Eggs and issues
I really like a good omelet. Eggs, cheese & other goodies all served hot for a nice rib-sticking breakfast is about as good as day can start. It’s the mixture really. Having eggs here, cheese over there & the other ingredients separate just isn’t the same. But blend them together and it’s delicious.
But mixing things together isn’t always the right way to go. And when it comes to policy and legal issues, it’s a really, really bad idea. I was already exasperated with an example of this yesterday when I came across this CNBC article on the proposed settlement by the 50 state attorney generals and the major mortgage servicers. I don’t want to get in to great detail on the settlement because there are better places to get the latest (like here, here and here). But I do want to get in to a broad theme about what the attorney generals apparently are pushing and has been a principal point of consumer advocate protests about the settlement. According to reports, part of the settlement was to include $20 billion as a fund to be used to assist homeowners that are currently struggling with mortgage delinquencies. Protestors, according to CNBC, are unhappy with how the proposal will affect future modifications.
Maybe I’ve gotten the whole mess confused, but the attorney generals aren’t economic advisers. They aren’t consumer advocates (although they do serve the public). They aren’t affordable housing programs. Their job is to be the principal criminal prosecutor of the state that they serve. So I’m befuddled why they are negotiating a settlement where a (if not “the”) principal punishment is a housing affordability program.
This got started because it was revealed that on foreclosures that have already happened, servicers were “robosigning” and engaging in other slipshod practices that amounted to fraud on the courts and perjury. The whole point of the criminal justice system to is bring wrongdoers to justice, partly out of the desire to see that those who injure others are punished as a retribution by society (hence why criminal matters are often captioned as “The People v. John Accused Doe”) but, even more importantly, to provide a very vivid and tangible deterrent to others that might be tempted to act in a similar unlawful manner.
So to the attorney generals, it’s time to quit scrambling eggs and sausage. Put somebody in jail for crimes committed during foreclosure processes from the past. Preferably someone who made the call to engage in the perjury and fraud or pushed employees to handle a workload that couldn’t possibly be administered properly. But certainly anyone who is on video admitting that they didn’t read affidavits that they signed or that they notarized documents with signatures that they never witnessed should be on the list. Once you put one in jail, keep looking for more.
As for the consumer advocates and protestors seeking writedowns, that’s an issue of what happens moving forward. It’s less a criminal justice matter and more of an economics and public policy issue. Protest away, but direct it to the officials that set aside $37 billion for a HAMP program that has been so tightly wound in rules and procedures that only a fraction has been used. Or to the legislators that are not trying to cancel HAMP instead of reform it so that more than a small percentage of applicants can get permanent modifications. Or to the underwriters at Fannie Mae and Freddie Mac that are denying loans due to low appraisals even when the new loans will have the same or lower balances that the current loans held by Fannie & Freddie. Or to any number of other vested interests that have either bungled attempts to provide appropriate relief or have allowed short-term, short-sighted concerns to create obstacles.
That’s enough. I’m still peeved. But now I’m hungry more.
EDIT: I had to link to this piece from Housing Wire over a Congressional Republican reaction to the proposed settlement. I don’t agree with some of it, don’t know enough about how the process worked to get to this point to comment about other parts of it and I concede that I suspect that much of what was said is actually directed less or not at all at influencing the settlement and is more about hamstringing the influence of the Consumer Financial Protection Bureau and using the HAMP issues to take shots at a Democrat administration. Nevertheless, the statement that the settlement is more about legislating future conduct is on point and wholly valid. The attorney generals are responsible for enforcing the laws as they are written and there are plenty to enforce against the servicers and their attorneys in how they’ve handled foreclosures.
Moreover, it should be troubling that a collection of state elected or appointed officers have banded together to craft what would essentially be a nationwide code of conduct. As unpopular as Congress might be, instituting such government oversight is either within the jurisdiction of the U.S. Congress for any law to apply to all 50 states or it is within the purview of each individual state. As a resident of Pennsylvania, I am troubled that the attorney general of Iowa, who should have no power beyond the borders of that state, who I have no right to vote for or against and who might not know an Act 6 notice (a Pennsylvania notice of default commonly required before beginning a mortgage foreclosure) from a take-out menu is the one that has been trusted by our attorney general and those of other states to take the lead. Quite frankly, I’d prefer if the Pennsylvania attorney general’s office did its own investigation and start dragging people in to a Court of Common Pleas in any county of this Commonwealth and putting them on trial. Maybe it wouldn’t be the politically expedient thing to do. Maybe it would drag out the foreclosure mess and hinder the housing recovery (although I don’t think it would more than this mess already has). Maybe it would cost a lot of taxpayer dollars when Harrisburg seems to want to chop every budget in sight. But I’d feel a lot better about making sure that when a mortgage lender operates here in Pennsylvania that we can trust that they’re going to follow Pennsylvania laws and not fall back on using widely-accepted industry standards for how they should operate.
EDIT NO. 2: As I mentioned above, there are some things about the Republican statement against the settlement that I think are off-base. Here is a nice post that makes provides a far more detailed critique than I have. I stand by my criticism of the settlement as a misguided coordinated effort to regulate future conduct rather than prosecute criminal transgressions that are already in the books. But the arguments in the post are compelling. I highly recommend checking it out.
EDIT NO. 3: There are few, if any, writers covering the real estate scene with more incisive analysis than Rob Hahn. Frequently, I want his conclusions to be wrong but it’s rare to find flaws in his logic. He put up a post with his thoughts on the foreclosure settlement. If you have any interest in the topic, it’s mandatory material. Thanks for the great insight Rob.
