Wednesday, September 29, 2004

Your Tax Dollars at Work

Because most of the squaliformes are national in scope their victims tend to not see where they can fight back right in their own towns, cities, counties and states. They also don't realize they're paying taxes to local governments that are doing business with companies who help fund (and in some cases even own) the predators.

Find out who your city, county and state governments do business with. Start with the treasurer's office and find out what companies and banks provide financial services.

Not much gets done around here in the way of public works projects without municipal bonds. You know those boring bond elections that only a few people care about? Those kinds of bonds are tax free so they attract investors who don't want to pay taxes. And behind them are guess what? INSURANCE companies who help the municipalities increase the value of their bond issues by guaranteeing them. So if the city fails (and some have), the investors don't lose their money in the bonds.

Hint, hint: A search on "municipal bond insurers" is a good place to start. Then match up their subsidiaries and you'll soon find the interrelationships. Then walk in to your next scheduled city council or county board meeting and let them know if they're using your tax dollars to do business with creditoris squaliformes. Particularly useful just before an election.

Not in my town!

The Honorable Judge Roy Bean.

Tuesday, September 28, 2004

Hear Ye, Hear Ye, Court Is Now in Session

(Beware, the Judge is in a foul mood. [The Clerk of the Court.])

Notice to the judiciary: I'm growing more than just a little weary of seeing some of my learned colleagues and fellow jurists let illegal actions on the part of the Creditoris Squaliformes order be smothered under court-approved settlement agreements.

It's time for judges to find some cajones and step up to their duty to dispense justice instead of backing away from your responsibility. Every time one of these cases settles without exposing the company and its management you are facilitating the perpetuation of crimes against consumers.

I realize a lot of you have investments and they might include some among the squaliformes order; they're so damn tied together it's hard not to. But except in New York (where you don't have to worry about your conflicts in rulings involving financial institutions you have an interest in) the rest of you ought to start rethinking this bovine scatology of not wanting to rule against the predators. Especially where you're elected.

A word of warning: If you're elected and you have a track record of shielding the creditoris squaliformes by forcing victims to agree to secrecy in settlements instead of actually trying cases and exposing them for what they are, there's going to be a space (at the left) just for you.

Be it so ordered.

The Honorable Judge Roy Bean

Monday, September 27, 2004

The Hidden Shifting of Debt

The order Creditoris Sqauliformes is accomplishing a number of things other than just making executives multi-millionaires while fueling the American economy and pumping up campaign war chests. One thing in particular that stays under the radar of consumer watchdogs is the industry's drive to shift unsecured debt (i.e., credit cards) into the category of secured debt.

Because of the failure to ram so-called "bankruptcy reform" down the throats of a few recalcitrant lawmakers, the next best thing for the industry as a whole is to get more and more of the highest-risk debt moved out of the potential protection of bankruptcy and into secured debt.

It may sound counter-intuitive; why would a credit card company want to have a card balance paid off rather than keep collecting interest and all those yummy fees? Shouldn't they see the home equity lender as a competitor?

The short answer is no, especially if they think the victim might run for cover under the bankruptcy law. And there is so much money to be made, complaining about a supposed competitor would be like a fishing captain bitching about another boat somewhere else on the ocean. Besides, it's bad form to diss your fellow squaliformes.

To secure this debt requires someone to "own" something like real property that can have a lien placed against it which is used as leverage to make sure the victim keeps up on the payments. Hence the thrust to get prospective bankruptcy filers who own homes to refinance anything and everything into some kind of a mortgage-linked loan. Pay off your cards, your student loans (really dumb idea), your car, fix up your house, go on vacation, etc., etc., all at the risk of losing your home.

The great "American dream" of homeownership is much like the marketing of diamonds. That industry managed to convince the women of the world to believe only a diamond is worthy of that ultimate symbol of marriage. And yes, ladies and gentlemen, size is everything.

Home ownership is supposedly so good for the economy that Washington provides some tax benefits for the interest paid on mortgage loans. Why? Because everyone should have the opportunity to own a home.

Why? Sociologically, it appears there are benefits. Financially, it can be a very good investment. That does not mean it is right for everyone, and in a growing percentage of situations, it is far better for the squaliformes than for a consumer. As mentioned previously, a certain amount of collateral damage is acceptable.

Squaliformes know once they find the right kind of victims there will be multiple opportunities to profit. Many in the order thrive on taking small chunks of wealth over time, while leaving the larger members like predatory mortgage servicers to ultimately finish off the meal when there is nothing left but the home.

Part of this works because it works. In other words, when someone gets far enough behind their debt, everything costs more, which simply makes it more profitable for the lending industry because everything ends up being paid for with higher interest rates, which makes it harder for victims to pay for them, and so on and so on and scooby-dooby-dooby. [ed. A little bit of morning bench humor.]

The victims just can't seem to get ahead. The fact is though, they're not supposed to. If they somehow managed to actually get ahead, they wouldn't qualify as food for the squaliformes. The sub-prime food chain must be kept in operation, otherwise those who are ahead would have to pay more for everything and they might slow down their spending.

The entire economy relies on debt and the flow of wealth. It was designed and institutionalized that way. There is nothing inherently wrong with that situation unless you believe in some far-less viable economic system such as communism or socialism.

But what is inherently wrong is the legalized manipulation of middle and lower-middle class consumers to subsidize the rest of the economy with usurious interest rates and inflated insurance premiums. And at the same time, lowering the squaliformes risk by securing more and more of their debt with their only real assets; their homes.

The Honorable Judge Roy Bean.

Saturday, September 25, 2004

Court is adjourned on weekends

The Honorable Judge Roy Bean's court is adjourned until Monday.

Unless his honor gets a bug up his ass and decides to show up before that.

The Clerk of the Court

Friday, September 24, 2004

Collaboration with Other Species

Creditoris Squaliformes thrives in part because of the diversity of other forms of life in the consumer ocean.

There is at least one symbiotic relationship working on a macro-economic scale that re-redistributes wealth back toward the upper-middle and upper classes; wealth that was originally taken from them by so-called "progressive taxation" policies.

As members of the investor economic class see diversification of their portfolios into the RMBS (bond) markets, the higher return issues generate cash flows that are coming directly from the higher-interest rate loans foisted onto the allegedly sub-prime borrowers.

So while the pro-tax contingent in Washington continues to try and reverse the tax cuts, they and their opponents both know full well that even if they do increase tax rates on the wealthiest 25% of Americans, those who have any investment guidance or sense will realize they can get much of that money back directly from the people who pay little or no taxes by investing in sub-prime RMBS issues.

Obviously while the lenders continue to feed off this interesting situation, neither side of the legislative aisle is willing to expose their designation of Creditoris Squaliformes as a protected species.

The Honorable Judge Roy Bean.

Thursday, September 23, 2004

Corporate Arrogance & The Myth of the Sub-Prime Borrower

Creditoris Squaliformes as an order has a lot going for it.

First, the family believes it is legitimate business to take advantage of people who may not know or understand complex financial issues involving credit and debt.

Secondly, they have a lot of help. Their partners-in-crime who market products, cars and homes turn to the lenders to keep themselves in business because the vast majority of people don't save before they buy. Everyone wants it now and Creditoris Squaliformes are ready to make that happen.

Let's face the fact that there are people who are not well educated and have lower incomes. Some of them aren't ever going to make six figures. Whether they should own a giant screen television and a $35,000 SUV and a $100,000 home is not something lenders want to think about.

To Creditoris Squaliformes those people are just a large and growing demographic market segment, ripe with opportunity and conveniently labeled as sub-prime.

The mask of convenience helps defray questions about mistreatment. After all, who would a judge be more likely to believe, a large, well established business represented by highly-qualified counsel or a consumer/borrower that has been painted as being inherently questionable because they're having "credit problems."

After all, to those who currently don't have "credit problems," the only people who do must be deadbeat low-lifes that can't pay their bills and spend irresponsibly. Only until the unaffected run into the credit data scam themselves will they get a taste of what it can be like to be called something you're not.

The lending industry operates against consumers with a level of arrogance that would not be possible if they didn't wield absolute power over who they want to call "borrowers with less than perfect credit." They are unchallenged for the most part, and the correlation between lower credit scores and supposedly higher risk, higher interest rate loans works perfectly in their favor.

Since the usury laws were done away with back in 1980, Creditoris Squaliformes have deliberately and diligently worked to create millions of sub-prime borrower/victims.

Consider that just the errors in credit data negatively effect at least 30% of people who apply for credit. The opportunity to charge nearly twice as much for a loan for that many people is just too tempting to ignore.

Abuse in reporting by collections firms alone is rampant. The fact that credit card companies get to raise their rates based on changes in your credit score (that they can easily manipulate) only helps enlarge the target market of victims.

The arrogance required on the part of executives and managers also finds its way down into the ranks of supervisors and employees. To perpetuate the scheme, everyone in the life cycle of a loan has to firmly believe three things:

1 - The borrower is wrong but won't admit it.
2 - The company and its computers are always right.
3 - The victim will lose the fight and there's no limit to the litigation budget.

This innate position of arrogance creates an operational environment that attracts people who can function without regard to truth or any concern for right and wrong as long as the company is there to reinforce the above three tenets. The collections and customer service call center environment is often conditioned to measure performance in what most normal people would consider emotionally as well as morally bankrupt.

Like Homer Simpson once said: "De fault! De fault! The two sweetest words in the English language! Woohoo!"

Until the leadership of these giant companies admits there is a problem, they're not going to fix it, and they are doggedly trying to avoid admitting there is anything at all wrong.

The Honorable Judge Roy Bean

Wednesday, September 22, 2004

Foreclosure myths

The most common myth about foreclosures you will hear from the creditoris squaliformes order goes something like "...we don't want to take your home..." or "...we want people to keep their homes..." etc. More elaborate and seemingly convincing statements include estimates of the losses the species faces when foreclosing, often referring to amounts in the tens of thousands of dollars per foreclosure.

The statements are an almost ingrained mantra from any squaliformes who comes face to face with a reporter.

Like so many things business executives are trained to say, they are designed to protect the image of the company as opposed to being entirely honest. They serve to deflect the uninformed reporter or writer by not having to actually discuss or explain the realities of the mortgage market.

Unlike automobile reposession, which deals with assets that functionally decline in value (depreciate), in the vast majority of cases, real property increases in value. In fact, unless the loan was fraudulently created or significantly damaged, the property is almost always worth more than the balance owed.

One would hope reporters would understand the concept of equity and would then explore the issue in a little more depth with the executive, as in: "But what if the house is worth a hundred and fifty thousand and the loan balance is only a hundred thousand?"

Surely, that's not always the case, but neither can it be said that a lender "loses" tens of thousands of dollars on a foreclosure.

It is particularly disingenuous of sub-prime loan originators to imply they lose money on foreclosures. Few of them own or service the loans they originate so when a foreclosure occurs it is essentially meaningless to them. In reality, they stand a chance of seeing another borrower come through the door.

Because most foreclosed properties end up back on the market, a foreclosure and eventual home sale and new loan generates new income for almost all the players:

Property "preservation" services
Real Estate agent(s)
Private property investors (rental property buyers)
Listing services
Mortgage Broker
Credit bureau (Fair Isaac)
Wholesale lender
Mortgage insurer (GSE or PMI)
Title insurance company
Courier/delivery service
Property/Casualty Insurer
Master servicer
Servicer/sub servicer
Bond brokers (Wall Street)
Bond holders

Everyone gets a slice of the pie. The bigger the pie (the more loans written) the more money is made. The amounts may be small, so the key is to do lots of loans.

The other facet of the argument they won't dwell on is what happens to that borrower's equity in a foreclosure. The fact is, much of it will be eaten up in various fees, including thousands of dollars in legal fees supposedly billed by and paid to a network of specialty attorney firms for what is mostly an electronic filing process. To make a long story short, the goal is to get enough at the auction to cover all the creative charges and fees and never have to write a check to a borrower.

This takes some expertise as well as creativity. The analysis of when to foreclose has become rather scientific, and goes beyond the simple mathematical equity opportunity/cost analysis. It even includes computerized analysis of what it said by borrowers when they're communicating with company representatives. Savvy servicers even get credit notifications to see if borrowers are shopping for refinancing.

Under the guise of "loss mitigation" the process culls the fattest cattle from the herd and sends them off to the meat packers (the law firms).

The statements of servicing industry executives need some editing. To wit:

"...we don't want to take your home..." should read: "...if you've got a sharp attorney, and we're going to lose money on a foreclosure, we don't really want to take your home, but we will try if you really piss us off, and if we do win, and the auction sale doesn't cover all of it, we'll come after you anyway."

"...we want people to keep their homes..." should read: "...we want people to keep their homes as long as they'll pay us what we tell them to pay without too many questions..."

Just one of many lender myths to be exploded.

Judgment hereby ordered in favor of the victims.

The Honorable Judge Roy Bean.

Tuesday, September 21, 2004

And so it begins

In the process of exploding myths on at least a weekly basis, there will be companies and people identified in this blog. Some of them may squirm a little if it shows up in a search about them or their company. Some of them may get really bent out of shape. Some of them will call their attorneys. Some will have their PR firm write rebuttals and get articles placed in major newspapers to keep the myth of their good citizenship going.

But none of them will take steps to fix the problems they are creating for millions of consumer victims of their loan sharking. When it comes to profits in comparison to ethics, accountability or responsibility, profits will win every time.

Creditoris Squaliformes is the broad definition of a class of sharks who engage in all manner of businesses surrounding the process of lending and collecting money. There are literally hundreds of different businesses involved and even more sub-specialties, some of which you never even knew existed until one of them came after you.

The cross-ownerships and interlocking relationships create a web through which our entire economy moves. This web is where capital moves and consumers load themselves up with debt as they keep the machine oiled. But there are firewalls between the various parts that serve to not only keep prying investigative eyes away, but also serve to protect players from potential litigation or prosecution.

The mortgage-related portion of the industry alone is measured in TRILLIONS of dollars. It's no wonder Washington is incapable as well as unwilling to take steps to protect consumers. The task is simply too daunting, particularly when large amounts of money are provided to those who are supposed to take legislative action to protect victims.

The nature of the industry is to prey on just enough of a selected part of the consumer base to leave others unaware of the danger and still willing to do business with them. A certain amount of this financial collateral damage to consumers is acceptable in Washington; after all, it's not their neighborhood or their relatives being fed into the wood chipper in what has become known as "predatory lending" and "mortgage servicing fraud."

Most of the victims of these squaliformes are in the part of the bay marked off as "sub-prime," where their allegedly higher-risk credit scores isolate them from the kinds of offers for those who are seemingly more responsible. We used to call it "redlining." Now it's just "credit scoring." If you map it, guess where the lines are drawn?

But, sharks need a food supply. And the credit information industry works hand in glove with lenders and other credit providers to effectively keep the food chain full.

And there are all kinds of smaller predators with some equally large appetites for other people's money; they are popping up all over the net, even on radio and television with "save your home" offers, most of which are simply multi-level-marketing schemes to sell "secrets" about things you and I don't know about doing away with debt. Many take on the guise of "credit repair" or "loss mitigation" but usually end up making the victim pay even more.

Along with exploding myths, I will be relaying stories about victims and the people and companies who participate in that victimization. Without this kind of publicity, these companies will simply continue to operate as usual.

Consider what they call "the poster child" for predatory mortgage servicing, Fairbanks Capital (now "Select Portfolio Servicing"). Without a web site (the contifairbanks site is no longer operating) frequented by thousands of victims, the news media may not have picked up on the story. Without the TV stations running their investigative reports, the two Maryland Senators would not have publicly demanded that the FTC finally get off their asses and investigate. Without that investigation and negative publicity, Fairbanks would have only had to keep fighting the myriad of class-action suits and would have kept growing. Now it appears the victims got pennies on the dollar, but SPS is tiny compared to what it used to be so the number of its potential victims is smaller as well.

There are literally hundreds of lawsuits, maybe thousands, representing a modest fight against these industry giants and their henchmen. Every once in a while a victim will have the resources to fight back, but most don't, especially those cast out into the sub-prime wasteland. To expose these crooks, I intend to track as many as I can and report here on decisions that affect consumers, especially when the courts continue to dance to the tune of the companies involved.

Here, the playing field is actually tiltable toward the victim.

The Honorable Judge Roy Bean.