Jamie Dimon and the other mega-bankers who derailed the economy have a new PR campaign to sell you. They're saying that families who can't pay their mortgages must bear the blame -- all the blame -- for the foreclosure crisis. That means the public should just ignore banks' widespread lawbreaking in the registering and transfer of property titles. For the bankers who would appoint themselves the nation's moral arbiters, It's always somebody else's fault.
Not that we should be surprised. After all, the Mortgage Bankers Association, which calls itself "the voice of the real estate finance industry," did a short sale on its Washington DC headquarters which left CEO John Courson uncharacteristically speechless. It seems he didn't want to talk about how he walked away from the loans he took out to buy that building. But before the cat got his tongue, Courson managed to lecture homeowners on their "legal obligation" and the terrible "message they would send" by walking away from their mortgages.
Morality and law for thee, but none for me.
John Courson paid $79 million for his Association's headquarters and sold it three years later for $41.3 million. In his defense, anyone who loses nearly $38 million on a single real estate deal is, in fact, uniquely qualified to speak for the real estate finance industry. They mismanaged their finances so badly that they brought down the economy. They needed to rescued by the rest of us, a privilege they're working overtime to deny others. They claim that struggling homeowners are "undeserving" of help, even if the other party in their transaction has broken the law or violated a contract.
The bankers have benefited from a stacked deck, or what's known as "moral hazard." That's the term for what happens when people don't bother protecting themselves from risk because they know somebody else will take care of it for them. The banks are saying they've been reasonable business partners, giving their borrowers all the information they need to make good decisions while asking no special favors for themselves. Does that sound right? We created the "Home Loan Blame Game Scorecard," which is at the end of this post, to find out.
As CEO of JPMorgan Chase, you'd think that Jamie Dimon might hesitate before saying "We're not evicting people who deserve to stay in their house." His argument rests on the idea that homeowners bear sole responsibility for taking out loans they couldn't repay. He might be shocked, shocked, to learn that his own employees have relentlessly been trying to push these loans on people:
The "blame homeowners" argument is hypocritical, but it's been effective. It helped bankers get themselves massive bailouts, pay themselves huge bonuses, and walk away with the profits they made by selling and trading these mortgages at inflated prices. And it's helped them avoid having to write down their books to reflect the actual, reduced value of the assets they're holding. That means millions of homeowners are propping them up by paying mortgages at property values that the banks themselves artificially inflated.
Now they want to use the same argument to get around the fact that they've been breaking property laws on a massive scale for years. It's just "paperwork," they say. But any homeowner who filed false affidavits - a crime that's legally equivalent to perjury - would be looking at jail time. Remember: Law and morality for thee ...
"But if these people had paid their mortgages, there wouldn't been a problem." That's a pretty compelling argument (if you're willing to ignore the widespread lawbreaking by the banks). But why couldn't they pay their mortgages? In many cases, it's because banks have violated HAMP rules for helping distressed homeowners modify their loans. That's breaking the law.
As the Wall Street Journal reported last week, the banks are "largely unsympathetic" to the idea of a foreclosure freeze, and they consider reports of widespread lawbreaking merely a bureaucratic problem. ""If you didn't pay your mortgage, you shouldn't be in your house," said a portfolio manager at Greenwood Capital Associates. "People are getting upset about something that's just procedural."
"Procedural" ... you know. Abiding by the law. Doing what the little people do ...
Bank of America has been a particularly egregious violator of HAMP's legal requirements, which means that many of the people it's foreclosing on shouldn't even be in that position. Yet you could almost see CEO Brian Moynihan rolling his eyes sarcastically as he said of the missing titles, "We'll go back and check over our homework one more time."
Please, Mr. Moynihan, don't trouble yourself. Allow us to check your "homework" for you. Surely bankers that hold homeowners to such high moral standards won't object to a thorough and very detailed audit of these transactions by the proper authorities. I'm sure such ethical and meticulous leaders want to know how many home appraisals were carried out by "friendly" appraisers, for instance, rather than ones who were known to come up with whatever number the bank wanted. And I'm sure they'd want to know if any of their employees had misled borrowers, perhaps by telling them that they could be sure that refinancing would be available long before their adjustable rate mortgages went up.
Remember, they're lecturing homeowners for not managing their finances well, when their entire industry would have collapsed because they didn't manage their finances well.
In a famous (and probably apocryphal) story, it's said that FDR finally got frustrated during a meeting of his economic advisors. After hearing talk about loan rates, interest, borrowing, and various financial mechanisms, the story says that FDR finally blurted out "What the hell! It's all our money, isn't it?"
That's how bankers feel about the current foreclosure crisis: It's all their money. Who cares about titles and property laws? If a homeowner hasn't been making their mortgage payments, the argument goes, then surely they should lose their house to somebody . It doesn't matter whether its Chase or Citi or Wells Fargo. As long as the banks agree among themselves who gets to put that family into the street, what's it to you, pal? And if the family's only in trouble because their bank (whoever it was) broke the law, well, we can't blame the bank if we can't find them, can we?
We're not saying that no homeowners bear responsibility for defaulting on their mortgages. Sure, some people should've known better. But three million homes have been foreclosed upon in the last three years. That's a systemic problem. One in every five houses is underwater. That's a systemic problem, too. The only factors common to the system as a whole are the bankers, and the rules that let them get away with running up housing prices in a gambling frenzy and walking away with everything when they fell. They've written millions of loans without proper risk management. Many experts were warning us that the housing bubble was about to burst, and they were getting paid extraordinarily well to understand the dangers.
Bank stocks took a steep hit last week, and why shouldn't they? The executives running them aren't very good at what they do. It's about time bankers took some responsibility for their failures. It's about time banks shared some of the lost value of these properties with homeowners - not just those who are defaulting, but all affected homeowners.
Stockholders should can the executives who have so badly mismanaged their banks. To paraphrase Jamie Dimon, we're not about talking evicting people who deserve to stay in the corner office. Word to Brian Moynihan: If you can't manaqe your business, you don't deserve to keep your job. Nothing personal, of course. For those who want to see the finance industry run by competent people, firing you is what we would call "just procedural."
______________________________
MEET THE HAZARD MASTERS: THE HOME LOAN MORAL HAZARD SCORECARD
|
HAZARD |
BANKERS |
HOMEOWNERS |
ADVANTAGE: |
|
Were financial professionals |
Yes |
No |
Bankers |
|
Cheated on property laws, taxes, titles, etc. |
Yes |
Mostly no |
Bankers |
|
Got rich off the deal |
Made trillions |
Some got to buy boats or flat-screen TVs |
Bankers |
|
Acted as unfair trading partners |
Yes; had FICO, databases, teams of economists |
A few hid things, but the banks knew anyway |
Bankers |
|
Could influence politicians with fat campaign contributions |
Yes |
No; never attended $20,000/plate fundraising dinners |
Bankers |
|
Able to influence public opinion with PR campaigns, etc. |
Yes |
No |
Bankers |
|
Absolutely shameless about blaming others for financial mismanagement after accepting massive bailout |
Yes |
No; most feel guilty about missing a payment and ashamed if they default |
Bankers |
|
Forced to bear financial burden of overpriced homes |
No |
Yes |
Who else? |
Final score: To be determined in the court of public opinion, and in the corridors of Washington power.
Richard (RJ) Eskow, a consultant and writer (and former insurance/finance executive), is a Senior Fellow with the Campaign for America's Future. This post was produced as part of the Curbing Wall Street project. Richard also blogs at A Night Light.
He can be reached at "rjeskow@ourfuture.org."
Website: Eskow and Associates
Follow Richard (RJ) Eskow on Twitter: www.twitter.com/rjeskow
I don’t know what a “Blank Check Company” is, but I don’t like the sounds of it. I don’t like a company incorporated in the British Virgin Islands being responsible for taking the homes of hundreds of thousands of my neighbors. I especially don’t like the thought of the profits derived from taking the homes of hundreds of thousands of my neighbors having anything to do with,
“an unidentified operating business which has its principal business and/or material operations in China.”
I hope the FBI and AG's are investigating this company - if DJS is doing busy with this company, maybe others are, too - a great place to hide money, China is. Could it be out of US jurisdiction? If that's so, then there must be another way to get restitution for damaged homeowners.
One the Fed realized the MERS mistake, it was too late. TARP was already handed out. It looks like the Mortgage Bankers Association may get out of this scott-free, since MERS is Bankruptcy-remote and the toxic assets are now paid for, and owned by, the Fed. We the people have gotten shafted, meanwhile, through the loss of jobs caused by the failure of Corporations that bought into the worthless crap. What did they buy into? Intentionally overvalued MBS. Losing a job means loss of a home for many people. Loss of a home means the Mortgage Bankers can remortgage it and keep the money wheel turning under MERS. This all started with the rape of homeowners. It should not end with more rape. Investigate the MBA, not just the Banks. Investigate MERSCORP. Give the people a bailout, and put the rapists in jail where they belong!
In Mexico in the mid-'90s Wall Street engineered a currency coup that tripled the debt owed by small businesses and family farms and also allowed for them to be massively ratejacked on top of it. Mexicans consequently formed the "el Barzon" movement and pushed back Wall Street and deposed their ruling party of 60+ years. In this country YouTube phenom Ann Minch has already declared the debtors' revolt and begun going after them http://www.revoltstartsnow.com
If you've been pushed under, you can read every other page of my book for free: http://www.scribd.com/doc/25443175/Debt-Hope-Down-and-Dirty-Survival-Strategies-Evaluation-Version-Complete
"Securities fraud." Check.
"Money laundering." Undoubtedly.
"Usury." Yep.
"Swindling." Duh.
"Racketeering." Yes.
And I could go on, until all of my word-count is used up. But these are all: Crimes.
I know where to find 310 million Plaintiffs in this country alone, and (literally) billions more outside.
Never mind the "morality" of it. Never mind what the criminals are saying. Focus, instead, upon the crimes they have committed and that they continue to commit. No criminal institution is "too big to fail."
Also let us focus upon the "all civil officers" of our Government who, in direct defiance of Article 2 Section 4 of the supreme law of our land, took billions of dollars in bribes and continue to do so. That venerable document doesn't call it a "campaign contribution," doesn't use the word "lobbying," and knows nothing of "corporations" or "corporate freedom of speech." The word is, "bribery." And the word next door is, "treason."
A criminal never faults himself. Some dim part of Al Capone probably did think of himself as "a furniture salesman." But 310 million people do not have to live under the heel of such evil men and women. And, we won't.
But consider this...when you go for a mortgage, you KNOW how much you can afford...or should. When I bought my home over 20 years ago, I demanded to know how much the payment would be, with EVERYTHING...meaning taxes and insurance. I needed to know if our income could cover it. We were already paying $750 a month for rent. Buying a home did not INCREASE our income. Most people can handle a small raise in their costs...but going for double or worse is a recipe for disaster.
I was pitched for re-financing again and again during the last bubble. In every case, they were trying to persuade me to borrow against my equity, in exchange for an ARM. I remember how carefully they avoided the issue when I said i didn't want adjustable rates. And they always said "Yes, but you can always re-finance!" as the kicker. Thank god I resisted the temptation. Too many people with perfect credit are being denied. The likelihood that the average consumer will get the loan they need to haul their chestnuts out of the fire these days is negligible.
But while it was happening? "Just ignore the man behind the curtain, Dorothy..."
This isn't about blaming the victims...please don't mistake my point.
But an entire generation of young adults take the financial cues from watching their parents...and i think its better for them to know where NOT to go, don't you? I am still seeing ads trying to suck in first time buyers. The "good loans" at the lowest interest are now seriously hard to get...which means there are still sharks in the water.
The current standard is now 20 percent down to get a home...which is what it USED to be 30 years ago. We do ourselves no favors if we set people up to make the same mistakes.
The banks deserve what they got and are stuck with. They ruined the economy, causing people to lose their jobs and thus their homes.
I expect when they mismanage their business by being over leveraged to 100:1 on junk mortgage back securities or other casino "derivatives," that they will go out of business. I then expect that their will be a sheriff's auction to sell off their fancy office furniture.
Not that they will crawl weeping to congress for a bailout and free money to keep their "casino" going, and then knife the very taxpayer that saved them in the back.
1) Regardless of how the banks behaved in processing documents, these people need to be evicted as soon as possible. They have broken their moral and legal obligations to pay their bills and they need to move on. Banks need to get tighter procedures but after that let’s move on. This isn’t worthy of the indignation you are throwing at it.
2) You diatribe against John Courson is misdirected. Firstly, he couldn’t pay his bills and couldn’t refinance so he lost his building. It was foreclosed upon. It wasn’t like he wasn’t paying and then trying to use the system so he doesn’t have to pay while he uses it for another 18 months (average defaulted house loan prior to eviction). He returned the building to the bank, just as people who took out loans they could not pay need to return their houses to the bank. It is the circle of economic life.
3) You criticize Mr. Dimon for his bank’s ‘pushing of people to take ARM loans’. So what, that is their business. People didn’t need to take the loan and they could have shopped around. If they didn’t that is their fault not JP Morgan’s. What people do also not realize is that if people default on ARM’s, the banks most likely also lose money. Its is lose-lose for both parties. And you claim they misled borrowers by making false claims but you provide no proof. None. Just conjecture and your own imagination.
Kai
Regarding modifications, are they illegally being denied modifications? Again, where is the support? And where does it stipulate that banks MUST modify even if you apply. If anything they are incentivized to modify but NOT legally forced to modify. Congress does not have that much power that it can order banks and property owners to take losses on their investments. As such, where are they breaking the law? Just because you qualify to apply does not mean you qualify to get, and that is mostly the banks prerogative.
Your thoughts?
Kai
Oh gee...
Beat me to it, KAI
Anyway when Congress speaks of the rule of law, it doesn’t mean banks. And surely Congress never meant the sanctity of contracts to apply to bankers.
Besides mortgage papers are so confusing why would any court expect bankers to understand them.
OK. So the banks want to cheat the middle and working classes out of hundreds of billions of dollars. It’s not like it hasn’t happened before.
So what if your mortgage is up to date and it’s foreclosed. Go rent. Let’s give the banks a break. This mess is so big they’re bound to make a few mistakes.
On the other hand, this could be an issue the Democrats could really capitalize on.
Hello, Democrats? Are you there? This mortgage thing could be a really big issue in the campaign. Like, ya know, it could be an October surprise or something. After you get finished demolishing the campaign of Jack Conway in Kentucky you might want to read up on mortgage fraud. It’s in all the papers. Now’s the time to take the bull by the horns and turn this thing into a winner.
Oh. I forgot. Wall Street would never give you permission.
Contractual obligations are daily revised or even completely repudiated by businesses large and small in countless boardrooms and bankruptcy courts. The interests of secured creditors, typically lenders, are routinely protected at the expense of unsecured creditors, typically very small businesses that can least afford the losses. I have yet to hear of a CEO of a large company going through reorganization shedding tears or losing sleep over the small creditors who are crushed in the process.
If a homeowner is two hundred thousand dollars upside down on a mortgage and can't get the lender to agree to a modification or a short sale, the best advice is to walk away. Until lenders become powerful enough to re-establish debtors' prisons, they can save their sermonizing.
Ah well, we know Washington will be listening to their sermons. They too are devout servants of Mammon.
"The subprime loans we forced Freddie Mae and Freddie Mac to swallow will eventually return a profit. Fannie and Freddie can afford to hold them because they are government back loans. " umm no...Fannie and Freddie holding MBS makes these gov't backed loans, but does not make them profitable, as shown by how Fannie is constantly hempraging money on them even with many of these assets not being marked down to market yet and frauduland paperwork making rights to foreclosose on underlying assets skethchy not being priced into these assets yet. We bought/guaranteed these because no one else would, they weren't going to be a good deal.
Truth: TARP is small part of a much larger pool of money that has gone into propping up our insolevent banks. Most of that taxpayer money hasn’t had much public scrutiny at all and was not mentioned in recent reports on lowered estamates on TARP costs. It's easy to pay back the treasury with money from the fed, though. The U.S. has lent, spent or guaranteed as much as $12.8 trillion on total bailout programs.
http://www.pbs.org/wnet/need-to-know/economy/the-true-cost-of-the-bank-bailout/3309/
The issue is not whether the affidavits are factually false. They are not. And many borower's counsel are doing their job and fly specking them to verify that. Where are the claims that the affidavits are actually false? There are a few out of millions of foreclosures.