I.          Loan Modifications:  The New Scam On America

In the January 20, 2012 issue of the Wall Street Journal’s Market Watch, Lew Sichelman shared a few of the many letters he received from homeowners detailing their nightmarish experiences in trying – unsuccessfully – to modify their mortgages.  Take a look at the stories and know that they are being repeated thousands of time a day all over the country.

Those of you familiar with this blog know that I have written posts about loan modification before.  My take on the process has been quite cynical because of what I’ve seen in my bankruptcy practice.

Apparently, the problems I’ve seen in the Central District of California are mirrored throughout the nation.  I recently read an amusingly cynical decision written by Judge Dennis Blackmon of the Superior Court of Carroll County, Georgia.  In the case, Otis Wayne Phillips v. U.S. Bank, the good judge wrote:

The United States Government paid taxpayer dollars to the largest of our financial institutions, and to the European Union Banks, in order to prop up those poorly run organizations.  Twenty Billion of those dollars were handed over to the defendant, U.S. Bank.  U.S. Bank agreed to participate in the U.S. Government’s HAMP program to help struggling homeowners.  U.S. Bank signed a Service Participation Agreement (SPA), in which the bailed out bank agreed to comply with the HAMP Guidelines for loan modification.  The HAMP Guidelines require U.S. Bank to perform modification services for all mortgage loans it services.  Otis Phillips applied to modify his mortgage with U.S. Bank.  U.S. Bank denied the request, without numbers, figures, or explanation, reasoning, comparison to the guidelines, or anything.  U.S. Bank would not reveal to Mr. Phillips how his income, or his house, or his expenses would make him ineligible according to HAMP Guidelines.

Judge Blackmon then launched into an amusing discussion of how “A cynical judge might believe . . .” before denying U.S. Bank’s motion to dismiss Mr. Phillips’ action against it.  Check it out.  It’s quite funny.

Humor aside, based on what I regularly see in my practice, I must conclude that the loan modification programs are nothing but a huge scam on the American people.  The banks got massive amounts of the American taxpayers’ money, and the American taxpayers got nothing other than hollow promises in return.  I strongly suspect that the whole bailout fiasco was nothing other than a bunch of deeply corrupted politicians shoveling taxpayers’ money toward their crooked benefactors in the banking industry.

While I’m not quite ready to sign up with the Occupy movement – just the poor personal hygiene alone is enough to turn me off – I think they have a point about the deep corruption of the financial industry.

II.        Château Shopping With Other People’s Money

Former New Jersey governor, Jon Corzine, is the poster child for the blending of corrupt politicians with crooked financiers because he falls into both categories.  He was first a senator from New Jersey, then governor.

His stay in the governor’s mansion was so successful that he lost his reelection bid to Chris Christie, New Jersey’s current governor.  Then he took over MF Global.  The result:  MF Global recently filed for bankruptcy protection – the eighth largest bankruptcy ($41 billion) in U.S. history and the largest filing since the Lehman Brothers filing in 2008 – the largest filing in U.S. history.  And on the eve of MF Global’s bankruptcy filing Mr. Corzine was in France shopping for a château.

MF Global’s bankruptcy filing isn’t my point.  After all, I’m a bankruptcy attorney and I think bankruptcy can and usually is a good thing.  The interesting thing about the story is Mr. Corzine’s testimony before Congress.  When invited to testify he refused, so Congress subpoenaed him.

According to the December 15, 2011 issue of The Wall Street Journal:

[A]fter a series of appearances in front of the House Agriculture Committee, Mr. Corzine relayed a frightful ignorance of MF Global’s machinations. He didn’t know what trades were being made. He described the company’s books as a reflection of the chaos during the company’s final days.  Mr. Corzine, as you know by now, doesn’t have even a good guess of where the missing $1.2 billion in client money is.  His amnesia led frustrated Sen. Debbie Stabenow (D., Mich.) to wonder: “This isn’t the Dark Ages. MF Global didn’t keep their books with feather quills and dusty ledgers.”

Now I can sympathize with poor Mr. Corzine.  After a hectic day of château shopping it’s easy to misplace things.  And really, let’s be honest:  who among us hasn’t lost $1.2 billion?  I’m sure it just fell between the couch cushions and will turn up shortly.  It’s probably with missing $9 trillion in bailout money.  Stay tuned.