Category: White Collar Crime

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

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

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

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

Could A Foreclosure Freeze Damage The Housing Market?

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

Well, of course, it will. Massive wrong doing has consequences for the innocent. That is the nature of illegal acts. That is the nature of speculation and greed. People without fault are injured.

So, we have competing values here. Should the health of the economy and the suffering of the innocent be a bar on prosecuting thousands upon thousands of mortgages done outside the rules of the law.

I’m going to come down on the side of the rule of law.

I teach business ethics. You can’t have business ethics just through teaching and exhortation. They have to be backed up by penalties. If the suffering of the innocent is a bar to prosecution, it sends a clear signal that cutting corners, skirting the law, deliberately disobeying the law, have little or no consequences as long as the perpetrators can point at economic hostages and say, “Oh, but we can’t harm them.”

You cannot avoid prosecuting the guilty in the business community over and over again without them getting the message that there are no consequences. They will realize (or have realized) that the law does not apply to them.

Once they know this, what will happen to the rest of us?

Here’s the CBS News Story – Beware it has a commercial.

James Pilant

A View On The Mortgage Fiasco From A Georgia Professor

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

What’s the academic view point on this disaster you might ask. Well, one sign is this professor’s comments from the University of Georgia. It’s a brief comment and there are no commercials. Enjoy –

James Pilant

Does History Repeat Itself – The Stock Market Crash?

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

“The past is prologue?” Are we in the same place that America was in during the first years of the Depression? I worry that this economic downturn is just the beginning of long term destabilization of the economy.

(You should probably avoid my blog if you want to put a happy face on the economic situations because I find it hard to find things just to be content about.)

I found a wonderful set of history films about the early days of the Great Depression. They provide a lot of insight into how people thought and reacted to the events as they unfolded day by day. We look at what people were saying, what they were reading, what music they were listening to. We can wonder if we wouldn’t have done the same things. It’s a better way to understand history than the summaries in textbooks.

If you listen to the incredible confidence that the moneyed and political class had in the economy and the sureness they had in an immediate recovery, you have to wonder about those in out system today, who say we’ve turned the corner.

We have not.

Part 1 –

Part 2 –

Part 3 –


Part 4 –

Part 5 –

I want to be wrong about all this. I want the economy to thrive, everyone to have a job, and as much as possible for people to become prosperous.

We’ll see.

James Pilant

President Obama Is Lagging Behind Public Opinion

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

I’ve been saying this for several days. The public, the states, the courts, are all moving toward a consensus that a foreclosure freeze is necessary. The President does not think so and he has sent his minions to be sure we understand his position.

Andrew Leonard writing in Salon, an article entitled “Obama’s foreclosure nightmare,” describes the situation in terms very similar to mine.

Once again, the President lines up with the financial industry and the banks against the interest of middle class Americans.

Drawing on Leonard’s article and adding my own spin, the situation is like this. Now, generally speaking, I do not waste my time on the Wall Street Journal Editorial Page, but have heard a rumor that their take on this situation is that all this stuff about not having the proper documents is just a matter of procedure and is really not something to get that excited about.

This is the United States. In this country you cannot transfer any land whatsoever without a written contract, that’s LAW 101, the statute of frauds. If you can’t produce your paperwork, you don’t get the property. Why? Because in Western Civilization, land has been considered the primary measure of wealth and status for hundreds of years. Therefore, the law was made to protect those interests.

How come the banks don’t have good records of who owns the property? Well, that has to do with the enormous speculation(casino capitalism) of the latter part of this decade. The great wall street investment houses were buying and packaging mortgages into packages of securities. But if they followed careful procedures they wouldn’t have had as much as they wanted. So, they “cut some corners,” “skipped a few steps,” “overlooked a rule here or there,” to get those mortgages as quickly as possible. What was the result? Incomplete paperwork, missing documents, and general confusion were the result of that speculative era. So, the banks had a problem with foreclosures. If they followed proper procedures they were hit with a double whammy. First, there was no way they could process the number of mortgages they wanted foreclosed without hiring a lot more staff and spending a lot more time doing the work right. Second, if they examined the documents carefully they would run across all the problems bequeathed them by the previous financial speculators. So, they solved both problems. They processed the mortgages without looking at them. It was an elegant solution. It was thrifty, cost effective almost beyond belief, and not legal.

I am outraged. I’m not the only one. The general public is only at the edge of this issue. It’s only been running hot in the media for almost two weeks. This issue has built up power in a politically brief period of time. But it’s not hard to tell the direction that public opinion is going. On one side we have banks refusing to obey the rules, while on the other we have story after story of homeowners tossed from their homes without legal justification. How do you think it’s going to go? If this were a Western, who’s wearing the black hats and bushwhacking their enemies?

The President should declare a moratorium on mortgage foreclosures. It does not have to be a blanket ban. He could ban the ones where it is known that there have been problems with a provision to extend it to other firms if similar wrongdoing is found. That would be adequate. In my opinion, a full blanket ban is the smarter move politically but that’s really not important.

I know the President is worried that this will stall the recovery. Of course, if you follow my blog, you know that I believe this is a lull before more serious problems appear and not a recovery at all.

To the President I would say, “This nation can handle a steeper economic downturn better than the continued wrong doing by some of the most important and most influential people in the financial industry. At some point, justice has to take priority over economics.”

I might add.

“Mr. President, I can feel the anger out there. How much more can people take? The basic facts appear to be out. The financial industry breaks the rules and knows that nothing will be done. The money will continue to flow. Their stock will go up. The bonuses will get bigger. The great mass of American citizens do not believe that if they did these things that they would be handled so gently and rewarded so thoroughly.”

“So, what’s it gonna’ be. Are you going to confirm to the great majority of Americans that there are two kinds of law, one for them and another for the foreclosure industry?”

“At what point, will you decide to enforce the law, seek out the guilty and bring them to justice?”

James Pilant