Category: business ethics

Do The Banks Have Proof Of Ownership?

On By southwerkIn business ethics, ethics, Government Failure, Philosophy of Business, White Collar Crime

I’m not the only one who has suspicions that the banks might not have the necessary proof of ownership. Read the following from the Wall Street Journal –

Under a far gloomier scenario, the problems created by using robo-signers may be irrelevant if, instead of being lost, mortgage documents weren’t ever properly transferred during each step of the securitization process, says Adam Levitin, a professor of law at Georgetown University. If that happens, “the whole system comes to a halt,” he says. Investors could argue in court that they never owned the mortgages backing their money-losing securities.

Banks and their attorneys say such fears are overblown. Procedures for transferring loans into mortgage-backed securities “are sound and based on a well-established body of law governing a multi-trillion dollar secondary mortgage market,” said Tom Deutsch, the executive director of the American Securitization Forum, in a statement Friday.

I love that second paragraph. Here look at the key phrase, “Procedures for transferring loans into mortgage backed securities are sound and based on well established law…” Wow, you’d think the founding fathers were doing it! Well, this vast body of jurisprudence has existed since that grand old year of history, 2002? I doubt if any of it has been tested in court. His statement is more hopeful than true. You see the transfer of property is one of the most important procedures in the law. It’s surrounded over and over again by legal protections many of them requiring specific procedures. Now, you might ask me if during the Go Go years of financial mismanagement, the mid years of the first decade of this century, that the banks and their mortgage creating boiler rooms did all that proper procedure? Not a chance. Not even a little chance.

Some of the mortgage companies were giving out mortgages with NO capital of their own and Wall Street still bought them. If you’re giving people mortgages with not a single cent of your money on the line, how much do you care about good paperwork?

James Pilant

Tax Breaks to Encourage Individual Poverty-Fighters? (via Get Aktiv)

On By southwerkIn business ethics, Capitalism, Philosophy of Business2 Comments

Get Aktiv is out there with a different kind of idea. He wants domestic tax deductions in return for investing in the developing countries. This would re-distribute money from the first world to the third on a voluntary basis. It’s an interesting idea. Give it a read.

Tax Breaks to Encourage Individual Poverty-Fighters? Extreme poverty is, well, an extreme issue – and it requires extreme commitment and creativity to address it. I'm always reading other people's works, visiting developing countries, and basically trying to soak up and synthesise as much knowledge and experience as I can. In continuing my reading of Creative Capitalism, edited by Michael Kinsley, I've just encountered a fresh idea I hadn't considered before and I believe it warrants serious consid … Read More

via Get Aktiv

Will Congress Save The Banks By Dismissing The Ownership Rights Of Homeowners? – Senior Editor, John Carney Says They Will

On By southwerkIn business ethics, Capitalism, ethics, Government Failure, Philosophy of Business, Uncategorized

I’m cynical. You can’t have much to do with the field of business ethics and be anything else. I was outraged for days after Congress passed the act that would have legalized much of the mortgage industry’s wrong doing. When Obama vetoed it, I had a rare moment of gratitude. But I’m still cynical always waiting for the knife in the back, a sell out, a deal behind close doors … There is always someone waiting to make a deal no matter what crawling excreted maggot they have to deal with. Always someone.

But this guy is more cynical than I am. And he might be right. John Carney in an article entitled, “Sorry Folks, The Put-Back Apocalypse Ain’t Gonna Happen,” says that Congress will not let Bank of American get in real trouble.

Here’s an excerpt from this article –

But Bank of America’s recent decline—down almost 10% this week—is driven by fears that the bank could be hit with huge liabilities for faulty mortgage pools. And I’m pretty sure that is not going to happen.

Why not?

Because the politicians will not let the financial stability of the largest bank in the nation be threatened by contractual rights. Not when there’s an easy fix available that won’t cost taxpayers a dime.

Here’s what is going to happen: Congress will pass a law called something like “The Financial Modernization and Stability Act of 2010” that will retroactively grant mortgage pools the rights in the underlying mortgages that people are worried about. All the screwed up paperwork, lost notes, unassigned security interests will be forgiven by a legislative act.

He may be right. I’ll bet the other way. Fifty state Attorney Generals and countless other officials are on the prowl right now and bad stuff is coming out every minute. The Public is in a bad mood. Saving the banks under these circumstances could delegitimize our system of government in a way we haven’t seen before. It is true that people have virtually no faith in Congress and only somewhat more in the President. But that is different from active hate. It’s different because the government will essentially be putting a sign on its front lawn, “You have a dispute with a bank and you’re right – WRONG, bank wins. You’re less than nothing. Go home and suck it up.”

I don’t think that’s going to go over well. Further, I don’t think it will go away in time for 2012.

We’re about to see how much power public opinion has. John Carney says it does not have the power to stop Congress from saving the bank by abrogating their legal rights. Carney hopes he’s wrong about this. From his work, it is easy to see that he is no defender of the banking industry and, is probably, one of those people I speak of as a ally in the “good fight.” But I hope he is wrong too.

The possibilities of the results of such an action by the federal government offer only two possibilities, acceptance by the public or another kind of response. I am not happy with my speculations on what that response might be.

James Pilant

Banks Could Lose $80 Billion

On By southwerkIn business ethics, ethics, Government Failure, Philosophy of Business, White Collar Crime

Analyst Dick Bove says the mortgage foreclosure crisis could cost the banks as much as $80 billion dollars. He is quoted in an article by Jeff Cox from CNBC.

Banks could face losses of over $80 billion from the foreclosure mess—not so much from the moratorium on home seizures but from the flood of homeowner and investor lawsuits likely to follow, analyst Dick Bove said Friday.

The lawsuits are likely to focus on “fraud at every level of the process”—from packaging mortgages into bonds to selling them to investors, the Rochdale Securities analyst said in a note to clients.

The legal fallout could cost the industry more than $80 billion, about 10 times the amount that Bove sees banks losing from the foreclosure halt itself.

I really like that phrase, “fraud at every level of the process.” It’s a beaut. It also sums up what has been going on for the last two years, and industry run amok.

James Pilant

Hotel Throws Couple Out After Accusing Them Of A Negative Online Review

On By southwerkIn business ethics, Capitalism, ethics3 Comments

From USA Travel –

A British couple says they were kicked out of their hotel after the hotel manager accused them of writing a negative review on TripAdvisor and called the police.

Adrian Healey, 33, tells the Blackpool Gazette that earlier this month, he’d booked a room a hotel in the seaside resort of Blackpool, England, to take his first vacation with his girlfriend Sherrie Andrews, 33, since being diagnosed with cancer 18 months ago.

But the Golden Beach Hotel’s manager asked them to leave two days into their paid, three-night stay, they told the Gazette, adding that the manager stormed into their room, accused them of writing an online review and called the police.

Is this the future? Google has suggested and apparently believes that all online users should have their identities clearly labeled as they travel the web. In this case, the hotel was guessing. What are you going to do when services like hotels can examine your postings to see if they want to serve you?

James Pilant

4 things buyers need to know about robo-signing and the foreclosure freeze (via Keyproperties’s Blog)

On By southwerkIn business ethics, ethics, White Collar Crime

I really like the advice this web site gives. Its explanations are wonderfully clear. Some of you may be thinking of buying homes or have purchased a home that has been foreclosed on. You’ve got some questions and their answers seem to me intelligent and well phrased. So give them a look!

James Pilant

from Tara @Trulia.com NOTE: This post will be continually updated, below, as more foreclosure freeze news breaks. I double-dog dare you to watch a TV news show or spend more than 5 minutes on the web without hearing about the massive "robo-signing" foreclosure scandal that is rapidly encompassing the biggest banks in the country. Here are 4 things home buyers need to know about this breaking real estate news, and how it impacts them. (Hint: I thr … Read More

via Keyproperties's Blog

What I’m Beginning To Suspect About The Mortgage Fiasco?

On By southwerkIn business ethics, Capitalism, ethics, Government Failure, White Collar Crime

At the moment, the mortgage crisis occupies a considerable amount of space on the web and the regular news, both popular and financial. I have been observing problems in the process for a long time.

The first thing that I observed was that banks were almost never re-negotiating their mortgages which struck me as extremely odd. Since the homes were priced during the housing bubble, the bank made much, much more money extending the loan then they did foreclosing, when they could only resell the house at its current market value.

The second thing was a constant drumbeat of stories where the banks were making foolish mistakes, foreclosing homes they didn’t own, or re-negotiating home mortgages and having done so, then foreclosing the house. Pretty strange stuff to see from well financed and lawyered up organizations.

As the crisis began to develop, I noticed that the high speed processing involved lying to judges perhaps several million times with false affidavits. I pointed out in postings that it would be hard to get lawyers to sign off on these things, Judges being the way they are. Then, of course, we found that they had hired every kind of person to sign off on these documents. Why would you want to do that?

I recognized that speed increased profits but you can get speed without incompetence. Considering the threat of later lawsuits and the chances of getting caught, we’re back to the question, “Why would you want to do that?”

One of the background issues that has been reported on a good number of times is that a high proportion of these mortgages were created at the height of Wall Street speculation in mortgage based securities. It was pointed out that in some of the reported cases, when challenged for the actual documents showing ownership, the banks have on occasion, been unable to do so.

Look guys, only a very small proportion of mortgages have been challenged in court. If you’re getting hits in those few cases (you’re finding properties without actual ownership documents), you are looking at the very tip top of the iceberg.

My suspicion is that the banks don’t have proof of ownership not in dozens, or hundreds or thousands of cases but in the tens of thousands. I am beginning to believe that all these bank assurances that the process would not have been any different if they had done their work is PR staving off inquiries as long as possible.

I believe the banks are desperate to get these matters settled before the deluge, to get as many foreclosures out of the way as possible so that when the eventual revelation occurs they can claim that the damage to the larger economy does not merit prosecution.

I suspect we are about to go into a second banking crisis similar to the one in 2008.

I hope I am just over suspicious and jaded.

If my scenario is accurate, we and the economy are in for a rough ride.

James Pilant

WSJ Writes Balanced, Intelligent Article – End Of World Imminent

On By southwerkIn business ethics, Capitalism, ethics

Since the purchase of the Wall Street Journal by Rupert Murdoch, I consigned it to the ash heap of history. I was doing my usual research into the crimes and misadventures of the banks in this foreclosure crisis. Suddenly, there was this article. I read through it and decided to post it. Imagine my surprise when I got to the top of the page and found where it came from.

Isn’t this the newspaper that just a few days ago told the world that lying to judges with false affidavits was just a matter of “paperwork?” Aren’t these the guys who honor the basic right of property ownership to the death just as long as an average American doesn’t attempt to assert it?

There is no explaining this. There must be some cognitive dissonance at the Journal. I hope no one on the editorial board dies of shock having seen a fact for the first time.

Well, give this article a read, it’s a good account of the current crisis in mortgage forclosures.

James Pilant

The Human Touch

On By southwerkIn business ethics, Capitalism, Government Failure, Philosophy of Business, White Collar Crime

The word, home, has powerful meanings for Americans. Who can forget, Dorothy in the Wizard of Oz, saying over and over, “There’s no place like home.” How many of us “want to go home?” How many of us when overseas, look back at the U.S. and think about going “home.”

Home is a human concept life love, caring, kindness,.. those kinds of things.

It’s hard to quantify.

For most of American history, homes were very simple, often one room, generally little more than shacks. But as time went by and with urbanization, homes became larger and more complex … and more expensive.

For most Americans, purchasing a home all at once became impossible. A market for mortgages developed and people bought their homes over time.

Banks were small and deeply embedded into the fabric of the community. Social fabric is a fancy word for multiple relationships. A local bank with small resources depended heavily on the success of its loans, even the smallest, for its continued success. So, the bank exploited its connections, it knew a great deal about a creditor, may have known him personally, probably his family as well. They knew what he did for a living, not in the sense of the job title on the application, they knew what he did.

The bank was also well known. It’s officials were church goers, customers, friends, etc. The locals knew the bank by its continuously developing reputation.

Thus, there was social pressure both ways. For the homeowner, it was a disgrace to fall behind on payments. For the bank, it was dangerous to its moral authority to foreclose without consideration of many factors. Generally, speaking there was a great deal of pressure, rightfully so, to work out the problem rather than seize the home.

That’s gone. Beginning roughly in 1999, banks began selling their loans as assignments to investment banks to be bundled into “securities” to be sold to the foolish and the more foolish.

There is no knowledge of the community or the borrower beyond the thinnest veneer of computer data. The bank might as well be orbiting Pluto for all the effect of public opinion.

Human and business are both relegated to key strokes.

This limited knowledge is probably entirely adequate for “World for Warcraft.”

Taking a process developed from a community developed series of relationships has been disastrous. Banks were given the benefit of the doubt because as community citizens they could be trusted. This made the process of mortgage foreclosure easier for the banks, streamlining a difficult problem in the community to be as painless as possible.

Maintaining that level of trust in bank integrity has been disastrous in an age where banking has become more a world of bonus obsessed, financial buccaneers than respectable community bankers.

The human recipients of the mortgages have suffered terribly. They have very often expected that their loans could be modified as since they were making what in the past were reasonable offers only to be tossed from “the gates of the temple.” What was reasonable no longer mattered. What was the best decision no longer mattered.

The only thing that mattered was the process. Humans need not apply.

We can no longer pretend that banks are reasonable, that they will act intelligently, or that they have the interest of the community or their nation in mind, when they make decisions.

James Pilant

Do Individuals Matter?

On By southwerkIn business ethics, Capitalism, White Collar Crime

Sometimes.

Look at this story of two citizens who took on the behemoth of the foreclosure industry and gave it a mauling it won’t soon forget.

More than a year before lenders, law firms and document companies began owning up to widespread paperwork problems with their foreclosure filings, Lisa Epstein and Michael Redman already knew that something was wrong — very wrong.

Redman, a former online automobile consultant, got his first taste of the problem in early 2008, when he tried to help a relative who was facing foreclosure.

As he tried to determine which of three or four supposed lenders held the note, Redman, 35, realized that not only did he not know the answer, neither did any of the companies that were asking for payment.

Epstein, a nurse who cares for cancer patients, also is going through foreclosure. She got her baptism in the world of shoddy foreclosure paperwork in the summer of 2009, however, when she tried to help a brain tumor patient keep her home.

Warms your heart, doesn’t it.

James Pilant