Audit Notes: Mortgage Servicers, Ghost Mall—China Style; The Joneses

Andy Kroll of Mother Jones takes a look (UPDATE: took a look, I should say. This story is from a year ago. As Paul Kiel points out, it’s “sadly still entirely relevant”) at the little-regulated mortgage servicers. There’s an anecdote about a woman who had her house sold—with no notice.

Walters’ discovery that her home had been sold out from under her marked the low point of a four-year fiasco that began when Ocwen Loan Servicing became her mortgage servicer in late 2004. Through no fault of her own, Ocwen incorrectly processed or lost dozens of Walters’ payments and charged her more than $2,000 in late fees and thousands more in additional charges—all without notifying her. The Florida-based company tried to foreclose on her three times. After she paid more than $10,000, Walters figured things were settled. But Ocwen had other ideas.

This is good reporting:

The Federal Trade Commission (FTC), Office of the Comptroller of the Currency, and Office of Thrift Supervision also have limited oversight over the mortgage industry. An OTS spokesman could name only one formal action the agency has taken against a servicer—Ocwen, in 2004. An OCC spokesman said his agency has never taken action against servicers.

The FTC has settled three major cases since 2003, resulting in settlements totaling almost $70 million.

And here’s why they should be heavily scrutinized (emphasis mine):

Mortgage servicers are the housing industry’s middlemen, low-profile companies that handle the day-to-day business of collecting payments, managing paperwork, and initiating foreclosures. Some banks, such as Wells Fargo and Bank of America, have their own mortgage-servicing arms; others contract with companies like Ocwen. Either way, borrowers are largely at their mercy: They have no say in who services their mortgages, and they can’t fire their servicer for doing a bad job.

— Bloomberg’s Paul Allen looks at the New South China Mall in Dongguang—the biggest mall in the world (by rentable square feet) and one of the most empty—and how it illustrates that the Chinese have had their own crazed real estate boom.

Allen reports that Bloomberg was told to bring its cameras on a Saturday when the mall would be at its busiest, but you can practically hear his voice echo in the emptiness of the place.

And Allen gets this astonishing quote from the president of the mall, which is more than twice as large as the Mall of America:

We still have some 200,000 square meters still to be developed. I think we’ll balance out as soon as those 200,000 meters are opened.

That’s not how supply and demand works, dude. Your mall has a 1 percent occupancy rate. This has to be one of the biggest development flops in history. Fascinating.

(h/t Barry Ritholtz)

— Catherine Rampell of The New York Times has a very good blog post on why rich people don’t think they’re rich: Because once you get above the 95th percentile or so, the amount of money it takes to move up a percentile starts going exponential.

For example, those who aspire to hop from the 30th percentile to the 35th percentile would need to increase their cash income by $4,000 annually (or by about 17 percent); those who aspire to hop from the 91st percentile to the 96th percentile would require an increase of $324,900 (or 171 percent).

In other words, at least in dollar terms, there is much greater inequality at the very top of the income scale than at the bottom or in the middle. Whether this translates to much greater differences in standards of living at the top is debatable, as an extra $1,000 for a poor family likely makes a much bigger impact on that family’s quality of life than an extra $1,000 for a wealthy family.

I don’t like that false equivalence there—that’s a newspaper tic. It’s just not debatable at all that an extra thousand bucks for a poor family means far more than a thousand bucks to a rich one.

But otherwise this is an eye-opening piece.

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Ryan Chittum is a former Wall Street Journal reporter, and deputy editor of The Audit, CJR's business section. If you see notable business journalism, give him a heads-up at Follow him on Twitter at @ryanchittum. Tags: , , , ,