Andrew On Mortgage Foreclosure Lies

On October 5, 2010 By southwerkIn business ethics, Capitalism, Economic measurement, ethics, Government Failure, Philosophy of Business1 Comment

My friend, Andrew, once again displaying his usual knowledgeable approach adds to the discussion on my essay on the mortgage foreclosure crisis.

I live, and have a mortgage, in Georgia, which is a non-judicial foreclosure state. Here, the banks are required to register all mortgages in a computer system called MERS. I believe that stands for Mortgage Electronic Records Service or something along those lines. The bank has to input all information regarding all of its mortgages in Georgia into this system.

Whats scary is that if the MERS system sees a lapse in mortgage payments for an account, it can automatically initiate the foreclosure process. With Georgia being a non-judicial foreclosure state, its very hard to fight a foreclosure once it has begun.

Every now and then I hear about people here who make all of their payments on time, and the bank forgets to enter the payment information into MERS. MERS then initiates the foreclosure of the property, and the homeowners have to hire a lawyer to have the process stopped. Its scary to know that I can make all of my payments on time and do everything that I am suppose to, but if my account information happens to fall through the cracks due to a lack of diligence on the part of the bank, that I can be burned for it.

It is always good to have Andrew’s thoughts on a subject.

James Pilant

Mortgage Foreclosure Lies

On October 4, 2010October 4, 2010 By southwerkIn business ethics, Capitalism, Economic measurement, ethics, Government Failure, Philosophy of Business4 Comments

Telling judges across dozens of states that documents are accurate and have been reviewed when you don’t know and haven’t done it, is just a pack of lies. Running thousands of foreclosures through the court system without enough staff to actually do the work isn’t just cost cutting it’s stealing from homeowners who do not owe the sums reported or are trying to prove fraud in the process. The banks essentially said, “Our documents show you are just wrong, suck it up.” All this when they had little or no assurance that the documents were correct.

In an article written by Arthur Delaney, he writes –

The paperwork scandal that has prompted several banks to halt evictions and review their foreclosure procedures is reminiscent of the predatory lending scheme that inflated the housing bubble.

“It’s the same process, falsifying documents to make them look acceptable to someone,” said Tom Domonoske, a lawyer and consumer advocate in Virginia. “They’re falsifying foreclosure documents so judges will look at them and say, ‘Here’s an affidavit. It’s signed.'”

Now, get a load of this – (further down in the article)

The bogus loans and bad foreclosure paperwork are both the result of Wall Street’s massive appetite for mortgages during the housing bubble, experts say, as banks repackaged mortgages as asset-backed securities and sold them to investors. As mortgages repeatedly changed hands, servicers in many instances lost track of who owned them. In states where foreclosures need a court’s approval, servicers now find themselves unable to prove they have a legal right to foreclose.

That’s right, they’ve been foreclosing on homes they weren’t sure they owned. (By the way, the sentence explaining that when they need a court’s approval, they don’t get to foreclose if they can’t prove ownership is nonsense. It is only when you contest ownership, usually with a lawyer, can you stop the process. There is no doubt in my mind that thousands of homes were foreclosed on, with no small profit to the bank, that the bank had no ownership rights to.)

What are we going to do? Banks have had a good reputation in the past with foreclosures. It was unpleasant for the bank and for the customer. They did their process and the home shifted possession. Because of this good reputation the law accepted the bank’s statement as to ownership and money amounts without demanding proof.

It would have cost a lot of money for banks to have to prove the facts in dozens of what were largely routine cases. So, the legal system streamlined the process. The bank’s paperwork was accepted as accurate as long as an attorney signed that he had personally reviewed the documents.

What have we learned? First, we can learn that the processes under which we gave financial institutions the benefit of the doubt have to be modified so that these institutions have to prove their case. Yes, it will make mortgages more expensive to forclose. Yes, it will make the process more complex and longer. But what choice do we have when the banks have deliberately and calculating lied for years in tens of thousands of cases? At what point do you stop giving them the benefit of the doubt?

Now.

They have proven that they cannot be trusted. Anyone who says otherwise is ignoring the hard, cold, unpleasant, unyielding facts.

James Pilant

Credit Card Companies Develop New Tricks To Get Your Money

On October 4, 2010 By southwerkIn business ethics, Capitalism, ethics, Philosophy of Business1 Comment

In an article from BNET’s Moneywatch, it is reported that there are three changes, credit card companies are using to make more money. These companies are losing a lot of money because of the new regulations. It definitely killed some of the content in their bag of tricks. But they are resourceful.

According to BNET –

The new Credit CARD Act, passed last year, handed credit card companies a long list of new consumer-friendly regulations. But it hasn’t taken long for card issuers to find sneaky ways around the new rules, says John Ulzheimer, head of consumer education for Credit.com.

The new rules are going to cost the credit card industry somewhere between $50 billion to $80 billion a year, he says: “That’s enough money that they’re going to have to make it up” in other ways.

First, they have increased minimum fees and interest rates.

Second, the law requires that if your payment falls on a weekend or a holiday while the companies are closed, your payment will not be late if you pay the day after. To evade this, the companies are keeping some of their offices open on those days. Call your company on a holiday and see if they have open offices, if so, to be on time, you must pay before the holiday.

Third, the law requires college students to show evidence of a job or have a parent as cosigner before they can get a card. The companies are turning a blind eye to other students co-signing and are considering student loans as income, evading both requirements.

I’m sure I’ll have more to report about credit card company tactics in the future.

Mortgage Companies Flout The Law – 56,000 Foreclosures Suspended

On October 1, 2010 By southwerkIn business ethics, Capitalism, Corporate Social Responsibility, ethics, Government Failure, Philosophy of Business

When you file a foreclosure the law favors the bank. All the bank has to prove is that they have personal knowledge of the case. This eliminates the need for proving each individual mortgage.

So all they had to do to meet their legal requirements was to have someone review the file. Guess what? In their hurry to foreclose on as many homes as possible (tens of thousands), they just didn’t do it. Since they didn’t do it, there is no way to know how many homes they took wrongly, or if the amounts were right, etc.

This isn’t just sloppy work, it’s a case where these large companies, in particular, GMAC and Chase, violated the law by asserting that they had fulfilled their legal requirements when they had not. But to them that wasn’t important only that they close the cases by thousands a month. Can you conceive of anything more contemptuous of the law?

I’d been reading reports of homeowners who owned their homes outright being foreclosed on by these companies and having to hire attorneys to get it stopped. I just thought they fouled up here and there. No, they didn’t even try to do what they were supposed to do and as long as the courts accepted that they had “personal” knowledge, the machinery of foreclosure went on whatever the actual circumstances were.

If you want to know why people have been unable to renegotiate their mortgages, look no further. The bank suffered little or no expense from a high speed unwitnessed foreclosure. Renegotiation would have required work, personal knowledge and a concern for the customers. Those three things were not about to happen and I believe will not happen.

From the New York Times article –

The missteps stemmed from the affidavits the lenders file as they seek a quick or summary judgment in thousands of foreclosure cases. The affidavits state certain facts about the case, including the amount owed, which the signer indicates he has personal knowledge of. Without the affidavit, the lender would have to prove the facts at trial.

In depositions taken by lawyers for homeowners, executives at GMAC and Chase said they or their teams signed 10,000 or more affidavits and related documents a month. That did not give them time to review the cases.

Defense lawyers say the disclosures are symptomatic of the carelessness, if not outright fraud, that lenders have been exhibiting for years in their rush to file cases. Many necessary documents have disappeared, with defense lawyers saying the lenders often do not even have standing to foreclose.

Callousness, cruelty, pure injustice, contempt for the law, an apparent total complete lack of concern for the hundreds of thousands of mortgage holders – this is all here.

Now, the big question, are they going to be penalized? And I don’t mean that they have to do the mortgages over again, I mean contempt citations, I mean state’s attorney generals filing lawsuits to recover the sums illegally taken from homeowners, I mean a forced reconsideration, re analysis of every single mortgage, these blackhearted villains did.

You say, James, calm down, they just messed up on their procedure. No, they took thousands of people to court based on NO knowledge of the case. They didn’t know what the people owed, the history of the loans or, in fact, whether they owned the home or not!

And get a load of this – their attorneys signed on to it, put their names on it. Let’s see a little action there. Let’s see what the state bar associations think about this.

There’s a lot more to say and I want to get this up, so more later. People have to know.

James Pilant

Personal Dharma at work (via The Divine Comedy)

On October 1, 2010October 1, 2010 By southwerkIn business ethics, Capitalism, ethics, Philosophy of Business

Well, it looks like India is catching up with America in terms of corporate financial scandals. What makes this blog really interesting, is that it’s from one of the people involved in breaking the case. It has a little bit of the detective in it. That’s rare in a business blog.

Further, our intrepid writer launches into a fairly lengthy discussion of business ethics, my turf. It’s a perceptive piece.

Please give it a read. Remember business ethics is a worldwide issue.

James Pilant

Today was the first day after the big day. Satyam finally came out with its financials last evening – restated to incorporate the impact of the 1.5 billion dollar scam perpetrated by its erstwhile chairman – in what can only be termed as India's answer to Enron. It was a proud moment for my team in finance – a moment of tremendous achievement and collaboration between us at the office of the Chief Financial Officer, our Finance team, our consulta … Read More

via The Divine Comedy

Forbidden Business Transactions – The Teachings Of Islam

On September 30, 2010October 1, 2010 By southwerkIn business ethics, Capitalism, ethics, Philosophy of Business4 Comments

One of my good friends suggested I look at a short (20 page) article that is basically a lecture by Shaikh Saalih bin Fawzaan Al-Fawzaan. (Yes, that’s all one name. Shaikh” is a title given out of respect to any scholar or elderly person in Arabic. His name is “Salih” and “bin Fawzaan” means the son of Fawzaan.)

This is a great summary of the teachings of Islam as applied to business ethics. It is most impressive. This civilization has a lot to say about what is a legitimate business practice, and they don’t shy away from the concept of right and wrong.

Listen to this –

Also, the scholars of Fiqh have stated that what falls under Najash is when a seller tells his customer: “I bought this item for such and such price”, lying about the price, so that the buyer may be fooled and buy the item at an increased value. Or it is when the seller says: “I was given this product at this price” or he says: “I received it for this much”, lying about the price. He only wants to fool the customers into bidding the price up to reach this alleged and false price, which he claims he spent for the item. This is from the Najash, which Allaah’s Messenger (sallAllaahu ‘alayhi wa sallam) forbade. It is a treachery and deception of the Muslims, and it is lying and disloyalty, for which he will be accountable for before Allaah. So what is obligatory on the seller is that he reveals the truth if the buyer asks him how much he got it for. He must tell him the truth and not say that he attained it for this much money, lying about the price. What also falls into the definition of An-Najash is if the people of the marketplace or the storeowners agree to not outbid one another when an item is presented for sale, for the purpose of forcing the owner to sell it for a (discounted) cheaper price. So therefore, they are all participating in this act, which is Haraam. And this is from An-Najash. It is also a form of taking the people’s money unjustly.

Where do we in this culture have the courage to call the continuous wall of “PR” lies and distortions, treachery and deception? That’s wonderful teaching. Now there is much in this that is not in accordance with the common beliefs in the United States, but is not every single branch of the Christian religion committed like the religion of Islam to avoid the things of this world and not to be worldly? Is that not repeatedly stated in the New Testament?

A dose of of the business ethics teaching of Islam would not be to the detriment of this country, it would be a blessing.

James Pilant

Making The Evil Suffer!

On September 29, 2010 By southwerkIn business ethics, Capitalism, ethics, Philosophy of Business3 Comments

People ask me what can be done about corporate crime. Usually I say, “Enforce the laws we have on the books and make them do real prison time as well as pay fines.” That will go along way to stopping that kind of crime.

But there is something, we all can do – we can take our moral responsibilities seriously.

You see we depend on the state to enforce the law and generally we assume that is enough. It is not.

When a white collar criminal walks the street after a wrist slap of a fine, justice is defied and the nation tarnished.

But You have a duty to justice as well. People would think twice about committing crime if the passive acceptance that justice was done by prison or fine disappeared as people realized their continuing duty. How do you exercise your duty for justice? When you meet one of these thieves, walk to the other side of the street, refuse to shake their hand. When these criminals are hired by a new company that explains blithely that they want their expertise, you can stop doing business with that company.

But above all it is our silence that demonstrates our lack of commitment to the principles of justice and citizenship. These criminal should be afraid to walk the streets not because of physical danger but because they are likely to be cut or insulted.

“White collar” criminals (and I truly hate that phrase – whoever commits serious crimes against the larger society to the tune of millions of dollars is a scoundrel and a disgrace to be shunned and despised just like the lowest bank robber) live in a cocoon of comfort. They go to the right churches, have the right friends, zealous business writers will minimize or deny their guilt, and their connections in industry and government continue unabated. Everything they hear is that everybody does it and if only the little people, the little people like you, could understand their job pressures and the unreasonable nature of the regulations, and the cruelty of the prosecutor and the randomness of it all – (other people have done worse so why arrest me), you would not persecute them like Christ on the Cross but honor their contributions to society.

You have a duty to justice to shock them out of that cocoon, to make it hard for them to get work, to stigmatize them and make them suffer. Justice does not stop at the prison door. If we can maintain records of where pedophiles live, surely we can track the financial offenders who have stolen so much and damaged society so thoroughly.

It is for you as well as the government to wield the sword of justice. Do not forget your duty. Do not forget your nation and your responsibility to it. Remember the evil that these men have done.

Do not harm them physically, take them down a peg. Don’t hurt their bodies, hurt their feelings.

I tell you truly when the great malefactors of this society are punished by the public in this fashion, a very large portion of this kind of crime will simply disappear.

When we act as negatively toward a white collar criminal as we do a man wearing a shirt and pants with opposite patterns, when we are as critical of these criminals as we are of people who live on the streets, when we are as uncomfortable in their presence as when a thoughtless person talks loud and long on their cell phone, they will change their behavior.

James Pilant

Deathbonds! Gambling On Death – Just The Elderly!

On September 28, 2010September 28, 2010 By southwerkIn Capitalism, Economic measurement, ethics, Government Failure, Philosophy of Business1 Comment

In a special report, Reuters tells a fascinating and horrifying story, a tale of intrigue, death and bizarre financial manipulation.

This story is about life settlement products. It’s a very comfortable sounding name for something far more sinister, the purchase of insurance policies statistically figured to pay off because of the death of the original owner.

From the article –

Life settlement products first appeared in the mid-1990s. Typically, the market is fed by elderly individuals with life expectancies of between 3 and 12 years. U.S. settlement companies buy these life insurance policies at a fraction of their face value, but above their cash surrender values, picking up the tab for insurance premiums and collecting on the death benefit — or policy maturity.

Industry proponents say that as long as the models used to predict the deaths of underlying policy holders are broadly correct, a suitably large portfolio should offer a healthy return, despite the industry’s often eyewatering commissions and fees — as much as 10 percent upfront — and the lack of generally agreed rules about how to value portfolios.

At what point, did we as a society arrive here? We are at a place where gambling on the time of death of the elderly is a legitimate way of making money. I’m not talking about life insurance. That’s a long term deal in which both parties benefit. I’m talking about buying out insurance policies for a fraction of their value and making a killing on the early deaths of the holders.

Well, let’s look at the rule of the business world’s favorite economist – “There is one and only one social responsibility of business–to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition without deception or fraud”

I would note that what counts as the “rules of the game” seems to be rather flexible, and if you can figure out why any businessman would engage in free and open competition, you’re one up on me. As for deception and fraud, on everything from bank fees to credit cards, making sure that knowledge is limited and initial offers inviting, has created whole industries based on oversell by obscuring the facts.

I would argue that the only part of that statement, that businesses in the United States heard, was the unconditional purpose of making money as the only, single rationale for business. This rule is not a fact, it is the beginning of an economic religion.

That’s how you get gambling on old dead people. It’s making money. It’s within the rules. There is competition. The deception or fraud does not directly violate law.

It takes an economic religion, a new set of sacred beliefs, to overrule the pangs of conscience, to disregard the duty of religion, to escape the burden of civilization and to be deaf to the pleas of the patriot.

That’s why we are here, a national moral vacuum.

James Pilant

Americans Believe Recession (Depression) Is Not Over

On September 28, 2010 By southwerkIn business ethics, Capitalism, Corporate Social Responsibility, Economic measurement, ethics, Government Failure, Philosophy of Business1 Comment

From a CNN story –

Seventy-four percent of Americans believe the economy is still in a recession, according to a new CNN/Opinion Research Corporation poll. Only 25 percent think the downturn is over.

One-third of Americans say the recession is serious, while another 29 percent characterize it as moderate.

Only the elite in the beltway believe the ridiculous idea that we have successfully come through the recession. I don’t understand how the numbers could add up to anything but a continuing crisis.

Unemployment – 9.6 percent – This doesn’t count those who have given up seeking work, so the real number is probably closer to 15.

Financial Markets – All Better? – NO – Federal Reserve Governor Kevin Warsh said on Tuesday that financial markets have not fully recovered after the financial crisis and that economic growth is currently weighted to government expansion.

Hiring – All better? – NO – U.S. chief executive officers’ view of the economy darkened in the third quarter, with top executives saying they were less willing to hire new workers as they fear sales growth will slow.

Consumer Confidence – Optimistic? – NO – When it comes to attitudes about the economy, Americans continue to see the glass as half empty, according to the latest reading on consumer morale. The Consumer Confidence Index fell to 48.5 in September — its lowest level in 7 months — and down from August’s negatively revised level of 53.2, the Conference Board, a New York-based research group that compiles the index, said Tuesday.

How long can I keep going? How long have you got?

The politicians and the commentators feel your pain from a safe distance. You’re just more economic data and an annoying one. If you would only believe, everything would be fine. Everybody is doing well. You just don’t see it because you can’t see the big picture obstructed as it is by your suffering. Don’t be pessimistic. Don’t you know that this is America and a good attitude can solve all your problems?

I get tired. You get up and you hear these criticisms of hard working Americans and the utter lack of comprehension of the beltway elites as to what the world is really like, and the next day it happens again. The cycle never ends. Americans are lazy, self-indulgent, and fat. They need to get tough, get smart and do what we, the real people, the people that count do. Learn from us, they say. These creatures who don’t live in a world of labor and pain, who live by manipulating money, shaping opinion, and other ill defined processes. They know how to fix your lives. Right, and I can build a nuclear weapon with a little barb wire and an old tire.

Well, tomorrow will be another day and the cycle will begin again.

James Pilant

Pilant's Business Ethics Blog

Category: Philosophy of Business

Andrew On Mortgage Foreclosure Lies

Mortgage Foreclosure Lies

Credit Card Companies Develop New Tricks To Get Your Money

Personal Dharma at work (via The Divine Comedy)

Forbidden Business Transactions – The Teachings Of Islam

Making The Evil Suffer!

Deathbonds! Gambling On Death – Just The Elderly!

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