Recently, UK-founded, Barclays Bank said it would sell its US mortgage collection business for $1.3 billion in cash. In addition to buying into mortgage collection, roughly four years ago when the mortgage market was flourishing, Barclays bought the investment banking and trading divisions of Lehman Brothers (when they filed for bankruptcy).
At the time (2008), NY Bankruptcy Judge, James Peck, after a rather lengthy trial said, “I have to approve this transaction because it is the only available transaction. Lehman Brothers became a victim, in effect the only true icon to fall in a tsunami that has befallen the credit markets. This is the most momentous bankruptcy hearing I’ve ever sat through. It can never be deemed precedent for future cases. It’s hard for me to imagine a similar emergency.”
Mortgage servicing companies have been faced with having to make drastic changes while loan defaults continue to grow. The government’s efforts in introducing foreclosure prevention programs have already cost billions of dollars.
The Ocwen Financial Corporation, based in Florida, is expected to buy HomEq Servicing from Barclays—who agreed to put in $1 billion towards financing the deal. Ocwen handles loans made to borrowers with weak credit. According to Ocwen’s legal counsel, Paul Koches, the deal will increase the number of loans presently managed by the corporation, from approximately 400,000 to close to 600,000.
Years ago, investment banks bought up mortgage lender organizations and companies as well as collection firms. Today, a good number of loans fall into default as the government becomes the country’s best mortgage securities firm.
Barclays implemented its US affiliate, Barclays Bank of California, in San Franscisco back in 1965. In addition to introducing the UK’s first ever ATM machine, Barclays was the first bank to open its branches’ doors to Saturday business—some 20 years after banks stopped working on Saturdays. Consequently, in 1984, two years after reintroducing Saturdays, Barclays reached record profits.