Saturday, October 20, 2007


It shouldn't surprise anyone that the players and robber barons from Wall Street are raising a stink about mortgage backed securities. And the weeping and wailing and gnashing of teeth from people being let go is getting louder and louder.

All this Judge can say is "QUIT WHINING!"

If you think anyone is stupid enough to think hedge fund managers believed what the likes of Fitch, Moody's and S&P were shoveling on behalf of their customers, you need to invest in Nigerian 419 scams.

The power players and raters knew exactly what was going on. So did employees. Some of them just didn't get their exit strategy timed correctly. They knew the reality of dishonesty being portrayed in countless court actions, foreclosures, bankruptcies and news stories would catch up to them, they just didn't know when to pull the plug.

No, instead they buried their collective heads up their collective asses and kept raking in the dough, stashing it away in other less risky gambling endeavours as fast as it kept coming in.

And it did come in. And it did go out. And there won't be any serious accounting of the billions of dollars that were taken from everyday people and ground through the machine into accounts held by the people who knew how to play the system without risk of prosecution.

It's a question of timing. You're at the table. You're ahead 200%, maybe even 300%. You see six months of mortgage payments in your grasp. Do you sit and play? Or do you think your run of luck is over and go find a more honest job?

For the employees of the scam artist companies who continued playing beyond rational expectations, it's not a pleasant scenario. They were in it for a few thousand a year in bonuses. For the executives in on the scam early enough, it's a simple bump in the road and the 7-figure lifestyle isn't really going to take a huge hit, unless of course all those political friends they stroked don't want to be seen with you. That can be painful to the ego. Just ask Ken Lay about what a night in the Lincoln Bedroom turned out to be worth.

But the properties, corporate jets, yachts, vacation destinations, casino nights, fine wines and gourmet meals are still within their grasp. They've got lots of people to blame and unlike Lay, their connections run much deeper than just the White House. None of them risk prosecution. They've paved the way to "no admission of wrongdoing" long ago with their influence on K street.

So to the industry workers who've lost their jobs, quit whining already. You went to work with these crooks. You deserve anything that happens to you. Find honest work.

And contact your local FBI office if you want to be able to sleep better at night.

Thursday, August 30, 2007

The Meltdown Continues

Note from the Clerk of the Court: An industry source passed this to us and His Honor simply cannot resist letting others in on the fun:

Amazing what employees who have come to grips with the reality of their jobs can come up with.

Monday, February 12, 2007

Merger-mania will make things worse for borrowers

If you have a sub-prime mortgage loan and aren’t keeping close track of what your mortgage servicer is doing, you better start. As the lenders scramble to buy up failing originators, loans will be moving in and out of the hands of servicers like cards in a game of gin rummy.

Even if you’re not facing foreclosure (like nearly 20% of recent sub-prime loans), get ready for the tsunami of transferred and messed-up mortgage accounts, and keep in mind the servicer who obtains your loan will believe anything and everything on the computer, no matter how screwed up it is. On top of that, the search for profitability will lead to adventures in fee creation as well as opportunistic equity recovery in order to balance out the really upside-down loans in a portfolio.

Contrary to what some industry observers have said, the servicers aren’t exactly in a panic about the 2+ million coming foreclosures of bad loans. In fact, the real predators are positioning themselves to take advantage of the mess, bargaining behind closed doors to divide up the spoils and offer troubled lenders a way out of their servicing-related overhead.

The industry would like Washington to believe that the closing of doors and shrinking profits are evidence of a market that can and will rid itself of bad or weak players. A few of the sub-prime lenders who made bad loans are going out of business and that seems to satisfy the Mortgage Bankers Association’s Chief Economist, Douglas G. Duncan. This is the same person who, in his prepared testimony before the Senate Committee on Banking, had the gall to claim: “The primary reason for defaults are family and economic difficulties – not product choices.” To support this half-truth, he points to a Freddie Mac study that looked at reasons for delinquency based on data from their “Workout Prospector® system.” Here’s what his table of reasons looks like:

Unemployment or curtailment of Income 41.5%
Illness or Death in Family 22.8%
Excessive Obligation 10.4%
Marital Difficulties 8.4%
Extreme Hardship 3.3%
Property Problem or Casualty Loss 2.1%
Inability to sell or rent property 1.6%
Employment Transfer or Military Service 0.9%
All Other Reasons 9.0%

Of course the data is from 2002 through 2005 and doesn’t touch the 2006 disaster – but that’s not the disingenuous part. What isn’t going to be one of the options the users of “Workout Prospector®” can enter into the system would be things like “Predatory Loan,” “Borrower Scammed by Lender,” “Illegally constructed loan,” or “Opportunistic Servicer.” And let's not forget, most sub-prime loans aren't touched by either Freddie or Fannie, so the data is even more misleading.

Duncan goes on to promote the “everyone loses in a foreclosure” mythology, conveniently ignoring the fact that the home being foreclosed on is going to be sold to someone, and that someone is probably going to get a new loan to buy it.

He even put this jewel in his prepared testimony: “Servicers do not have an incentive to intentionally cause foreclosures, because profitability rests in keeping loans current and, as such, the interests of borrowers and lenders are mostly aligned.”

His duplicity is glaring; “profitability” for servicers involves far more than keeping loans current and a substantial portion of it comes from fees and charges (legitimate or otherwise). Not to mention the discounted acquisition price some servicers pay for loans the previous servicer doesn’t want to handle.

So at least in Senate Committee testimony, the industry is as fundamentally sly as they are in the loan origination process.

Which brings me back to the original point – the troubles in the sub-prime lending marketplace are going to land in the laps of the borrowers, not the lenders and servicers. Trust me, these predators are not going to slink back under a rock somewhere and not try to minimize their losses.

Washington is going be dancing to the tune of the lobbyists, and the lending industry will spend millions in the coming election year to make sure they don’t have too much interference. And in the mean time, they’re going to grind as many of the garbage loans into mulch as fast as they can.

Anyone with a sub-prime loan best be equipped to prove every stinkin’ payment and stay on top of every little detail in their loan every month. And you’d better at least find an attorney and get him or her ready, because you are a target, especially if you have equity in your home.

The Honorable Judge Roy Bean

Monday, January 15, 2007

Y’all put stupid in the water or somethin’?

Leave it to the news media in the Lone Star State to turn a blind eye to things that affect Texas consumers. Two major legal cases are brewing, one that affects anyone who bought or buys a car in Texas and the other that shows just how ignorant the state is when it comes to identity-theft issues.

First, after years and years of legal wrangling, it looks like a settlement is going to be worked out on a case involving most, if not all of the members of the auto dealers association in Texas. Clever folks they are, they crafted a conspiracy to gouge car buyers by making it appear something called a “vehicle inventory tax” was a tax applied to the buyer at the time the car was sold.

The really crafty part was that the VIT is a tax the dealer pays – in effect, property taxes on their inventory, and there’s nothing that says that expense is to be itemized and specifically paid by the buyer at the time of sale. It’s simply part of the dealer’s business overhead. In a competitive environment, that tax may or may not have any effect on the price someone pays for a car. The ruse effectively made it look like the price was non-negotiable. Therein lies the rub. Gene Fondren, President of the Texas Auto Dealers Association circled the wagons back in 1994 and everyone in the association has been tacking on the VIT and making it look like it was something the state required the buyer to pay on the purchase documentation. It’s a bit like the dealer putting a line item on the sales documentation that shows the salesperson’s Social Security withholding for the deal and telling the buyer that the law required the buyer to pay it on top of the price of the car.

Along comes the suit way back in 1997 charging violations of the Clayton Act and the Sherman Act, and it crawled its way through the courts until a recent proposed settlement with most of the defendants. This Judge’s guess is they’ll wind up giving consumers a refund and stop showing it as a “tax” that the buyer is required to pay.

Over the last thirteen years, car buyers in Texas have been gouged – a little bit at a time, yes, but it adds up. And where’s the news coverage? Try doing a Google News search on “Texas Auto Dealers.” Zip. Nada. If the power of the auto industry ad budget isn’t alarming, it should be.

Much as no one in the Texas news media wants to look into the practices of some of the lending predators based in Texas, none of the news outlets wants to tackle the auto dealers and their millions of advertising dollars.

Wake up Texans - when you sign for a car, cross out the VIT and change the total. If they don't like it, get up and leave.

Then comes some skullduggery by some Texas corporations in obtaining drivers license and motor-vehicle data illegally. Instead of complying fully with the spirit of federal privacy laws, Texas will sell personal information to someone who claims they have a legitimate use for it. The gist of a recently-filed class-action suit is that when the Department of Public Safety or Department of Motor Vehicles sells information, they sell the whole database – without regard as to whether or not a person doesn’t want their private information sold or used.

The suit seeks damages from the companies that bought the data for all 20-million+ Texans in the database, and the statutory amount for each violation is $2,500.00. There are twelve defendants. All told, that could be $600 Billion. This ought to be fun.

Looking at the defendants makes it interesting to think about why they would want the personal information on all Texans who own and operate motor vehicles.

ACS State and Local Solutions is a division of Dallas-based automation outsourcing and services giant ACS. Part of what the company does is child support payment collections.

Fedchex is a payment processing and recovery/collections operation based in Irvine, CA.

Gila Corporation, dba Municipal Services Bureau is essentially a collection agent focusing on handling collections for municipalities. Gila is headquartered in Austin, TX.

Global 360 BGS, based in Dallas, provides technology services to a variety of public entities, including public retirement entities.

Centerpoint Energy, American Electric Power, TXU Business Services, Reliant Energy and Houston Electric Power are utilities or utility-related companies.

Southwestern Bell (SBC is becoming AT&T) is the major local phone company in Texas.

The Texas Motor Transportation Association is the state trucking industry trade group/lobbying organization, based in Austin.

The Industrial Foundation of America calls itself a “trade association” and operates under non-profit status. Based in Boerne, TX (near San Antonio), IFA is a data gathering and reporting entity that few, if any consumers or employees know of and only member companies (mostly energy and exploration related) use. Among the things IFA does: Pre-employment screening, accident history reports, criminal reports, motor vehicle reports, education verifications and credit reports.

There are 23 plaintiff’s listed in the suit and of course everyone in the Texas DMV and DPS databases is said to be a potential member of the class. But despite the case being filed January 10th, is there any word of any of this in the Texas press? Zip. Nada.

Given the amount of money energy companies are spending on advertising in the new "less-regulated" utilities market, it isn't any wonder the media isn't helping spread the word.

So at least in other parts of Texas, it appears to this court that all you have to do to avoid being exposed is make sure you spend a lot of money on advertising.

The Honorable Judge Roy Bean