A few years back when the foreclosure crisis started, I lambasted people who openly admitted they never bothered to read the details of mortgage loan documents or think interest rates and payment schedules through when they bought houses they obviously couldn’t afford.
I still believe that is irresponsible.
However, given the now daily revelation by banks and mortgage firms that they apparently don’t bother to read foreclosure documents and have robo signers putting their signature to them irresponsible home buyers were acting no differently than the banks. The New York Times reported that one Chase document signer had signed 18,000 foreclosure-related documents in a month along with a team of eight others.
What makes this nice and dicey is the fact their signatures are supposed to mean they actually read the documents and made sure they were in order before being filed with the court system.
Facing fierce consumer, political and legal pressure banks are starting to voluntarily suspend foreclosures on tens of thousands of homes while they review their process.
Most economists are pretty sure what will happen next. It will force an upswing in prices in more than a few markets as the supply of inexpensive homes dries up. But then when all of the banks start the foreclosure document processing line going again the market will be flooded with more homes than it can absorb. This will either prolong the housing downturn longer or in some markets send prices down even farther.
Remember it was the banks and mortgage firms that bought mortgage loans from brokers that issued loans without checking the home buyer’s ability to pay or verifying income.
Simply saying you were complying with Congressional pressure to make home buying easier especially for lower income individuals just doesn’t cut it. Would the banks have given away half of their assets to non-profits if Congress had pressured them? The only reason they did it is the people at the top saw it as a way of creating more volume which in turn pumped up their bonuses that are based on what now appear to be dubious performance bench marks.
It is no different than a CEO who may have a 9 percent return but knows he can pocket a $10 million bonus if he cuts costs enough and gets the return into double digits. So what are 1,000 or so jobs filled by real people with real families to fatten the bottom line of a CEO? It is no different than processing dubious loans that end up costing stockholders big time so CEOs can again make fat bonuses.
It may sound jaded, but it really isn’t. A large number of publically-traded corporations that are in the hands of so-called “financial wizards” who reach “bench marks” by merging, cutting jobs, and such often in ways that hurts the firm’s ability to stay competitive or financially afloat in the long run, have inflated their compensation.
Business Week, which isn’t exactly a socialistic magazine, did a study that showed a CEO of a major corporation made 42 times the average hourly worker’s pay in 1980. By 1990, the gap had increased to 85 times. In 2000, it was up to a nose bleeding 531 times the pay of an average worker.
This was all done to tie executive compensation to “performance based” bench marks. ZD Net analyzed data and found that the total return to shareholders was higher for many firms that paid their top guy less than $500,000 a year in overall compensation as opposed to the companies that forked over multi-million dollar packages including lucrative stock options.
Essentially this has turned firms on Wall Street into nothing but Las Vegas casinos with the big spenders being a tad more reserved as they wear custom tailored suits.
None of this justifies home buyers from acting irresponsible. Two wrongs never make a right.
What it should do with the election just weeks away is make people realize that the culprits responsible for this are both Democrats and Republicans who cozy up to fat cat donors and those who wine and dine them and essentially give away our country - and future - so well-compensated CEOs can hand down edicts that essentially prompt corner cutting to accelerate profits so they can pocket even more money.
America’s economic health is essentially being sold so someone making $20 million a year can pocket a $30 million bonus from running a company that is often owned in millions of little pieces through mutual funds held by workers.
It’s time for Congress to end the orgy on Wall Street.
Robo signers on legally binding documents that essentially make a mockery of our justice system and laws is just another example of what is wrong with America and mega-business.