Stupid Is As Stupid Does

For those readers who write to complain that while we zing federal regulators with glee, we go easy on state regulators not named Spitzer, we curl our upper lip in an Elvis-like sneer for our beloved Lone Star Stud, Texas Attorney General Greg Abbott.

Last Thursday, A.G. Abbott summoned three of the largest mortgage loan servicers in the state (and in the nation) to his offices and enlightened them with a step-by-step game plan for avoiding the horror of having to foreclose upon all the innocent borrowers to whom "a lot of junk was done" by subprime mortgage originators. For sheer brilliance, the plan is worthy of an other Bud Light "True Man of Genius Award" that we've been passing out lately to similar Forrest Gumps of mortgage lending.

Here is General Greg's Five Step Program:

• Provide long-term solutions for borrowers with adjustable-rate mortgage loans (ARMs). Mortgage companies should consider easing homeowners’ mortgage-related burdens by converting adjustable-rate loans into fixed-rate products. Many ARM loans have already adjusted and pushed countless consumers into the foreclosure process. Because of high foreclosure costs, this proposal benefits lenders, loan servicers and homeowners. [Ed.: In addition to being a belaborer of the obvious and a rehasher of yesterday's news, the Attorney General is now an expert on what is in the best economic interests of lenders and servicers, as well as of homeowners. For example, foreclosing is more expensive than not foreclosing. Genius!]

• Mitigate first, collect second. Under the protocols currently used by most lenders, homeowners who have difficulty making payments receive expedited referral to the collection process, which is often antagonistic and intimidating. Attorney General Abbott encouraged companies to engage homeowners before sending a case to collections by reviewing each case in a non-confrontational setting and exploring solutions. By doing so, the servicers increase the chances of debtors repaying their obligations. [Ed.: Whether to mitigate or to collect is primarily a business decision, not a legal decision. I'm impressed that father knows best, business-wise, but who was it, exactly, who died and left Abbott the boss of mortgage lending economics? In addition, I'm certain that the underutilized members of the Attorney General's staff will provide the already stretched-beyond-capacity servicers with the personnel needed to accomplish this painful corporate reorganization.]

• Create an in-house resolution committee to address consumer complaints. Attorney General Abbott urged today’s participants to dedicate in-house staff to immediately address consumer complaints received by the Texas Office of the Attorney General (OAG) and report promptly to the OAG on the status of those complaints. [Ed.: Regardless of whether or not there is any basis in fact for any complaint received and passed on or whether the complaint's alleged factual basis even provides grounds to support the Attorney General's jurisdiction to play any role whatsoever in any such dispute. That makes sense. See above re: staffing.]

• Improve communication with consumers. While many companies have adjusted their protocols and are engaging consumers who face imminent foreclosure, Attorney General Abbott recommended that companies improve their communication efforts. The attorney general also encouraged the companies to contact consumers well before ARMs reset to higher interest rates so that fixed-rate options can be explored. [Ed: The A.G. is also a communications expert. His expertise knows no bounds. For a politico like Abbott, "communication = public relations," so he must mean "hire a good flak." If not, then mega-dittos on the previous comments re: staffing requirements.]

• Waive applicable penalties and fees. Attorney General Abbott urged lenders and loan servicers to waive penalties and late fees associated with loans at risk of foreclosure while the companies work with troubled consumers to preserve their loans. [Ed: Of course, without investor consent, servicers may not be able to, or may be severely limited in being able to, waive penalties and fees. Whether or not to do so should be a decision made on the facts of each case, not as a give-away to make a local politician look like he's doing something to enforce the law, when what he's actually doing is grandstanding to enhance his public media profile in his home state so that he can run for governor like "Spitz" Spitzer. Maybe Mr. Abbott would be willing to agree that the lenders and servicers will be reimbursed from by a special fund established with salary give-backs from the Attorney General and his staff. Shall we suggest it as a modification of "measure five"?]

Abbott wants the three servicers to report back to him in thirty days as to their "progress" in complying with his "five measures." Or what? He doesn't say. Issue another press release? Surely, there's no legal basis for any legal action against the three servicers if they decline to follow Abbott's five measures and tell him to pound sand. 

On that note, the Attorney General's press release tries to loop in some connection to his primary area of responsibility.

Protecting Texas consumers is one of Attorney General Abbott’s top priorities. Under the Deceptive Trade Practices Act, the OAG has prosecuted a variety of deceptive loan practices, including title-related scams, fraudulent refinancing ploys, and other mortgage-related fraud.

There's more palaver in the release about unrelated smackdowns by the rough, tough super cop of Texas, of "scammers" of consumers, none of whom include the three servicers he now insists adhere to his "best business practices" diktat.  Which of the "five measures" addresses either a deceptive trade practice or a remedy for a deceptive trade practice? What "mortgage-related fraud" is being addressed by the Attorney General through the "five measures"? If none, then why mention deceptive trade practices at all, unless it's some kind of "Elliot Mess"-like strong-arm tactic to attempt to scare the three servicers into kowtowing (Texans prefer to spell it "cowtowing") to this Spitzer wanna-be?

If deceptive trade practices is one of Abbott's "top priorities," how does this exercise in self promotion serve that priority? What "deceiver" is being deterred or punished by following the "five measures"?

As one reader of the blog wrote to comment after reading about this FUBAR late last week, "What was this guy before he became Attorney General? He had to have been a litigator."

So here's to you, Grego, for being not only another true man of genius, but, as a matter of fact, a bigger wiener than we ever thought possible.