Once again, our largest banks have botched things up. Hat tips all around on this one. Everyone has been covering it but I will recognize specifically The Huffington Post, The New York Times, The Washington Post, Bloomberg, Naked Capitalism, and Representative Alan Grayson's office. A few days ago, I blogged on foreclosure fraud in Florida, so I won't run through that background again. What has newly developed in the last several days are these facts:
One of my colleagues had a long conversation with the CEO of a major subprime lender that was later acquired by a larger bank that was a major residential mortgage player. This buddy went through his explanation of why he thought mortgage trusts were in trouble if more people wised up to how they had messed up with making sure they got the note. The former CEO was initially resistant, arguing that they had gotten opinions from top law firms. My contact was very familiar with those opinions, and told him how qualified they were, and did not cover the little problem of not complying with the terms of the pooling and servicing agreement. He also rebutted other objections of the CEO. They guy then laughed nervously and said, "Well, if you're right, we're f****d. We never transferred the paper. No one in the industry transferred the paper."
Now you understand why everyone is resorting to fabricated documents and bogus affidavits. There is no simple way to fix this mess. The cure for the mortgage documents puts the loan out of eligibility for the trust. In order to cure, on a current basis, they have to argue that the loan goes retroactively back into the trust. This is the cure that the banks have been unwilling to do, because it is a big problem for the MBS.So here we are back to 2007-8. If you and I make a serious mistake at our jobs, we get fired, and if we make a really serious error, our company could perish. But when bankers screw up, and leave a lot of collateral damage in their wake, they are confident that their sugar daddies in DC will clean up the mess for them.
These things do not happen in a vacuum. The old "rogue employee" line will be trotted out. "Errors in judgement" will be admitted. But it will not be admitted that errors in judgement are produced systematically. You see, the cost of such errors in judgment is less than the ill-gotten gains. Such costs are a 'cost of doing business'. The profits that were generated by this activity dwarf the potential cost. Executives incentives are to produce gains today and they do not pay for the risks that are left for tomorrow. The decision to have individual employees sit and sign affidavits that are false was made consciously. Someone decided to save the expense of doing it right. Or someone figured out that the chain of title had already been broken and it is better to whistle past the graveyard and defraud a court, a debtor, an investor, or a shareholder, than it is to do the right thing. All of those someones will likely not be identified or will get a slap on the wrist. The shareholders will never really know what happened and how certain executives created the culture in which these decisions made sense. But the truth is that decisions to cut corners, commit fraud, abuse clients or mislead investors are generally cognitively rational given the position in which the individual employee is put.
Do any executives get that? Let's hear one Wall Street CEO stand up this week and say, "I created this. I was wrong. I will pay the price and I will change the system in my bank so that employees never feel they have to choose to commit fraud. I will root out the responsible managers. Until this is complete I will work without pay. When it is complete I will offer my resignation to the Board of Directors and ask that it be put to a vote of the shareholders at the next annual meeting." Oops, I'm dreaming.
The government mandates every single homeowner in a foreclosure action has the right to expert legal council chosen by the homeowner and paid by the bank. The fiduciary duty of counsel is to the homeowner. Thats it. Simple.
All those unemployed real estate paralegals, legal secretaries, title abstractors, title insurance agents (of which I am one) and attorneys would suddenly be gainfully--and ethically--employed. Not to mention a bevy of other currently unemployed clerical staff from related professions. This would be good employment for years given the scope of the problem.
An examination of the recorded documents and the HUD, Note, Good Faith Estimate and unrecorded assignments will tell counsel all he/she needs to know. Putting banks on document treasure hunts going back to the broker who did the loan origination will employ thousands more.
Wow! This could just about cure the unemployment problem all by itself.
The other option is, of course, the market leader approach. The oligopoly that exists today and the one that continues to get worse with the wholesale seizure of smaller failing banks by the handful of TBTF firms is really only threatened by a market leader that, from the ground up, exists as a force for productive good. From the mission statement, the company will need to exist to provide people with a service that they want and not be considered a necessary evil. The notion that a being very profitable and being socially responsible are mutually exclusive can be debunked by the demonstration that being a good corporate citizen and a productive member of society isn't just good for the economy and the customers but good for the business as well.
One thing worth mentioning as well is that I think personal responsibility is almost as rare these days as corporate responsibility.
And the regulators dithered under Bush's administration so, .... they got away with it because we had not enough government. Here's the NYT article describing only the tip of the iceberg. http://www.nytimes.com/2010/04/04/opinion/04koniak.html?_r=1
This is "securities fraud." It is "swindling" It is "racketeering." It is "money laundering." It is "usury." And ...
... it is "Bribery."
And the politicians and civil officers who are trying to sweep it under the rug and to simply "get the public to pay for it?" Uh huh.
They took the bribes.
Millions of dollars per person, per day. Millions. Per day. Every day.
Yeah. THAT big.
Un excellent exemple du mépris des règles est relaté dans cet article, consacré à la gestion des prêts hypothécaires aux USA. L'auteur est pessimiste sur les possibilités d'améliorations, car selon lui, les plus hauts responsables font tout pour que le problème soit traité au cas par cas, et non pas dans l'ensemble.
(Actually, it is both. Regulations were weakened and not enforced. Non-enforcement reveals the fatal flaw in the system, though.)
Wow. I'm speechless. This whole thing is such a mess. I agree, how can this even be sorted out at this point.
Chilling stuff.
If the average investor or homeowner becomes aware of how much chicanery has/is going on,...
Well, lets just say it won't be pretty.
Not that it is.
Millions w/o jobs. Millions who have lost or are losing homes.
Would a moratorium on foreclosures be a possibility?
How do we get out of this mess? Anyone?