“Bob Simpson, president of Imarc Investors Mortgage Asset Recovery Co., an Irvine firm that investigates why home loans go bad, says no federal mortgage rescue plan can save people from having gotten in too deep. Simpson says he’s seen thousands of people fail to pay mortgages for which they were not qualified. He anticipates seeing tens of thousands more this year, no matter what the government does.”

- Orange County Register

Click Here for excerpts of his conversation with the Register.

“To understand what was happening in the mortgage industry, 60 Minutes went to Bob Simpson, whose company, IMARC, investigates failed mortgages.”

- 60 MINUTES

Click Here to read the full story.

One estimate puts nearly a third as already in re-default
American Banker | Monday, November 24, 2008

As the mortgage industry begins modifying troubled loans in greater numbers, early rounds of modifications are coming in for performance reviews.
For the most part, public discussion of modifications has focused on the ability and willingness of servicers and investors to make them. For several reasons, including the still undeveloped track record for modifications, less attention has been paid to the outcomes of those that have gotten done.
A handful of analysts and academics who have studied which types of loan modifications work have found that some of the most common changes — reducing or freezing the interest rate and allowing missed payments to be rolled into the balance — often fail to prevent the borrower from defaulting again.
These are, of course, high risk loans by definition. But one aspect of some modifications points to why the default issue can rearise so quickly. The addition of arrears and fees to loan balances can actually increase monthly payments, a situation that leaves strapped borrowers no better off from a monthly cash-flow perspective. (Not all lenders charge fees on modifications. Bank of America Corp., for example, waives fees on the Countrywide Financial Corp. loans it is modifying under an agreement with state attorneys general.) Also, in an environment where house prices are falling, higher loan balances can erode or wipe out a homeowner’s equity.
“We’re going backwards,” said Alan White, an assistant professor at Valparaiso University School of Law. “The voluntary modifications are putting people underwater more than they already are and those terms are contributing to the failure rate.”
Prof. White said he examined the September and October remittance reports on $4 billion of bonds backed by subprime and alternative-A mortgages. Of the loans that were modified, roughly 72% received some form of “negative prepayment” that increased the principal balance.
He and others said that the most effective modifications are the ones that reduce principal as well as the interest rate. But principal reduction remains rare.
Rod Dubitsky, the head of Credit Suisse Group’s asset-backed securities research division found that only two servicers — Ocwen Financial Corp. and Goldman Sachs Group Inc.’s Litton Loan Servicing LP — are doing it in any great numbers. “It seems that the momentum in mods is taking principal forgiveness off the table,” Mr. Dubitsky said.
Servicers are less likely to make loan modifications that result in lower payments than those that result in higher payments, he said.
In his own analysis of monthly trustee reports from 19 servicers, Mr. Dubitsky found that about 30% of borrowers who received any type of modification in the fourth quarter of last year became 60 or more days delinquent within eight months.

There will not be a recovery in the home market until all the “five timers” are out of their homes, said Bob Simpson, the president of IMARC, a Newport Beach, Calif.-based mortgage fraud investigations firm. The fact that those who owe five times more than what they make are still in their homes means the bottom has not been reached, he said, speaking at NAMB/West in Las Vegas after having made similar comments at the SourceMedia Mortgage Fraud Conference. The “five timers” need to turn in their house keys and move into something they can afford. “You’re not qualified” is a phrase mortgage originators have to start using again, Mr. Simpson said. At NAMB/West, he made an analogy to the markers casinos give to high rollers. In the lending industry, those markers have now gone bad. The origination process was not about cost but about monthly debt service; originators sold payments. Compounding the problem, Mr. Simpson said, is lenders no longer required borrowers “have skin in the game” in the form of a downpayment. He added that he was not a fan of downpayment assistance programs. There need to be barriers to homeownership and the borrower’s ability to save is important, Mr. Simpson said.

“These problems are not related to reset issues,” he said. “That’s a ruse.”

Read the full article here.

“So when they set aside $1 billion that’s a day’s worth of funding,” he said. “I’m not sure that addresses what the real problem may be.”

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“This is not a sub-prime crisis. This is a stated income crisis,” said Robert Simpson, chief executive of Investors Mortgage Asset Recovery Co. in Irvine, which works with lenders, insurers and investors to recover losses related to mortgage fraud…

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“(The mortgage lenders) knew the bad credit quality of the loans being originated, they took their profits, and now the ship sinks,” said Bob Simpson, president of Investors Mortgage Asset Recovery Co. in Irvine. “They will all walk away rich. And we are left with neighborhoods full of foreclosures.”

Read the full article here.