Paladin Strategic Partners acquired a controlling interest in HomeSaver Mortgage Management.
HomeSaver and its partners believe that the number of borrowers facing foreclosure will increase considerably over the next 12 months. The continuation of present trends shows the advantages of the alternative forms of resolution that are consistent with the prudent regulation of the banking system, which holds over $2.9 trillion in residential whole loans. It also supports political realities and social responsibility, according to a release about the purchase.
First American CoreLogic estimated that over 32% of the 52 million plus U.S. homeowners with mortgages are now "underwater" versus their home value, and many housing analysts expect that figure to exceed 45% by 2010.
Meanwhile, RealtyTrac reported that foreclosure actions in 2009 are expected to exceed 3.4 million, and trend higher in 2010 (versus a normalized rate of 520,000 per annum).
Actual repossessions of homes in the U.S. this year are expected to exceed one million, which is over ten times the rate of a typical year. At the same time, RealtyTrac projected that over 500,000 such repossessions are being held off the market by foreclosing lenders, for fear of causing added real estate market disruption.
"Many of the current loan remediation programs are simply not working. HomeSaver is uniquely positioned to step in and work with homeowners during this crisis, as well as with selling banks," said Carl Webb, managing partner of Paladin. "HomeSaver employs an aggressive and 'socially responsible' workout approach toward loan remediation. We feel that HomeSaver has demonstrated what the non-bank private sector, unburdened by legacy assets, can do to achieve ultimate resolution of the residential mortgage nightmare," Webb added.
Len Blum, a managing partner of Westwood Capital Holdings, noted that, "recent stabilization in home prices is not likely to be sufficient to reverse the ballooning numbers of foreclosures and underwater mortgages. Nor is it reasonable to expect that residential real estate values will be restored to those of the bubble-era, for the foreseeable future."
Blum added that this is why strategies that emphasize eventual loan principal reduction, including those employed by HomeSaver, are the only realistic alternatives.
"The banks that are most exposed to the risks posed by legacy loans are signaling their understanding of the predicament they are in, by amassing record levels of balancesheet liquidity, and conserving capital, in preparation for increased loan disposal losses and provisioning," Blum said.
HomeSaver (previously ARC/Westwood HomeSaver Management) is an asset management firm formed to use private capital in acquiring bank-owned portfolios of troubled mortgage assets. It also implements modification and remediation strategies the lenders and government have been thus far unable to make happen.