, Caliber Home Loans is a wholly owned subsidiary of Lone Star Funds. Both companies experienced considerable growth in recent years, with Caliber growing to “the 10th-largest mortgage servicer, or bill collector, out of 30 major companies nationwide,” according to the New York Times report.

In recent years, Caliber Home Loans expanded its operations with several acquisitions, including First Priority Financial and Cobalt Mortgage.

Caliber also made waves when it began originating mortgages outside Qualified Mortgage lending box.

Caliber’s non-agency program included four types of loans: the “Fresh Start” program, Foreign Nationals, Non-Warrantable Condos and Non-Agency alternatives.

The Fresh Start program specifically is designed to help borrowers who may have experienced a credit event but cannot afford a program in the marketplace that meets their needs as they re-establish a strong credit history.

Those loans were backed by money from Lone Star Funds, which in turn brought a residential mortgage-backed securitization to market backed by those mortgages.

As Goldstein notes, many of the distressed mortgages that Caliber services are “bought at discount from either government agencies or banks by Lone Star.”

Lone Star Funds has made a habit of buying up non-performing loans from Fannie Mae and Freddie Mac through its trust, LSF9 Mortgage Holdings.

Earlier this year, LSF9 Mortgage Holdings bought 2,250 non-performing loans that carried $516.6 million in unpaid principal balance from Freddie Mac.

In March, LSF9 Mortgage Holdings was the wining bidder for three NPL pools from Freddie Mac, which carried a cumulative unpaid principal balance of $822.6 million.

In September of last year, LSF9 Mortgage Holdings also purchased three pools on NPLs from Freddie Mac that carried the exact same unpaid principal balance –$822.6 million.

In May 2015, Freddie Mac sold 1,052 deeply delinquent Ocwen-serviced non-performing loans with an aggregate unpaid principal balance of $201 million to LSF9 Mortgage Holdings.

In August 2015, the trust also purchased two pools of non-performing loans from Fannie Mae, which included approximately 3,900 loans totaling $765 million in unpaid principal balance.

And now, the NYDFS is looking into Caliber’s business practices. Buckle up.

When contacted by HousingWire about the potential investigation, a representative from Caliber said the company will not be commenting at this time.

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