Chase Workers Avoid Layoffs

As the housing boom and bust has faded, JPMorgan Chase & Co. made staffing cuts this year in its mortgage processing division, including in the San Fernando Valley. Now, some of those employees have been scooped up by a Florida law firm that is expanding nationwide and specializes in defaults, foreclosures and other problem mortgages. ALAW opened a Chatsworth office on Dec. 16, hiring 80 employees who were to be laid off by Chase. “The (banks) still have the loans to manage and the outreach to the borrower that still has to be done,” said James Albertelli, president and founding partner of ALAW, which is based in Tampa and has a total of 94 attorneys and 551 employees. ALAW is among the smaller players moving in quickly to service difficult mortgages as the New York bank and competitors such as Bank of America Corp. in Charlotte, N.C., and Wells Fargo Bank in San Francisco cut thousands of customer-service employees. ALAW, which has offices in Fort Lauderdale, Jacksonville and Atlanta, expects an additional 120 support personnel will be hired during the coming year in Chatsworth as the firm brings in work from Oregon and Washington State. It has a preference for former Chase employees, and will have plenty to choose from. In addition to up to 300 job losses in Chatsworth at its California Reconveyance Co. subsidiary, Chase also cut 245 jobs from its Irvine mortgage business unit this year. The cuts are driven by a slowdown in refinancing as many homeowners already have taken advantage of low interest rates, which have remained at rock bottom levels for years. Now, defaults and foreclosures – and all their associated paperwork – are beginning to tail off as the housing market continues to gain strength. At the same time, government mortgage giants Fannie Mae and Freddie Mac this year changed regulations governing firms that handle problem home loans. Experts say the new regulations give sophisticated specialists an opening to get more business from lenders trimming back their in-house units. In February, for example, Chase sold its mortgage servicing operation in Melbourne, Fla. to Wingspan Portfolio Advisors LLC, a Carrollton, Texas firm specializing in servicing nonperforming loans and working one-on-one with borrowers to keep them in their homes. Wingspan offered to hire up to 400 Chase employees following the sale. Michael Pfeifer, general counsel with the California Mortgage Bankers Association, said the new regulations are consistent with others promulgated out of Washington D.C. since the financial meltdown. “The servicers have greater freedom … yet at the same time Fannie Mae and Freddie Mac are saying here is how we are going to hold you accountable,” said Pfeiffer, an attorney with Smith Dollar PC in Orange. Identical salaries Founded in 1997, ALAW is a law firm that represents institutional and private lenders in dealing with borrowers who fall behind on their payments. The company has a subsidiary named Oversite Data Services, which tracks foreclosures as they move through the court system, including filings, deadlines and court appearances. Oversite sells the information to lenders that have hired ALAW for legal representation. It turns out ALAW had an inside track on the Chase deal, since the Oversite unit already had Chase as a client. The former Chase employees will receive an identical salary from ALAW and a similar benefits package and will essentially do the same work, Albertelli said. That consists of processing paperwork and trying to work with borrowers on troubled loans in danger of default or foreclosure. “There is talent out here and we want to take advantage of that,” said Rayman Mathoda, chief revenue officer for ALAW and president of Oversite Data Services. ALAW began eyeing an expansion into California nearly two years ago, prompting the firm to begin vetting potential partners and acquisition targets. California was an obvious expansion target given the size of its housing market, huge economy and location of many mortgage companies prior to the housing bust. (Countrywide Financial Corp. in Calabasas, which was acquired by Bank of America in 2008, was only the most high-profile company that was headquartered in state.) “The employees we have hired have been in this area for 10 years and such a long tenure is unusual,” Mathoda said. In June, new regulations by Fannie Mae and Freddie Mac went into effect on how mortgage servicers choose the law firms handling default-related legal services. The two institutions had long required loan servicers handling Fannie- or Freddie-backed mortgages to use law firms chosen and vetted by the two institutions. The regulations no longer designate specific firms but require law firms meet minimum requirements, including training. That gives an advantage to law firms that have offices across the country, since giant banks would rather deal with them than a number of smaller firms. “Banks want to work with companies that are national and work on the default side and origination side (of mortgages),” Mathoda said. Cuts not complete Meanwhile, the state housing market continues to improve. Defaults were down 45.2 percent and foreclosure sales were down 65.4 percent through October compared to a year earlier, according to PropertyRadar, a Truckee firm that tracks foreclosure activity. Dustin Hobbs, a spokesman for the California Mortgage Bankers Association, said the market is slowly being driven more and more by traditional buyers. But there are nto yet enough to make up for the decline in refinancing. He expects some layoffs in mortgage servicing will continue as a result. “That side of the market is not ready to pick up the slack yet,” he added. A year ago, Bank of America announced the closing of a regional office in Glendale that could result in up to 100 job cuts. And last month, the bank notified 161 employees in Simi Valley, 49 employees in West Hills and 13 in Westlake Village their jobs would be eliminated effective Jan. 19, according to a notice filed with the state Employment Development Department. Rick Simon, a Bank of America spokesman, said that delinquent mortgage loans serviced by the bank have fallen to less than one third of the peak levels. “As we continue to resolve the needs of customers with delinquent loans, we are reducing the size of the operations that support these specialized programs,” he said in a prepared statement. Susan Avelluto, a managing director and head of human resources in the mortgage banking division at Chase, said the bank is trying to do all it can to lessen the impact of the layoffs on workers. Chase will either re-assign the employees elsewhere in the company or work with outside employers to find them work, she said. In the case of the Chatsworth office, the bank held a job fair in October for the employees to meet with representatives of companies that could potentially hire them. “There were 21 companies from the San Fernando Valley who came and interviewed,” Avelluto said. “We have been active.”