"Big business never pays a nickel in taxes, according
to Ralph Nader, who represents a big consumer organization that never
pays a nickel in taxes."
A consultant for a (then) Big Five accounting firm once told me that the key to successful consulting was to convince a prospective client that there is a s**t storm on the way and that the consultant has the best umbrella. Whether there's any truth to the weather prediction is irrelevant. It's all about creating the perception of a problem. The same holds true of successful consumer advocacy.
The National Community Reinvestment Coalition urged lawmakers today to pass legislation immediately to shut down the "foreclosure mills" being operated by law firms, racing to kick out financially-troubled subprime borrowers from their homes. The law firms represent mortgage servicers, Wall Street investment firms and lenders.
Testifying before the House Financial Services Committee, a NCRC official recommended legislation that provides for 60-to-90 day stays in foreclosure proceedings nationwide to ensure that homeowners situations are properly assessed prior to facing needless and expensive foreclosure actions that strip equity.
The dreaded "land sharks" are doing their jobs so efficiently and swiftly that they're "stripping equity" away from subprime borrowers, in connection with mortgage loans where, according the consumer advocates, the amount of the loan exceeds the value of the collateral, leaving nothing to "strip." Makes sense to me.
What does "the homeowners situations are properly assessed" mean? In every state that I'm aware of, the lender has to, in effect, certify or demonstrate that the loan is in default and that the lender is entitled to foreclose. What more needs to be "assessed" that would take an additional 60 to 90 days?
Recent reports reveal that the average real estate loan foreclosure costs the lender a loss of $20,000 to $40,000. You can do the math. It's obvious that these evil lenders are out to drive themselves, as well as the borrowers, straight into the poor house. It's insane, but pure evil is bereft of any purpose other than "doing a bunch of junk" on everything and everybody.
The NCRC also wants Congress to enact a nationwide uniform stay of foreclosure period so that subprime borrowers have time to head for Las Vegas, Atlantic City or the nearest Native American casino, waltz up to the roulette wheel, and lay it all down on Black Number 35. "Redemption, here I come! Be good to me, baby! Be good to your pappa!"
So much for states rights.
If a "subprimer" needs a stay, I have a Five-Point winner of a program:
2. Declare bankruptcy. That will get you a nice stay, until they figure you out. Of course, you might have to forfeit the HD flat screen TV, so maybe that's not the plan of choice.
3. Hire your own land shark (rob a Shell mini-mart if you need a retainer), come up with some (real or plausible sounding) grounds, and secure a temporary restraining order. That might not buy you as much time as bankruptcy, but you'll have the benefit of spending quality time with the attorney of your choice.
4. Record "Woke Up This Morning (Got Yourself A Gun)," hire a pretexter to find out the loan officer's home phone number, call him in the wee hours, and play it, over and over, followed by "Who Let The Dogs Out?" You then need to disguise your voice and demand that all pending foreclosures be stayed, to avoid the unpleasantness that comes from the lender (and local law enforcement) focusing on only your loan.
5. Join Muqtada al-Sadr's Mahdi Army and go all jihadi on the lender until it agrees to stop the foreclosure. In this case, jail time is not a concern, it's a reward, as are the 72 virgins, in case the lender counters with a foreclosure "surge" of greater violence than you're prepared to meet. Keep an eye peeled for helicopters if you use this one.
Not content with lambasting attorneys, consumer advocates also went after the most unfair and loathsome practice in which any lender can engage: handling its own foreclosures in-house.
Consumer advocates have begun criticizing major mortgage lenders, such as Countrywide Financial Corp. and GMAC Financial, that also have in-house foreclosure businesses.
It is "mind-boggling" that in many states, people can lose their homes in foreclosure without any court hearing and that the foreclosure is done by a company with ties to the lender, says Ira Rheingold, general counsel for the National Association of Consumer Advocates in Washington.
"They should be completely objective and not have any financial interest in how the case is resolved," Rheingold added.
Like outside lender's counsel, Ira? Ira's poor mind is "boggled" by state foreclosure laws that have been around, and found compliant with due process requirements, for decades. In the sage words of noted legal commentator Ira ("Bugs") Bunny, "What a maroon!" This is the same Ira Rheingold who, last year, was aghast at the unfair, if obvious, application of federal preemption principles. Naturally, he's now calling for the US Congress to preempt state law. Having been skewered in these pages in the past, we almost feel that it's cruel to keep piling on. So, we'll let Bert Ely do it.
Bert Ely, a banking industry consultant in Alexandria, Va., disagreed, pointing out that lenders have every incentive to prevent foreclosures.
"No legitimate lender wants to foreclose, and the reason why is that the losses are very substantial," he said.
"Foreclosure is not a profitable activity, let me assure you."
Foreclosure is so costly to lenders — on average they recoup about two-thirds of a home's value — they should be able to foreclose using their own staff rather than having to hire outside attorneys, Ely said.
"The banks should be allowed to do it the cheapest way possible," Ely said.
Bert's also taken his lumps on this blog. Now, however, I agree with him, so he's aces in my book.
None of this, of course, is about helping the consumer. It's about another opportunity to call a press conference to justify the NCRC's and the NACA's existence. Neither group actually believes that the U.S. Congress is going to enact a moratorium that preempts state foreclosure laws. In golf, you drive for show and put for dough. In lobbying, you blather for both.
If, as Norman Cousins once asserted, cynicism is intellectual treason, then these clowns are the Benedict Arnolds of the intellect.