CoreLogic Monopoly in Portsmouth?

Mortgage Monopoly in Portsmouth?

In the comparison between Portsmouth, Ohio, and Westlake, Texas, that I made in my previous post, I emphasized the differences between the two towns. They don’t make things in Westlake, and they never have. They skipped the commercial and industrial stage that Portsmouth and many cities in the Northeast and the Midwest went through. What is now Westlake was for most of its history north Texas cattle country, but fairly recently, after a struggle between residents and developers over the future of the town, dramatized on NPR’s This American Life (click here). Westlake came to life economically as an “information-based” community.  Well west of the Rust Belt, Westlake is where they make money, or where,   more accurately, they make money on mortgages.

The way Westlake’s second largest employer, CoreLogic, claims it makes money is supplying information about the risks involved in selling or buying mortgages and insurance. But at least where Portsmouth is concerned it appears that CoreLogic’s main business is not selling information about but rather buying Portsmouth mortgages from local banks, including, and perhaps particularly, from American Savings Bank.  By rough estimate, in the last ten years or so about eighty per cent of Portsmouth mortgages were CoreLogic. Though it is not a Fortune Five Hundred company, it appears CoreLogic is  mopping up the floor in Portsmouth with the likes of Fortune Five Hundred mortgage companies like Bank of America, Wells Fargo, and Fifth Third, which rank nationally among the top mortgage giants. CoreLogic looks like it’s well on its way to monopolizing mortgages in Portsmouth.

City Officials: Portsmouth and Chillicothe

Who holds CoreLogic mortgages in Portsmouth? City officials, among others. Portsmouth’s unelected  mayor doesn’t have a mortgage because he bought his house at so low a price that he didn’t need one. But the city auditor, the second most important city official, has a CoreLogic mortgage on a $134,000 house. The  city solicitor, the third most important city official,  has a CoreLogic mortgage on a $192,000 house on Willow Way, in the Hill section of the city. The solicitor paid $192,000, or about $50,000 more than the $142,820 valuation that the county auditor  placed on it. The $192,000 figure is puny by the standards of Westlake but is way up there by Portsmouth’s.) The $50,000 is a much larger disparity (35%) than usual between the county auditor’s valuation and what a home sells for.  Incidentally, there  are five other houses on Willow Way,  a short street, that have CoreLogic mortgages. Of the three members of city council who have mortgaged homes, two are with CoreLogic and the third is with American Savings Bank (ASB).  Former police Charles “Matt Dillon” Horner’s home on 28th Street does not have a mortgage, but a dozen other houses on the street do, and eleven of the twelve are with CoreLogic while the twelfth is with Bank of America.

In the past I’ve compared Portsmouth and  Chillicothe because the two cities have a lot in common. Do they have  CoreLogic in common? Apparently not, at least not among city officials. Looking at the real estate records of Chillicothe city officials, I found a wide variety of mortgages, but CoreLogic was not among them. The Chillicothe mayor has had a number of mortgages, all with Chillicothe banks, especially with the Chillicothe branch of National City Bank, whose corporate name is now PNC. It’s what I would expect a politician to do—support the local economy by patronizing local businesses, especially for an automobile or mortgage.  All other things being equal, whether you are a politician or ordinary citizen, why wouldn’t you want to support the local economy? The Ross County recorder has an extensive real estate history, which began  back in 1973. Her mortgages usually had direct ties to Ross County and Chillicothe. In the last ten years, she has mortgages almost exclusively from  the Chillicothe Fifth Third Bank. So for some time, with their mortgage choices, Chillicothe public officials have been supporting Chillicothe’s economy, not Westlake’s.

Portsmouth has a PNC branch and a Fifth Third branch in Portsmouth. but they are also-rans compared to CoreLogic. The Portsmouth Fifth Third branch resembles a poor cousin of the Fifth Third family. Because it can’t afford the spacious downtown building it now occupies, Fifth Third, under the coaxing of developer Jeff Albrecht,  has tried to persuade the city government to  move its offices to floors above the bank. But like the Marting building, the First Third building hides its age behind a deceptive façade. The facade ain’t really brick at Marting’s and neither is at Fifth Third. The heating and cooling systems in Fifth Third are reportedly a problem, as is the roof. Though it is not nearly as old as the Marting’s, the Fifth Third Building is unsuitable for city offices. The taxpayers of Portsmouth would be taking not much less of a screwing if Albrecht, acting like a procurer, is able to bring Fifth Third and the city government together.

Questions Remain

Questions remain: why is so much of Portsmouth’s mortgage money ending up about a thousand miles away in Westlake when branches for Fortune Five Hundred companies, such as Fifth Third Portsmouth are  hungry for business, including mortgages. What other banks besides American Savings Bank, acting as intermediaries, and subsequently as agents, are selling mortgages to CoreLogic? Is CoreLogic paying that much more than its competitors? Shouldn’t CoreLogic’s shaky financial situation and peculiar relationship with its former partner First American be a warning sign? If there was some tacit separation agreement between First American and CoreLogic that the latter’s main business would be selling information about mortgages and First American’s would continue to be buying and selling mortgages, or mortgage notes, CoreLogic’s footprint in Portsmouth constitutes evidence to the contrary. Furthermore, First American acknowledged in its 2011 filing with the Securities Exchange Commission that the fact that it  and CoreLogic were now competitors, not partners, posed serious potential financial risks.  There is an executive, Parker Kennedy, who occupies the same position at both companies! Isn’t that a clear conflict of interest?

Is there somebody in the financial circles in Portsmouth involved in a conflict of interest, at least where mortgages are concerned? Is there some suit in some hypothetical bank in Portsmouth who, in selling mortgages to CoreLogic, is selling out the citizens of Portsmouth, and is that hypothetical bank as financially shaky as CoreLogic? And do those homeowners in Portsmouth with CoreLogic mortgages understand that they are helping make Westlake the most prosperous community in America while Portsmouth remains among the poorest? Where’s the logic in that? 

The city official who has most to explain is solicitor Mike Jones because his mortgages with CoreLogic, American Savings Bank, and the now defunct and disgraced Southern Ohio Growth Partnership are as illogical as any one person’s could be. Jones has proven as incompetent in the donut business as he has in the courtroom. He appears to be a sucker for overpriced mortgages, and it would not be a surprise to see him declare bankruptcy, following in the footsteps or our  former mayor Jim Kalb, our current unelected mayor David Malone, and the next in line to be mayor, city council president John Haas. 

Somebody who might be able to unravel the mystery of Jones’s mortgage with the SOGP is Bob Huff, that defunct organization’s director, but he is not talking about Jones, CoreLogic, or anything else. Maybe he is waiting for his day in court.  On the day the new Grant Bridge opened, our hip angel of the airwaves, Steve Hayes, reported that Bob Huff, in the manner of Neal Hatcher, was giving passing motorists the finger. Now it may be Huff, left holding the bag, who is getting the finger. Huff’s home on North Hill Road, incidentally, has a CoreLogic mortgage.

Bob Huff, yet another CoreLogic mortgagee, fired for allegedly cooking the books at the SOGP

The Illogic of CoreLogic

Even Einstein couldn't figure it out

The Illogic of CoreLogic

It doesn’t make sense. Why would a troubled company whose main business is supposed to be advising others on whether or not to buy or sell mortgages, why would such a company itself go into the business of buying and selling mortgages when it itself was apparently a high risk company that those in the mortgage field should be wary of?  Core-Logic, in other words, was in a Catch-22 situation. If CoreLogic was doing its job properly it would  have warned itself that  CoreLogic was a risky company to be doing business with.  

First American, CoreLogic’s predecessor  had a troubled history. That may be why it rebranded itself with the awkward name of one of the companies it had acquired, CoreLogic. Two prominent officers of First American helped give the corporation a bad name. The septuagenarian director of First American, D. Van Skilling, was rumored to no longer have his Midas touch, and after CoreLogic lost $66.5 million in 2011, the second consecutive year of red ink, there was a board shakeup and Van Skilling announced his retirement. Then the chief financial officer of First American/CoreLogic, Anthony “Buddy” Piszel, resigned under a cloud in February, 2011, after it became known that he was under investigation for possible wrongdoing when he had been chief financial officer of Freddie Mac, the controversial quasi-governmental agency that had been accused, at least by Republicans, of helping bring about the so-called Great Recession. It did not help Piszel’s reputation, or First American/CoreLogic’s either, when his replacement at Freddie Mac committed suicide. The liberal online tabloid, the Huffington Post, reported that Piszel, while at Freddie Mac, instead of behaving like a Certified Public Accountant, had been living it up in a luxurious Maryland shore home, of which it provided a provocative  photo spread, not of nude women but of old money country club opulence. What  is expected above all of CFO’s, many of whom are glorified Certified Public Accountants, is financial probity, not profligacy. But Piszel proved to be a Jet-Setter in CPA clothing. “Some of the fancy toys on the property,” the Huffington Post pointed out, “include a $230,000 38-foot Fountain Sportfish Cruiser, ironically named ‘A Better Decision,’ powered by three fuel-sucking outboard engines, two high-end Jet Skis, a house Jeep and a few horses.” But the stock market crash that precipitated the Great Recession turned Piszel into a pretzel financially and  put his palatial coastal pad into the hands of a real estate agent. The asking price was just under $5 million.

Instead of improving its image, First American’s rebranding of itself as CoreLogic made it only worse. One handicapper estimated online that CoreLogic had almost a four-in-ten chance of going bankrupt in the next two years, offering the following colorful chart to illustrate its precarious predicament.

One of the problems at CoreLogic, the same handicapper explained, was  the ratio of assets to debts, as the following chart illustrates:

       Since the housing market has improved slightly in the last two quarters, so presumably has CoreLogic’s financial position, but it is not out of the woods yet, far from it, as the graph below, taken from the company’s most recent annual report makes clear, but only if you focus on the CoreLogic line, 

which shows that $100.00 invested in 2006 would have been worth only $60.00 at the end of 2011, a 40% loss. Highfields Capital, of  Boston, was CoreLogic’s unhappy, second biggest shareholder. Since Highfields was an $11 billion dollar company, it would have  invested closer to $10,000,000 than $100.00, and stood to lose not $40.00, but closer to $4,000,000.

            All these charts and figures may not have anything to do with the price of tea in China, but they probably have a lot to do with the price of mortgages in Portsmouth, where homeowners carry more CoreLogic mortgages than with all the other mortgage companies combined, by a roughly eight to one ratio, including such mortgage giants as  Bank of America and Wells Fargo. If First American is still in the mortgage business, you would not know it by Portsmouth, where it’s CoreLogic, CoreLogic, CoreLogic. It seems  illogical to me that  CoreLogic, a relatively small, financially troubled, faraway supposedly information-based company, the Portsmouth-focused branch of which is located in that odd little town of Westlake, Texas, carries the most mortgages in Portsmouth. The who, the why, and the how of it all is a mystery I will delve further into in my next post on the subject.