November 25, 2016
On Thanksgiving day, President-Elect Trump announced that he would name Wilbur Ross as Secretary of Commerce.
Wilbur Ross was described in new reports as a “billionaire investor” who was also known as the “king of bankruptcy.” Ross was famous for buying and selling companies that had hit hard times and filed for bankruptcy.
Ross, 78 years old, was a big financial contributor to the Trump campaign. His wealth was estimated to be $2.9 billion by Forbes magazine.
One of the companies Ross acquired through bankruptcy was American Home Mortgage Servicing, Inc. (“AHMSI”). In August 2007, American Home Mortgage, the 10th largest retail mortgage lender in the U.S., filed for bankruptcy. Big banks had pulled the plug on mortgage lenders and the financial collapse of 2008 ensued. American Home Mortgage was unable to fund $800 million in mortgage loans. Ross formed AH Mortgage Acquisition Company to purchase that portion of American Home Mortgage that serviced – but did not own – mortgages. AH Mortgage Acquisition company bought the servicing rights for $435 million. His new company acquired the rights to service approximately $42 billion in mortgage loans. Ross changed the name of his company to American Home Mortgage Servicing, Inc.
Ross’s AHMSI next acquired the servicing rights of Option One Mortgage Company for approximately $1.1 billion. At the time, Option One was servicing $53 billion in subprime mortgages. The acquisition made AHMSI the second largest subprime servicer in the country, second only to Countrywide. In 2009, AHMSI acquired a large piece of mortgage servicing rights from Citibank, specifically, from Citi Residential Lending Services or Citi Res. AHMSI paid $1.5 billion for the servicing rights to 185,000 loans with $37 billion in mortgages.
AHMSI used outsourcing to provide many of its services. Lender Processing Services and its subsidiary, DocX, prepared, executed and recorded lien releases, mortgage assignments and various affidavits. The DocX employees signed names that were not their own names on documents that were used in foreclosures, and represented themselves to be officers of many banks, lending companies and MERS, Mortgage Electronic Registration Systems, Inc. On millions of mortgage assignments, the DocX employees falsified the dates that mortgage-backed trusts actually acquired mortgages from various lenders.
The practices of DocX were eventually exposed in a segment of CBS 60 Minutes. The DocX offices in Alpharetta, Georgia were closed. The senior vice-president of Lender Processing Services, Lorraine O’Reilly Brown, was indicted in federal court in Jacksonville and in state court in Michigan and Missouri. Brown eventually pled guilty and was sentenced to five years’ in prison. She served most of her time in a state prison in Michigan where she was first convicted.
AHMSI sued Lender Processing Services and DocX and settled for an undisclosed amount. AHMSI also settled with the Ohio Attorney General and agreed to implement and improve its servicing standards. AHMSI was also named as a party in several lawsuits brought by state attorneys general as the successor to the companies it acquired. In 2013, Lender Processing Services settled with 45 states for $120 million. Lender Processing Services previously agreed to pay $35 million to resolve federal criminal fraud allegations.
In 2012, AHMSI changed its name to Homeward Residential. Later in 2012, Ocwen Financial Corporation bought Homeward Residential for $766 million, including $604 million in cash and $162 million in preferred stock.
Ocwen was repeatedly sued by various states for its servicing practices. In August, 2016, Ocwen was fined $900,000 by the State of Washington for using unlicensed offshore companies to service Washington loans. The state found that Ocwen used unlicensed companies in India and the Philippines to service mortgage loans. In December 2013, Ocwen agreed to a $2.1 billion settlement over servicing abuses to resolve claims by the Consumer Financial Protection Bureau and 49 states.
AHMSI and Ocwen were two of the biggest contributors to the mortgage crisis, engaging in the imposition of unauthorized fees, dual-tracking, robo-signing, imposition of inflated force-placed insurance and the use of unlicensed off-shore companies.
With this track record, how can Wilbur Ross possibly be the best candidate for Secretary of Commerce?
*NOTE: The author filed a False Claim Act lawsuit against AHMSI, Ocwen, DocX, Lender Processing Services, and eight banks in 2010. Some of the bank defendants settled this action for $95 million to HUD. The claims against AHMSI, Ocwen Lender Processing Services and DocX were dismissed. This dismissal was appealed. Oral argument on this case is set for December 2016.
Dick Harpootlian of Columbia, SC, and Reuban Guttman of Guttman, Buschner and Brooks represent the author/relator.