Tag: mortgage foreclosure

Newspaper Business Pages – Wrong, Wrong, Wrong!

On By southwerkIn business ethics1 Comment

(A reprint of a previous column)

I search for people talking and writing about ethics and reform. Since we are discussing business ethics, a good place for me to hunt for these kinds of writers is on the business pages of large circulation newspapers. It’s not much fun. Fortunately not all business writers live in a cartoon like version of our world where noble business men are limited by government regulation from making us all rich and happy, where the chief problem with the stock market is pessimism, and where stupid home buyers ruined the economy, but many perhaps most do.

Look, I believe in free enterprise. I think a business man should be able to make a profit. But a lot of what got us into the current mess had more to do with gambling with other people’s money that it did with investing. Further, I have a strong prejudice in favor of actually making stuff and investing in this nation’s future instead of moving money around as if that was “God’s work.” And if you think, that after seeing how derivatives work, watching the colossal failure of the rating agencies, the incredible passivity of the SEC and other government regulators, and the inability of the government, various huge corporations and the business publications to predict, prevent or ameliorate the current crisis, that I am going to blame individual home buyers for this mess, you just aren’t getting me.

If we just remain optimistic the recovery will continue is a regular thought for many business pages.  Jim Gallagher writing in St. Louis Today says that the principal danger from the Greek bail out and the crisis for the Euro is that investors fearing bad things will happen will behave irrationally and damage the market by selling. He provides reams of data to support his thesis. But in spite of all of his data, I have doubts. The European Common Market is a larger economy than the United States and many of their members are more question marks or problems than we like to acknowledge. I think fear is appropriate.

It’s all that home buying that brought us into this mess is an almost constant refrain. I can’t help but notice it was the collapse of a part of the derivatives market (a 600 trillion dollar gambling casino masquerading as an investment) that destroyed much of America’s economy. I also feel obligated to point out that those nasty, demented, foolish home buyers never seem to have figured out they could package their mortgages as securities, get them triple A status from compliant rating agencies, and then sell all over the world as if they were good investments relieving lenders of any responsibility for their decisions.

They say regulation is a bad idea. There is too much now. Golly Gee, looking over the ruins of the world economy and the thirty million American unemployed, you might think somebody did something wrong. But no, if anything bad happened it was not the fault of the huge investment banks (who got into a little trouble requiring trillions of dollars of bailout money), it was the fault of over regulation. Here’s Thomas Oliver from Atlanta Business News.

Well, so much for my pain. I have found in my searches many authors who inform, enlighten and motivate me.That makes it worthwhile.

James Pilant

Can Thinking In The Long Term Help With The Future Of The Mortgage Industry?

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

Jim Russell writes in an article posted on “Media Center,” the web site of Tom Gyepes, Loan Doc Originator & Broker. He addresses a question that has also been on my mind. How is the mortgage industry going to change in the face of this, at the very least, public relations disaster?

He has several suggestions but I like this one best. Make the mortgage “originator” a long term actor in the deal than just a one time salesman.

Read how he puts it –

Mortgage originators have long been compensated just for getting loan applicants to the closing table. After funding many mortgage originators simply lose interest in the borrower’s financial situation until they see another opportunity for origination income. The insurance industry dealt with this issue long ago. Today every insurance agent is tied to his/her client with a golden rope…

Most insurance companies do not fully compensate independent agents at the time of sale like the mortgage industry. Instead agents are partially compensated at the time of sale while the remainder of their income is paid out at a later date depending on the performance of the insurance policy they sold. This compensation practice is called “contingent commission” and it creates an incentive for every agent to act in the insurer’s best interests because if they don’t, they won’t be paid.

Let me share an example. There are two active groups of golfers at my club; mortgage originators and insurance agents. These two groups have very similar economic profiles, they are all high net worth income earners and they all constantly manage their book of business. There is one big difference in the way these two groups maintain their lifestyles though; the mortgage originators are highly dependent on landing new deals while the insurance agents are dependent on the long-term performace of the deals they’ve already written. This forces insurance agents to fully understand the risk profile of their clients before they close the deal and it also forces agents to maintain contact with their book of business.

If you are a business student, this is a great topic for a paper. But beyond this it is an idea that needs to be taught across our society, to think and act in the long term. Thinking only of the next quarter is an excellent way to convert a successful society into an apparently successful one, just as long as you believe the numbers.

There are a lot of areas in our economy where thinking in terms of the long haul would be in the best interest of all the players as well as our nation as a whole.

James Pilant

Congress Leaps In To Protect The Banking Industry?

On By southwerkIn business ethics1 Comment

The web site, Crooks and Liars, has picked up a rumor that the lame duck Congress is planning a huge gift for the mortgage industry. They will retroactively legalize the MERS system to prove ownership.

Bankers Feast

Here is Wikipedia’s definition of MERS –

Mortgage Electronic Registration Systems (MERS) is a privately held company that operates an electronic registry designed to track servicing rights and ownership of mortgage loans in the United States. MERS asserts to be the owner (or the owner’s nominee) of the security interest indicated by the mortgages transferred by lenders, investors and their loan servicers in the county land records. MERS maintains that its process eliminates the need to file assignments in the county land records which lowers costs for lenders and consumers by reducing county recording revenues from real estate transfers and provides a central source of information and tracking for mortgage loans. MERS’ role in facilitating mortgage trading was relatively uncontroversial in its early days a decade ago but continued fallout from the subprime mortgage crisis has put MERS at the center of several legal challenges disputing the company’s right to initiate foreclosures. Should these challenges succeed, the US banking industry could face a renewed need for capitalization.

The computer program simply transacts exchanges of property. The only problem is that does not the fulfill the requirements of the law in most states. In most states you must actually go through a process and have actual documents. So, some five years ago, MERS went into operation with scant, non-existent or simple illegality.The really neat part about MERS is that no matter how criminally stupid or unlikely or straight up illegal your change of ownership is, it looks just beautiful and all proper on the computer.

So, the Congress of the United States of America is going to retroactively validate a computer system that shifts property five years after the thing began moving property around like pixels in a video game.

Does fairness and obedience to the law figure in Congressional decision making?

I bet if millions of homeowners had their property taken away with scant legal proof Congress would leap into protect them. But that has already happened without Congress acting.

Okay, I bet if hundred of billions, trillions of dollars, were lost by banks playing the world markets using casino chips made of mortgage backed securities, that Congress would punish the malefactors. But no one has been punished unless the homeowners are considered.

I could write about five or six more “already happened’s” and you could probably think of a few more.

But basically it boils down the this. If the financial industry has legal problems, Congress tends to rush in with legislation retroactively fixing the problem.

If a member of the great middle class gets into legal trouble, Congress is unlikely to be unduly concerned.

A society that puts value on fairness and justice should find these matters disturbing.

From the article –

Now it appears that Congress may attempt to prevent any MERS meltdown from occurring. MERS is owned by all the biggest banks, and they certainly do not want it to be sunk by huge fines. Investors in mortgage-backed securities also do not want to see the value of their bonds sink because of doubts about the ownership of the underlying mortgages.So it looks like the stage may be set for Congress to pass a bill that would limit MERS exposure on the recording fee issue and perhaps retroactively legitimate mortgage transfers conducted through MERS private database.

If only, we were all treated as if were banks.

James Pilant

Judge Started Shutting Down Foreclosures TWO YEARS Ago For Bad Paperwork!

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

Brooklyn State Supreme Court Judge Arthur Schack discusses his decision to turn down bank foreclosures for bad paperwork.

(Beware, this has a commercial.)

It’s 4:27 long.

The New York judiciary has gotten tough on the Mortgage industry.

James Pilant

Five Mortgage Myths Debunked

On By southwerkIn business ethics, Capitalism, ethics

This is from CNN Money. I found it on You Tube. It’s useful information, so I pass it on to you.

It’s 4:12 long.

(Watch out, it has a commercial in the front.)

James Pilant

White House Claims Amusing

On By southwerkIn business ethics

Andrew Leonard writing in Slate makes fun of the White House’s claims of there not being any serious problem with the foreclosure system. (But he doesn’t have anywhere near as much fun as I did.)

But in the same press conference he (HUD Secretary Shaun Donovan) also asserted that “we have not found any evidence at this point of systemic issues in the underlying legal or other documents that have been reviewed.”

That is simply nonsense. The widespread use of robo-signers, the epidemic of lost paperwork, the proliferation of lawsuits, the potential invalidation of mortgage-backed securities — everything points to a systemic problem. The only real question is how big the mess will get. The White House should be far more out in front. Right before an election, the administration couldn’t have asked for a development that better illustrates the necessity for tight government supervision of the financial sector and industrial-strength consumer protection.

But maybe Obama’s just afraid of being called “anti-business” again.

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