The loans were originally underwritten before the financial crisis by banks like JPMorgan Chase and Bank of America, with insurance guarantees from the Federal Housing Administration. With money from public pension funds, Lone Star bought those mortgages in the summer of 2014 at an auction held by the Department of Housing and Urban Development. The foreclosure was rescinded only after the couple went to court.Ĭaliber declined to comment on individual borrowers, but it said that in general, it was “committed to providing the best possible service to all borrowers, and identifying solutions that allow troubled borrowers to continue to pay their mortgages and stay in their homes is our top priority.” It said it had one of the highest loan modification rates in the industry.Īnother window into how Caliber and Lone Star operate can be seen in a rare look into one of Lone Star’s biggest deals - a bundle of 17,000 distressed mortgages that had an unpaid balance of $2.96 billion. Within a month, the three-bedroom house that the Hubbards had lived in for two decades was auctioned off to another affiliate of Lone Star with the right to resell it later. The couple said they had submitted the application to reduce their monthly mortgage payments four days before a planned foreclosure sale, but the Lone Star subsidiary said the Hubbards had been late in completing the application and pushed ahead with the sale. They briefly lost their home when Lone Star’s Caliber subsidiary dealt harshly with their request for a loan modification. Take Charles and Pamela Hubbard of Sacramento. In just a few years, Lone Star’s mortgage servicing firm, Caliber Home Loans, has grown from a bit player to a major force in the market for distressed mortgages.Īn examination by The New York Times of housing data and court filings, as well as interviews with borrowers, lawyers and housing advocates, revealed a pattern of complaints that Lone Star was quick to begin foreclosure proceedings, whether the firm had bought a delinquent mortgage at a federal auction or directly from a bank. One company has emerged as a lightning rod, criticized by housing advocates and lawyers for borrowers, but admired by investors: Lone Star Funds, a $60 billion private equity firm founded in 1995 by John Grayken. Federal and state lawmakers are taking up the issue, questioning why federal agencies are selling loans at a discount of as much as 30 percent to such firms. Housing advocates and lawyers for borrowers contend that the private equity firms and hedge funds are too quick to push homes into foreclosure and are even less helpful than the banks had been in negotiating loan modifications with borrowers. Federal housing officials, for the most part, have welcomed the new financial players as being more nimble and creative than banks with terms for delinquent borrowers.īut the firms are now drawing fire. Private equity and hedge fund firms have bought more than 100,000 troubled mortgages at a discount from banks and federal housing agencies, emerging as aggressive liquidators for the remains of the mortgage crisis that erupted nearly a decade ago.Īs the housing market nationwide recovers, this is a dark corner from which banks, stung by hefty penalties for bungling mortgage modifications and foreclosures, have retreated.
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