Wendy Smith believed that something was fishy about her newest mortgage-servicing company. She and her husband, Al, had bought their New Jersey home with the help of Countrywide Financial. When Countrywide failed, their loan moved to IndyMac Bank. But the feds closed that one down, too, in what was called the second-biggest bank failure in U.S. history.
That's how the Smiths' mortgage ended up with Residential Credit Solutions, a Fort Worth financial services company that describes itself as expert "on credit-sensitive residential loans" -- which means at-risk loans or those slipping into foreclosure.
RCS says it buys troubled loans, many of them subprime, and works to help owners keep their homes. Foreclosure, a company spokesman once told me, is the last resort.
But that's not what Smith and hundreds of other RCS customers say. They claim in complaints on consumer websites, with government agencies and with The Watchdog that the company is a foreclosure mill where employees purposely delay responses to customers' concerns to make it difficult for owners to keep their houses.
RCS officials said the company has not been accused of wrongdoing, and it received an upgraded Fitch rating last year that praised the company for its "effective foreclosure practices" and its "strengthening financial position."
But to Wendy Smith, the warning signs came on strong: "They wouldn't answer the phone. They wouldn't give their name. Their letters weren't signed by anybody there. I found the whole thing disconcerting."
And there was the laughter. "We tried for a year to get a loan modification," Al Smith said. "They were actually laughing like it was a joke."
So Wendy Smith went to work, digging into the company's history, its top executives and their employment backgrounds.
"You wind up in a gazillion different places. You just don't stop. The Internet is a beautiful thing for doing that. I'm just tenacious. I kept at it."
She worked several hours a night for a month. She used news websites and government records. She found old lawsuits. She felt like a detective, each new nugget building upon her knowledge of the company. The teacher's aide said she never felt so powerful in her life.
When she was done, she neatly typed up her findings in a two-page letter and mailed it to about 40 of the most influential Americans she could think of.
No, The Watchdog didn't make her top 40, but she did send it to top executives of the Star-Telegram's parent organization, The McClatchy Co., with a plea that her note be passed to someone at the Fort Worth paper since RCS is based here.
That's how I got a copy.
So far, only two of the 40 recipients have responded. Me and Warren Buffett. Not bad company, eh? But before I tell you what the legendary investor said about Smith's late-night research, here's what she found.
Several top RCS executives had worked at other mortgage companies with legal problems. She listed their names, their previous affiliations and the troubles these companies faced, such as government enforcement actions, company failures and accusations of robo-signing of mortgage documents.
From these connections, she concluded: "Does anyone see what I see in these findings? The executives at RCS seem to all have been affiliated at one time" with companies that were charged with bad behavior "and then moved on to form RCS!"
Warren Buffett summed it up with characteristic wit:
"You've done some remarkable research on the history of your servicer. Clearly not an immaculate conception.
"I'm not sure, however, how it will help in the foreclosure process. I wish I could be more helpful. Warren Buffett."
The Watchdog showed Smith's findings to RCS.
Spokesman Dan Hilley said the note was full of inaccuracies, but he declined to comment on specifics. He confirmed that some of her findings were accurate, but he pointed out that RCS faces no charges of wrongdoing "and has not been accused of fraud." He declined to comment on the Smiths' foreclosure case, citing privacy.
The Better Business Bureau has scolded RCS for a poor customer service culture, but the company seems to be flying higher than ever. Its 2011 portfolio consisted of more than 29,000 loans worth $4.8 billion.
Last month, RCS received approval from Ginnie Mae to expand its servicing to both investors and issuers of federally insured and guaranteed loans. That allows RCS to buy delinquent Federal Housing Administration loans out of Ginnie Mae securities, restructure them and resell them as new securities.
A former mortgage executive says Smith's findings reflect the revolving door of the mortgage industry. Richard Bowen, senior lecturer at the University of Texas at Dallas' Naveen Jindal School of Management and a whistle-blower who alerted authorities to irregularities in Citi's subprime mortgage practices, said mortgage company leaders become successful by cutting corners. Old habits are hard to break.
"I really feel bad for her," Bowen said of Smith. "She's tenacious and knows how to do her research."
What does Smith want out of this? For people not to lose their homes so easily.
Her dream: "Someone will say, let's look into this," she said. "It would help a lot of people."
Coming Sunday: He caught them dumping dirt and debris on his property, but nobody cared.
The Watchdog appears Fridays and Sundays.
Dave Lieber, 817-390-7043