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Bill Erbey Made $2.3B Off Your Underwater Mortgage

"I think in the government areas, people would rather have us hire everyone on-shore but they also like us more because we keep people in their homes. So it's a prioritization: you can't keep people in your homes if you're losing money," Erbey says.

Erbey continually comes back to this issue whenever he is asked to address criticism of Ocwen's practices.

"I would argue that the primary criteria for whether you should be happy as a delinquent borrower is whether or not you're able to maintain your house. As that objective standard of quality of service, we're better than anybody at that. And we strive to get better every day. Because you know why? Over time it's a better societal thing, people might think you're a good guy if you try to help people stay in their homes. B) we generate more cash flow off those securities than anyone else. And C) it makes money for my shareholders. If we're good at it, we get more business, we're more efficient at it, et cetera. So we try to make a business model that's aligned to all those constituencies that we have out there."

Ocwen has had its share of run-ins with regulators. An examination last year by the New York State Department of Financial Services found instances where Ocwen foreclosed upon borrowers without giving proper notice, or without properly establishing its standing to foreclose.

Still, community groups regularly make statements that suggest Ocwen is a considerable improvement over the big banks when it comes to dealing with delinquent mortgages.

"There's been a lot of servicing companies that have really contributed to the problem by wanting to head in the direction more of foreclosure rather than by working through problems and getting people into new loans. If there's a company in the mortgage servicing industry that has stepped out of the mainstream to do it differently it's Ocwen," says John Taylor, President and CEO of the National Community Reinvestment Coalition, a nonprofit organization dedicated to getting businesses to invest in poor communities.

Ocwen's fundamental belief, according to Taylor, is that modifying mortgages gives creditors a better result than foreclosure in many instances.

"At first I didn't really believe them, but they're the real deal in doing that. It's by far not perfect or anything like that, but they really have I think turned the industry in a direction where there's been a lot more cooperation as a result," Taylor says.

He'd Rather Not Be Shark Fishing

While Erbey's reputation for thriftiness is well known, it is not the reason the newly minted billionaire still includes 25-cent charges on his expense reports, according to longtime business partner Barry Wish, who sits on Ocwen's board.

"It has nothing to do with the money. It's because it's accurate, and that's who Bill is. It would bother Bill if something wasn't correct," Wish says.

To determine what is correct, Erbey leans heavily on data -- another discovery Wilbur Ross made once he joined Ocwen's board. In a move Ross says is unusual for a new director at a company, he was placed on the compensation committee.

"The first meeting I went to, it was to set the criteria for peoples' bonuses for the next year, always sort of the most sensitive thing that you can imagine to be done," Ross says.

In reviewing the bonus of the executive in charge of Ocwen's call centers "they looked at what you call the KPIs, mainly the key performance indicators, for that fellow for his bonus, and they were remarkably specific. Like reduced waiting time of the average caller from 12 seconds to 10 seconds, that kind of thing. I've never seen a company that had as precise criteria for bonuses as this company does. I mean, these are really buttoned-down people," Ross says.

Erbey's dedication to his work is undisputed among colleagues and business associates.

"The guy is a workaholic," says Lee Cooperman, Chairman and CEO of Omega Advisors, which owns shares in three companies Erbey oversees.

Erbey says he works between 70 and 75 hours per week, but age has slowed him down.

"It just becomes physically more difficult to put in 80 or 100 hours a week," he says. In 1983 and 1984, he and his wife Elaine, who used to work with him but has since retired, "literally worked every day but one day for two years."

I asked a former manager at Ocwen what Erbey does for fun, and he responded, "you don't get it."

Erbey laughed when he heard this.

"One of my investors called me up one time and wanted to take me shark fishing. I said 'I'll do it for you if you want, but I'll make more money for you if I go to the office.'"

Erbey's admirers say he has a dedication to creating shareholder value that is something like an obsession.

Ross cites the recent move of Ocwen's top management to the Virgin Islands to save on taxes.

"In order to make that really work, and not just be a phoney boloney gimmick, it became necessary for him to move there. I don't know if you spend a lot of time in St. Thomas, and I certainly don't mean to disparage it, but there not a lot of people, who are wealthy people, who live in Palm Beach, who would welcome moving to St. Thomas. He did that simply to make his company better. And when you think about how wealthy he's become, it's really quite amazing," Ross says.

When I asked about his bedtime reading, Erbey mentioned a couple of popular business books, The Drunkard's Walk and Thinking, Fast and Slow.

The Drunkard's Walk, was published in summer 2008, just before the worst of the financial crisis, and Thinking, Fast and Slow was published in 2011, but reviewers have contrasted both books with 2005's Blink.

If the message of Blink was to trust your initial instincts (something Lehman Brothers executives may have taken a bit too far), synopses of the books favored by Erbey suggest they urge readers to do just the opposite. Analyze, deliberate and analyze some more. Then maybe blink. Still, Erbey is "all about efficiency," says a longtime business associate. "He likes to get the information, make the decision, then move on."

Erbey takes great pride in his education. He likes to refer to charities as "eleemosynary institutions," and says he and his wife, who have no children, will leave "the majority of what we have," to scholarships.

One executive describes Erbey as the type of person who, asked about the rationale behind a business decision, might say merely, "Occam's Razor," either trusting that everyone else in the room actually knew what that meant, or expecting them to go look it up.

"You could easily see him as a business school professor," the executive says.

Erbey grew up in Moon Township, Pa., and his father was a controller for a unit of a shipbuilder called Dravo Corp. He attended public high school, Allegheny College and then Harvard Business School, from which he graduated in 1973.

Though he was a bit stiff in the first of what turned out to be several interviews, Erbey was most relaxed when recalling something he had been told by his professors at Harvard.

"It was a little less touchy feely than it is today. They basically told us that we were the dumbest class they've ever had to admit, and you are actually so stupid, you can't answer the question. We just hope in the first year, we can get you to actually accurately frame the question."

Erbey likes to describe himself as dull, but business associates credit him with some memorable, if rarefied, one-liners.

Dialing in late one time to a conference call with a particularly difficult access code for example, Erbey quipped, "I would have gotten on sooner but I had to make it through the Fibonacci Sequence."

While Erbey is chairman of five companies and CEO of none, followers of the five companies say he has the last word on all important decisions. However, people both inside and outside those companies say he has gotten far better at delegating authority.

Wish says Erbey's extreme involvement in all aspects of Ocwen's business "was a weakness in the company and I think we've turned it into a strength."

He says he and Erbey "came to the conclusion that we needed a much stronger management team over the years and that in order to attract the proper people, Bill had to step back a little."

The only conceivable thing that would make Erbey step back more than a little would be a health problem. Erbey says his health is "OK," and adds, "as you get older, stuff breaks. Luckily, modern science is pretty good and I have the money to be able to spend to deal with issues."

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