Pilant's Business Ethics

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Tag: mortgage-loan

Banks Manage their own Penalty

Banks Manage their own Penalty

Mortgage Settlement Report Finds Banks Reluctant To Reduce Principal, Despite Promises

The largest mortgage settlement in U.S. history was pitched by its creators as a deal that would offer quick aid to 1 million people in danger of losing their homes to foreclosure. But according to a report released Thursday by the court-appointed monitor of the settlement, in the first nine months after the $25 billion deal was struck, fewer than 50,000 people received the most coveted form of relief: reduction of principal owed on a first mortgage.

Meanwhile, more than three times as many borrowers — 169,000 — agreed to a short sale, which requires they leave the property, according to the report.

Banks still have time to meet their obligations under the settlement, which requires that 30 percent of total relief come in the form of first mortgage principal reduction. But housing advocates say the limited progress so far — just 14 percent of aid has gone to write down loan balances — suggests that banks are avoiding, or at least delaying, their obligation to provide meaningful relief as they promised under the deal.

Mortgage Settlement Report Finds Banks Reluctant To Reduce Principal, Despite Promises

What did the federal government think would happen when their vaunted, over-hyped 25 billion dollar settlement wound up in the hands of the banks themselves? A child could have made an accurate prediction. You reward criminality by avoiding any real penalties. You chock it up as an enormous victory for the government while the banks and people like me hold you in contempt for your incompetence and servile stance to corporate crime. The banks have to pay back some money to the people they stole from. Great. Except that they decide who gets the money and they have decided that most of the money will go to short sales. Isn’t that special. They’re maximizing their profit. Who would’ve thought?

James Pilant

 

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The Banks Evade Responsibility Again

The Banks Evade Responsibility Again

Banks thrive, while homeowners still suffer | The Great Debate

A year ago the federal government and 49 states completed a $25 billion agreement with the nation’s largest mortgage servicers to settle claims of “robo-signing” and unlawful foreclosure practices. President Barack Obama announced the creation of the federal-state mortgage securities working group in his 2012 State of the Union address. The nation seemed on the verge of transforming the way banks treat struggling homeowners ‑ particularly those with “underwater” mortgages, in which a homeowner owes more than the house is worth.

These promises, however, have yet to be fulfilled. The latest interim report on the national mortgage settlement is due out this week, and banks will likely again declare that it offers proof that they are fulfilling their obligations. But the communities hit hardest by the foreclosure crisis have yet to see any meaningful relief.

Time is running out to ensure that these communities receive their fair share under the settlement. But it is not too late to provide meaningful assistance. The settlement monitors need to demand greater transparency from banks, and they need to see that banks comply with the fair-lending requirements set out in the agreement. They also need to aggressively police the servicing reforms to ensure that all homeowners get a fair opportunity to save their homes.

Banks thrive, while homeowners still suffer | The Great Debate

And from further down in the article:

Unfortunately, there is little transparency about how the banks are using this money. They have not provided any loan-level data to show which borrowers are receiving assistance.

Moreover, mortgage servicers have complete discretion over who receives help. Advocates fear the banks have been cherry-picking expensive loans that are deeply underwater to meet their settlement obligations quickly. This provides an important service for the borrowers in that category but little systematic relief for low- and moderate-income communities suffering the most from the foreclosure crisis.

The mortgage holders committed fraud for years making billions of dollars taking homes they had little or no claim to. They used the HAMP program as a weapon against homeowners, telling them to skip three payments so as to be able to qualify, then rejecting their applications or not bothering to even process them (not that we’ll ever know in most cases, the HAMP program kept no records for the first two years) and then quickly foreclosing on their homes. I’ve had students in my classes who were victims of that scam.

Instead of holding the perpetrators of these crimes accountable they were “sort of” fined 25 billion dollars through a program they administer and report on without effective oversight. Let me repeat that – they, the banks, administer the program to give back some of the money and homes they stole. Oh, forgive me, they are not giving the homes back just some money should they feel in some way that they want to because if they don’t want to, they don’t have to.

That is what passes for justice in the current administration and the 49 states that the bankers negotiated this sweetheart deal with. Crime pays in the United States if you are a banker dealing mortgages.

They stole billions of dollars worth of homes. They in an epic display of arrogance created a parallel system of recording deeds without any legal justification purely to expedite trading of mortgages and to evade filing fees. They lied to judges all over the United States in countless jurisdictions filing tens of thousands of false affidavits saying that their paperwork, their proof of ownership was in order.

These are crimes, not mistakes, crimes.

If I stole through fraud the least home in the land, I would and should do prison time. No one has been sentenced for these crimes. Without prison time, fines, that are a fraction of the money made, are the only deterrent. Is that enough? Does that make sense?

Two systems of justice – one for the bankers and one for regular citizens, the “common” folk, the ones without political friends; the ones that don’t have the right memberships, the right bank accounts, the right lives lived in the adoration of business television and magazines.

We discussed in my class on business law and business ethics what it takes to build a good society. One of the thoughts was to reward virtue and penalize wrong doing. What kind of society does this build?

I think you know the answer.

James Pilant

From around the web –

From the web site, Diane’s Blog:

Kamala Harris is right: we need a Homeowners Bill of Rights, and the banks, like it or not and they don’t,  need good, strong regulations to control them. These two items are bare minimums.  As for giving the money to individual homeowners, if it does happen, the amounts will be small because the numbers involved are so large. Better to allocate some money to homeowners’ advocacy and education groups.

From the web site, On the Frontlines of Americans with Debt:

The  five mortgage companies who are part of the settlement are Bank of America, Wells Fargo, Chase, GMAC/Ally Financial, and Citibank.
While HUD estimates that 2 million homeowners could see their mortgage balances reduced, it will be up to the five banks to determine which homeowners will be included in the program.
In addition, payments of between $1500 and $2000 will be paid to people who lost a home to foreclosure between 2008 and 2011, so long as certain criteria are met. The factsheet does not explain the criteria necessary for those people to qualify.

And finally from the web site, Defend My Florida Home:

A major impediment to mortgage modifications is the bank practice of “dual tracking” mortgages.  When a mortgage is dual tracked the bank pursues foreclosure while at the same time allowing the home owner to pursue a modification.  The problem with this is that in spite of an eminent, or completed modification the bank will still sell a home at sale leaving the owner homeless.

 

 

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When Banks Break the Law, Families Suffer

Half million dollar house in Salinas, Californ...

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We can see from the full article excerpted below that  the banks’ evasion of State recording statutes and poor internal bookkeeping has led many families to disaster.

I have read some bloggers who talk about deadbeat buyers but where are they now when it is obvious that widespread fraud and incompetence were common in the industry for years?

The decision of a family to buy a home is almost always the single most important financial decision of their lives.

Beginning in 2000, that investment became a chip in a Wall Street game of financial speculation. But the industry found that those chips were heavily regulated by law. Not like modern regulations but regulations older than this nation itself. The rules were that property ownership had to carefully recorded, geographically correct and a chain of ownership clearly established. Owning property was considered a critical part in an individual’s life and was protected by the law from injustice.

But this inhibited trading, so the industry created their own system of property transfer (MERS) and we know from the many lawsuits in sloppy or virtually non-existent records keeping to accelerate the process. Today, those injustices have come back to haunt middle class homeowners.

Please read the attached article and get a fell for what economic injustice feels like when the affliction has human face.

James Pilant

Foreclosure From Old Mortgages ‘Most Egregious Manifestation’ Of Broken Housing Market

Diane Thompson, an attorney with the National Consumer Law Center, says she has defended hundreds of foreclosure cases, and in nearly all of them, the homeowner was not in default. “The record-keeping on the part of the mortgage servicers is not to be trusted.”
The problems grew from a lot of sloppy recordkeeping that began during the housing boom, when Wall Street built a quick-and-dirty back-office operation to process mortgages quickly so lenders could sell as many loans as possible. As the loans were later sold to investors, and then resold around the world, the back office system sidestepped crucial legal procedures.
Now it’s becoming clear just how dysfunctional and, according to several state attorneys general, how fraudulent the whole system was.
Depositions from “affidavit slaves” depict a surreal, assembly-line world in which the banks and their partner firms hired hair stylists, fast-food kids and Wal-Mart floor workers, paying them $10 a day, to pose as bank vice presidents, assistant secretaries and corporate attorneys.

Foreclosure From Old Mortgages ‘Most Egregious Manifestation’ Of Broken Housing Market

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Looking Back at One Media Story about the Foreclosure Crisis

You wake up in the morning hoping and praying that some justice will be meted out to the giant foreclosure industry for the crimes they have committed. In that hope is mixed the great sorrow for all the people who have suffered the loss of their homes in this foreclosure crisis.

Now, let’s go back a little in time and see how the crisis was treated by the public’s stalwart defenders in the press. Obviously, once the stories of owned foreclosed, shabby procedures and busted paperwork trail, the press was eager to fight for the public.

Not exactly, more of a yawn and a condemnation of the homeowners who owed too much.

In mid 2010, the beltway press knew it was all overblown. It has become a bit overblown in some tellings.“ You see, “there’s little evidence that this has resulted in improper foreclosures..” You see, “Anectdotally, these things do seem to have happened…” At that time we had only heard the occasional, once in a while, sort of, story about some poor schmuck losing his property.

This is from the Atlantic Monthly, an article called – The Real Scandal of the Foreclosure Mess – October 8th, 2010 – by Megan McCardle –

The story on the foreclosure mess has become a bit overblown in some tellings. It’s clear that banks have been taking some shortcuts in preparing their foreclosure documents. The banks are obviously overwhelmed with the volume of foreclosures, and the (apparently) many instances in which sloppy securitization has resulted in lost paper trails, obscuring who, exactly has a right to foreclose. Rather than seeking legislative or judicial clarification, they’ve resorted to dubious practices that seem (to my non-legally-trained eye) illegal.

That is bad. But as Arnold Kling points out, there’s little evidence that this has resulted in improper foreclosures: evicting people who’ve paid, or who never had a mortgage with your company. Anectdotally, these things do seem to have happened, but there’s no evidence that they’re frequent, or that they are connected to the procedural irregularities that we’re now discovering with foreclosure documents.

Arnold says that the real scandal is our antiquated title system:

The real scandal is that the process of recording property title is so antiquated, and there are so many interest groups that resist modernizing it. The MERS mortgage database shows what a modern system could look like. But all of the counties that charge fees for title recording, the title “insurance” companies that shake down home buyers to buy “protection” from getting sued to prove that they own their property–these interest groups want to keep the title recording system as expensive and unreliable as possible.

. . . and that it’s taking so long to get people out of homes they can’t afford.

These are my comments on the Atlantic web site –

What!? You don’t see much but “anectdotal” evidence? What were you going to see? No one knew to look until now. You can’t have statistical evidence until you know there is a problem and can look at the numbers.
Anecdotal evidence is the beginning of discovery. Sometimes it turns out that the stories lead nowhere. This time they scored big. And now, and only now, can we find out how big the problem is.
“Only anecdotal evidence” Oh, PLEASE!

And then, about five minutes later, when I got even more angry –

The saddest thing about this article is that in two years after this disaster, this legal catastrophe, when the facts and the numbers are available, no one is going to pull this article out of their Windows’ recycle bin, and wonder what in the hell possessed the author to write it.

According to the article, the “real” scandal of the mortgage crisis is 1) our antiquated title system and 2) “. . . and that it’s taking so long to get people out of homes they can’t afford.” Now, Ms. McArdle is all in agreement with Arnold Kling on the the title system being the real scandal but on the second statement (getting the people out of homes…) she disagrees. I give her full credit for disagreeing with the second statement and therefore my scorn for her writing is only for the first statement.

What?!, the antiquated title system is the real scandal? I cannot generate enough invective for this statement. The world is too short of obscenities for me to throw at it. Let’s just go to the next one.

“… and that it’s taking so long to get people out of homes they can’t afford.”

Let me tell you a story… About ten years ago, housing prices began to go up but strangely the ease of buying them multiplied. Banks began to demand less and less evidence of credit history and salary down to the point where they eventually just filled in the blanks. This lack of oversight was because the great financial institutions of this nation were packaging mortgages as securities and using them as chips in the great game of casino capitalism. It was a strange time, in which the Internet was utterly blanketed by ads calling upon you to refinance your credit card debts – mortgage your home or to refinance your home for a lower rate. By about 2005, that something was terribly wrong was becoming clear. But the the regulatory agencies, the Congress, the Presidency, the financial press or the “Fed” did nothing about it. The selling if anything became more frenzied. Banks hired celebrities to participate in sales meetings in the black communities. Phone banks and mailings to those who rented and those who owned their own homes or even to those who were about to finish paying their mortgages proliferated. The messages was always the same, re-mortgage for lower rates, re-mortgage to pay off debts and the best one, buying a home is cheaper than rent. Many of the ads were carefully aimed at first time home buyers counting on their lack of financial sophistication to smooth the process. In 2006, the boom was pretty much exhausted, but the great financial institutions nursed it along for the next year by trading securities based on mortgages to the foolish as good investments and to each other simply to keep the market going. And then it all fell down.

“… and that it’s taking so long to get people out of homes they can’t afford.”

Simple statement. Factually correct.

They signed the contract, didn’t they? They’re adults. They got in too deep. They have to pay the price.

That is what it looks like if you live in a skycastle. “Skycastles,” that’s where people live so high and so far above the common herd, that they and only they can see what’s real, where the air is clear and the thoughts razor sharp.

From there they watch the little people like bacteria on a petri dish and wonder why God made so many, unless their cold hard intellects have freed them from religious delusions.

I’m down here with the other inconsequential. I say that these people were victimized and deserve mercy. These people did what the government, the media, and the financial industry told them was the intelligent, the correct and the best decision. These people were generally misled, lied to directly and were often the victims of fraud.

But I don’t live in a skycastle.

James Pilant

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Obama Administration Continues to Protect Banks, Ignores Consumers

It seems that I can never get free of this subject. Obama never met  banker he didn’t like and whose interest he didn’t place ahead of everyone else. One of the things that average Americans resent is the lack of prosecution of these rogue banks. Just what did the banks do that makes me so angry? They lied directly in court claiming ownership of properties they did not own. The filed false affidavits lying about their ownership. They defrauded many customers by lying about the terms of the mortgage agreement. The lured investors into securities backed my mortgages that they knew would fail as investments and then bid against those investments with derivatives to make ever more money. To add one further insult, these heartless financial wizards foreclosed on serving veterans’ homes contrary to federal law.

Now get this. These arrogant people created their own system of ownership. Under the law of each State enshrined in American law, ownership of real property is proven by a careful record’s trail kept in most states in each county court house. To evade fees and speed the process, the mortgage machine created a computer system called MERS. They would make a single transaction using the county system then they traded the properties much like the homes in the monopoly board game. Instead of careful record keeping, we have a system where in many cases, no one knows who owns the property. In case you missed it, by using their own private system of property ownership, they never paid a dime of taxes on the transfers defrauding the states out of millions of dollars of taxes.

For more than 200 years, owning property has been the goal of Americans. To be a landowner was a mark of prestige, of achievement and security. But keeping property lines straight, land fraud and busted titles have bedeviled citizens. To curb these abuses laws were established to make as certain as possible land ownership, to protect the right to property. The right to own property is not sacred but it is as close to sacred as laws can make it.

These men, these arrogant men created their own separate legal system ignoring the laws of the government and the rights of citizens. They then used it to evade taxes and speculate like Riverboat gamblers playing with chips.

The law provides penalties so that justice may be served. Those who fail to obey the law are punished. Those are hardly radical thoughts. They are the basis of a system that treat both the small and the great equally. The administration is pushing an agreement which will free the mortgage banks from responsibility for their crimes.

What kind of nation do we live in where a petty shoplifter faces jail time and fines and bankers are freely given immunity without any assurance that I find credible that they will behave better in the future. I mean after engaging in a crime spree that makes organized crime look like a child stealing candy, they walk free. Doesn’t that give then the impression that they are above the law. It gives me that impression.

Can’t we have justice? What did I do? What did my fellow citizens do? Are we some of lesser creation that we must watch in awe and envy while those who evade over and over not just the law but evade their responsibilities of citizens to pay taxes and to act for the common good?

What kind of country are we becoming?

James Pilant

The Obama Administration’s ‘New’ Bank Fraud Deal: Still Unfair, Still Unjust, Still Unbalanced

The Obama White House continues to push for a settlement that would let bankers avoid being punished – or even investigated – for a wave of mortgage-related crimes that includes perjury, tax evasion, and several types of fraud.

Despite the President’s new-found populism – rhetorically, anyway – officials in his Administration continue to push an unfair deal designed to conceal the financial Crime of the Century.

The Financial Times reported on new details of the proposed settlement, whose stated purpose is to punish banks and reduce the amount of money owed by underwater homeowners. But it’s increasingly clear that the deal wouldn’t help homeowners very much and wouldn’t punish bankers at all.

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Sign a Petition; Stop a Foreclosure

Scrooge and Bob Cratchit illustrated by John L...

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Sign a Petition; Stop a Foreclosure

 

Lauren Bloom writing in her blog is asking her readers to help a disabled woman keep her home. I join in this effort and ask you to sign a petition in the woman’s behalf.

Note to First Mortgage – don’t be a Grinch!

Ms. Chappell has posted a petition on Change.org asking First Mortgage Corporation to do the decent thing and let Ms. Bourchard pay off some of her mortgage through the Hardest Hit State Fund. It’s not as though First Mortgage Corporation wouldn’t get paid, folks – it just means that the company would have to do a little more paperwork. HUD currently has First Mortgage Corporation on hold while everyone works to find a more compassionate solution. Come on, First Mortgage! It’s Christmas, for pity’s sake – have a heart and don’t evict a disabled schoolteacher from her home. Even Ebenezer Scrooge would know better.

If you agree with me that Ms. Bouchard deserves the opportunity to stay in her home, you can sign the petition by clicking here.

Note to First Mortgage – don’t be a Grinch! | The Business Ethics Blog

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Will Rogers – Mortgage Relief

Will Rogers (19th century photo)

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I am a big fan of the American humorist, Will Rogers. I have a first edition of one of his biographies, (Will Rogers, Ambassador of Good Will, Prince of Wit and Wisdom – P.J. O’Brien) and hope to collect a complete set of his newspaper columns.

The mortgage foreclosure crisis has  long been a concern of mine. I’ve written about it many times.

Imagine my delight when I discovered that Rogers had his own views on the subject –

… Why my lord, there is dozens of different things that will help the farmer on his land, besides water, or fertilizer, either. There is the interest on the first, and second mortgages. Why don’t they introduce a bill in Congress to help the farmer by paying off his mortgages? That’s what eating him upon the farm, it’s not lack of irrigation, or lack of fertilizer – it’s abundance of interest payments; that’ s the baby that is there every minute of every day. Talk and sing about “Old Man River,” but it’s old man “interest” that keeps the farmer running to town every few days. He has to have a bookkeeper to keep a set of book to keep track of when his various Notes and Mortgage interest comes due. It’s the thought of the old mortgages that keep him awake at night.

But if you notice, they are always trying to put through some kind of bill in Congress, but nobody ever puts one through to do something about interest. No sir, you couldn’t do that, because then you are getting into the business of the boys that really hold the hoops while the jumping is going on. You could no more get a bill through to whittle the old interest down, than you could get a politician to admit a mistake.

(The column was written in 1928 and is found on pages 134-135 of A Will Rogers Treasury, compiled by Bryan B. Sterling and Frances N. Sterling, Crown Publishing 1982)

Rogers was not a big fan of Congress or the big banks. In 1928, the farming depression was in its tenth year. American farmers had prospered during the First World War and had borrowed heavily to increase production by buying more land, mechanizing their farms, fertilizing and irrigating their crops. When the war ended and the soldiers of that war returned home and resumed farming the price of every kind of agricultural commodity dropped dramatically. The farmers were left on the hook for large mortgages that were difficult to pay. Believing in their way of life they doubled down getting further into debt but the agricultural depression did not let up until the Second World War. I wouldn’t be until the Roosevelt Administration that the farmers began to receive significant aid.

Will Rogers was a member of the one percent, the highest paid film star of his time but he never forgot where he came from and who was important even though they didn’t have that much money.

James Pilant

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What’s MERS? We’ll ALL soon know their importance (via News Unwrapped)

I’ve written about MERS several times, most recently  MERS And Ownership and A Thirty Dollar Fee?

I’m astonished that any lawyer would have encouraged a mortgage bank into this kind of deal, but it was one of those free money things. Any bank using the MERS system paid no property transfer fees like everyone else. So, it was worth millions of dollars to use that system even though it had never been authorized by law in any state.

This is big news. If property cannot be transferred using the MERS system, hundreds of thousands of mortgage foreclosures were done outside the law and hundreds of thousands of pending foreclosures will not be possible.

(This web site, News Unrapped, is brand new and I would like my readers to take a good look at it and consider subscribing. jp)

James Pilant

What's MERS? We'll ALL soon know their importance BREAKING FINANCIAL NEWS >>> This is very big happenings for the entire financial system, including but not limited to banks and investment bankers , real estate owners and investors, stock owners (and all associated with that industry), as well as all of us who exist and are subject to market movement. For sure, there will be lots and lots of spin on t … Read More

via News Unwrapped

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