Friday, October 26, 2012

Dual Tracking Endures

When home borrowers allegedly default on their mortgages, TBTF banks often Dual Track.  Banks will begin the loan modification process for the homeowner.  At the same time, banks will refer the account to an attorney for foreclosure.  This Dual Track procedure allows banks to more easily reject loan modifications.  Dual Tracking seriously prejudices home borrowers.  
Early this month, California Monitor Katherine Porter released her first report (.pdf) associated with the National Mortgage Settlement.  Ben Hallman has provided a helpful synopsis of the report.  

Porter, who was appointed by California Attorney General Kamala Harris to oversee the settlement, focused on dual-tracking she said because it is one of the most harmful servicing practices that banks were required to reform. Dual-tracking also suggests broader institutional problems that have plagued the foreclosure industry for years, including a lack of communication between various departments at mortgage companies, she said. "Dual-tracking costs people their homes," Porter said. She has "tempered optimism" that banks will stop dual-tracking and make other reforms required by the settlement.
Porter wisely tempered her optimism.  The Consumer Financial Protection Bureau (CFPB) has retreated from banning Dual Tracking as part of its proposed new regulations.  Although the National Mortgage Settlement Five must cease Dual Tracking, the rest of the industry may continue this harmful practice.  A recent New York Times editorial asks, Will Foreclosure Abuses Ever End?

[The Consumer Financial Protection Bureau's] proposal retreats from many existing requirements. It does not impose any meaningful standards for loan modifications beyond those already required by various federal programs and agreements, many of which will expire in the future and none of which apply to the entire industry. In a stunning reversal, the proposal actually permits dual tracking.
The CFPB's actual loss mitigation proposal is quite tame.  

9. Loss mitigation procedures. Servicers that offer loss mitigation options to borrowers would be required to implement procedures to ensure that complete loss mitigation applications are reasonably evaluated before proceeding with a scheduled foreclosure sale. The proposal would require servicers to exercise reasonable diligence to secure information or documents required to make an incomplete loss mitigation application complete. In certain circumstances, this could include notifying the borrower within five days of receiving an incomplete application. Within 30 days of receiving a borrower's complete application, the servicer would be required to evaluate the borrower for all available options, and, if the denial pertains to a requested loan modification, notify the borrower of the reasons for the servicer's decision, and provide the borrower with at least a 14-day period within which to appeal the decision. The proposal would require that appeals be decided within 30 days by different personnel than those responsible for the initial decision. A servicer that receives a complete application for a loss mitigation option could not proceed with a foreclosure sale unless (i) the servicer had denied the borrower's application and the time for any appeal had expired; (ii) the servicer had offered a loss mitigation option which the borrower declined or failed to accept within 14 days of the offer; or (iii) the borrower failed to comply with the terms of a loss mitigation agreement. The proposal would require that deadlines for submitting an application for a loss mitigation option be no earlier than 90 days before a scheduled foreclosure sale. 

The CFPB may permit Dual Tracking, but state-level consumer protections and the common law should not.  Victims of Dual Tracking still have a variety of legal remedies available to them even if the Federal government refuses to regulate its TBTF banking enterprises.    

Tuesday, October 2, 2012

The Hardest Hit Fund

As part of the financial relief package known as TARP, the Federal government has an array of homeowner assistance programs.  You may have heard of some of them: the Home Affordable Modification Program (HAMP), the Home Affordable Refinance Program (HARP), and possibly even the FHA Second Lien Program (FHA2LP).  

You probably remain unaware of the Hardest Hit Fund (HHF).  In 2010, Treasury allocated $7.6 billion to the HHF for distribution to the following 18 States and D.C.:

  • Alabama
  • Arizona
  • California
  • Florida
  • Georgia
  • Illinois
  • Indiana
  • Kentucky
  • Michigan
  • Mississippi
  • Nevada
  • New Jersey
  • North Carolina
  • Ohio
  • Oregon
  • Rhode Island
  • South Carolina
  • Tennessee
  • Washington D.C.

In its most recent report (.pdf), the Special Inspector General for the Troubled Asset Relief Program (SIGTARP) came down hard on Treasury's neglect of HHF.  

SIGTARP reported that as of December 31, 2011, the latest data then available, HHF had spent only $217.4 million to provide assistance to 30,640 homeowners — approximately 3% of the TARP funds allocated to HHF and approximately 7% of the minimum number of homeowners the state HFAs estimate helping over the life of the program. 
Treasury has not set measurable goals and metrics that would allow Treasury, the public, and Congress to measure the progress and success of HHF. Treasury set a single goal for HHF: help prevent foreclosures and help preserve homeownership. Treasury deferred to individual states to set goals but did not require those states to set measurable goals. 
Treasury has stated that establishing static numeric targets is not suited to the dynamic nature of HHF. Taxpayers that fund this program have an absolute right to know what the Government’s expectations and goals are for using $7.6 billion in TARP funds. By refusing to set any goals for the programs, Treasury is subject to criticism that it is attempting to avoid accountability.
[bold is mine]

The SIGTARP report also remarks that Treasury has failed to even track the progress of the program and has refused to publish the progress recorded by the various states.

States have experienced various amounts of success with HHF.  For example, Kentucky's Unemployment Bridge Program (UBP) has averted 1,500 foreclosures.  The UBP has broad eligibility and provides generous benefits.

The maximum amount of assistance is $25,000 or 12 months, whichever occurs first.  Of the $25,000, the maximum amount that may be used for reinstatement, all related fees and payments to bring your loan(s) current, is $12,500 (effective with closings on or after May 7, 2012).  To get started, click on Get Free Help at the top of the page.
Applicants must meet the following guidelines and the mortgage must be with a participating servicer.
  • Maximum amount of liens on the property cannot exceed $275,000.
  • Maximum of two liens permitted on the property.
  • Applicant(s) must demonstrate a need for assistance.
Notably, Kentucky's UBP still has $93 million left to disburse.  

South Carolina's Homeownership and Employment Lending Program (HELP) extends relief even to those who have suffered divorce, a death in the family, or medical disaster. But HELP has only expended 12% of its total reserves. Officials speculate on why the South Carolina has delivered so little aid:

The reasons range from people being too embarrassed to seek help to those assuming the free, too-good-to-be-true offer is a scam, he said. 
An advocate for the poor says South Carolina's program is too limited in who it can help, while a legislator in charge of the House budget for economic development blames poor marketing. 
"A lot of people don't believe it will help them," Ingram said. "We're constantly telling people not to self-exclude. At least apply. The worst that can happen is you're turned down. The best is, you'll save your home."

Treasury deserves only some of the blame for HHF's obscurity, as states reveal varying degrees of participation. Through HHF, California has averted over 16,000 foreclosures, North Carolina nearly 8,000, Ohio over 7,000, but New Jersey's Homekeeper a paltry 750.

In the larger scheme of financial relief, HHF's $7.6 billion constitutes a mere drop in the bucket. Last month, the Federal Reserve launched QE3. Banks appear to reap the lion's share of the benefit from the Federal Reserve's $40 billion per month purchase of Mortgage-Backed Securities. Too Big to Fail's corollary may well soon become Too Small to Save.

Sunday, September 16, 2012

Executive Compensation in the Health Insurance Industry

I do not yet have health insurance.  As I begin to shop around for health insurance, I will be asking providers how much they pay their executives.  I would rather subsidize my health care than subsidize their bottom-line.

Compensation for most health plan CEOs rose in 2011 — to $87 million in total

Executives in the top spots at the country’s seven largest publicly traded health plans were paid a collective $87 million for their services in 2011. 
Cigna CEO David Cordani made the most, at $19.1 million. Humana’s Mike McCallister had the smallest compensation package, with $7.3 million. The base pay of most CEOs is around $1 million, because of tax rules on executive salaries. But in every case, other financial rewards pushed the total pay packages into the multimillions. In 2011, Cordani made 94 times the average primary care physician’s compensation, using the latest Medical Group Management Assn. figures.
I will be avoiding the country's seven largest publicly traded health plans, including Humana.  

Monday, August 27, 2012

Sign your name at the Top

Individuals less likely to lie if they had to sign at the top of the document instead of at the bottom

The team then partnered with a U.S. automobile insurance company for a real-world experiment. They sent out more than 13,000 policy-review forms, which asked customers to report the current odometer mileage of their cars. Half of the customers received a modified form, where the honesty statement and signature line appeared up top. Comparing these readings with the company's latest records, they found that customers using the sign-at-top form reported driving their cars more than those with the standard sign-at-bottom form. The results suggest customers with the standard form were more willing to report lower mileages to reduce their insurance premiums. 
Seeing the signature up front reminds people of their own moral standards, Mazar explained.

Jason Dana, a University of Pennsylvania psychologist, then speculates that the mere novelty of signing a document at the top may explain most of the effect.  Thus, if we were to sign all documents at the top, the novelty would abate and honesty levels would return to normal.  Nevertheless, in a tax self-reporting study, those signing at the top overstated their income only roughly half as much as those signing at the bottom.

When we swear an oath, we usually do so before we give testimony.  Therefore, our oath-taking action should occur prior, and not subsequent, to the speech action.  The positioning of a signature may not matter as long as oath takers direct their attention to the signature first.

Notably, courts employ more than oath-taking to ensure testimony is truthful and reliable.  Courts rely even more heavily on cross-examination, whereby an opposing party questions the witness, to establish the truth of the matter.  I wonder whether non-hostile perusal and questioning of individuals who have filled out forms would further increase the reliability of reporting.

Sunday, August 26, 2012

Gov't Capture: Gov't Sachs

Via Geke.US

Gov't Capture: Monsanto

Via the Black Swan

Could Eminent Domain Seize Mortgage Loans?

Economic Depressions require Creative Solutions

Federal Budget: CBO's 'Fiscal Cliff'

Derek Thompson: CBO suggests Congress must act now

CBO projects that the so-called "fiscal cliff" -- a double-whammy of tax hikes and spending cuts -- in early 2013 will produce a short and sharp recession followed by rising unemployment throughout the entire year. 

Nobody should want the economy to crater again. Republicans and Democrats agree that 98% of taxpayers should benefit from the same low rates they have today. The GOP is as nervous about swift cuts to defense as Democrats are nervous about swift cuts to non-defense discretionary programs.
And so, we'll almost certainly get a deal. This is sure to make the staunchest deficit hawks furious.
[bold is mine]

Nobody wishes the economy to crater again.  But I would be furious with such a deal.  I'd like to see two of the three things happen which the CBO so fears: 
  • immediate across-the-board tax hikes (which effectively repeal the Bush tax cuts)
  • deep defense spending cuts
I would delay cuts to discretionary programs until recovery.  

Obama may finally play brinkmanship with the GOP; he's in a great position to get his lower 98% Bush tax cut extension without having to compromise with the GOP on the top 2% cuts.  He may yet blunder if he refuses to put defense cuts on the table to balance out discretionary cuts.  Unless he does, its possible the GOP may hold hostage non-defense discretionary cuts for a deal that would extend the top 2% Bush rates.  

2013 will be a poor year, anyway.  

A little more pain now; less lingering pain down the road.    

Welfare Work Requirements still in force

Conor Friedersdorf rebuts Romney's absurd charge, namely: the Obama Administration . . . gutted federal work requirements for welfare recipients, and that anyone can now collect a welfare check without even trying to get a job.

Tiny Explainer on Obama's Work Requirements

Recently, in response to a request from a bipartisan group of governors for more flexibility, the Obama Administration has said the federal government would consider waiving existing work participation requirements for states that were experimenting with "new, more effective ways" of helping welfare applicants find work, "particularly helping parents successfully prepare for, find, and retain employment."Critics of the move argue that it provides states enough leeway to water down work requirements, and that the executive branch lacks the legal authority to make the change. The administration has countered that the change is legal and gives states useful flexibility during an especially tough economy for the poorly educated.Either way, the Obama Administration hasn't gotten rid of the work requirement or laid out a new theory of what it ought to include. It has given states the ability to seek executive branch approval for new methods.
Obama's Executive Order allows experimentation at the State level.  How is that a bad thing?  I wish Romney supported Federalism as much as Obama sometimes does.

Reagan exaggerated welfare abuses for political gain.  Romney is worse: he's intentionally distorting welfare policy for political gain.

Apple's Assault on the East Asian Engineering Paradigm

Our opening link comes from the Verge:

Jury: Samsung copied Apple, should pay at least $1.049 billion in damages

After a surprisingly short time, court officials informed us that the jury in the Apple v. Samsung case had reached a verdict — and when it came, it wasn't good news for Samsung. The jury found in Apple's favor almost overwhelming, deciding that Samsung had infringement upon Apple's intellectual property with multiple devices. Apple won't be getting the more than $2.5 billion it had asked for, but it will be getting at least $1,049,343,540.
If Apple got 40% of what it asked the jury to award it, then it has done very well.  Its a defeat for Samsung, which lost on all of its counterclaims.

The jury didn't think much of Samsung allegations of infringement, either. They didn't feel that Apple had committed a single count of infringement — at least not anything that Samsung had demonstrated — against either Samsung's standards-essential or utility patents. As such, the company will be receiving nothing for its troubles. 
It wasn't all gravy for Apple, however. The jury found that the company's legal team didn't prove Samsung had broken any antitrust laws or violated its agreements with ETSI. Still, it was a meager get for Samsung, considering the jury also found that Samsung can't enforce its '516 and '941 patents against Apple due to "patent exhaustion" — in this case, the fact that Intel already has a licensing agreement with Samsung, and the company shouldn't be allowed to double-dip.
In case you  feel yourself second-guessing the jury, take a look at the smoking gun:

Apple seizes on Samsung internal document as proof of mimicry

Wired has a rather mediocre take on this whole affair.  Samsung presents itself as allied with the American consumer.  Not exactly.

“Today’s verdict should not be viewed as a win for Apple, but as a loss for the American consumer,” Samsung said in an official statement. “It will lead to fewer choices, less innovation, and potentially higher prices.” 
Indeed, since the jury deemed Apple’s iPhone-related design patents and user interface patents infringed across such a wide spectrum of products, other handset makers — Android manufacturers, in particular — may find themselves in Apple’s sights for future patent litigation. 
“The result will likely be an increase in costs to Android users because of licensing fees to Apple,” Houston-based intellectual property lawyer Steve Mitby told Wired. In layman’s terms: expect Android phones to cost more. “This will drive many Android consumers over to Apple. Next to Samsung, the biggest loser today is Google.”

Apple is the only true innovator.  Knock-offs are not choices, they're just knock-offs.
“The Federal Circuit has a history of scaling back big damages awards, which may spell trouble for Apple’s $1 billion in past damages,” Mitby said. ”However, on the core issues of infringement and validity, the Federal Circuit is less likely to reverse. So even if Samsung is able to reduce the monetary award, the jury’s decision spells trouble for the future of Samsung’s product line –- which is an even bigger financial issue for Samsung.”

Incorrect.  The judge has not awarded punitive damages yet and the $1 billion figure constitutes only actual damages.  In reality, the total dollar figure Samsung may owe to Apple will more likely be larger than that reported this week.  

In this case, Samsung embodied the East Asian Engineering Paradigm.  Top engineers, mostly educated in the West, are assigned to decode and then copy Western innovations.  They sell these near knock-offs very dear domestically and behind high protective tariffs.  Domestic sales subsidize entry into the American market.  

Usually, the East Asian Engineering Paradigm works.  But Apple has struck back.