I’m So Happy that I Ignored the whole AGs-Investigate-the-Servicers Thing

Well, this time it seems I played it perfectly.  This time, even though it was being discussed as being a really big deal, I just completely ignored it.  I’m talking about the negotiations that have been going on in Washington D.C. these last two or three weeks between the mortgage servicers/bankers… and the 50 state attorneys general.

People have asked me for my thoughts on the ongoing negotiations almost every day, and I’ve told everyone the same thing… I’m not paying attention to it.  I did get some funny looks.

I assured everyone who asked that I was fine… no more exhausted than usual, which is somewhere slightly north of dead, it was just that I wasn’t going to pay attention this time around.  I wasn’t going to write an article that forecast what was to come… I was committed to doing nothing… no mention of it whatsoever.

I knew there was a risk to this approach, I mean, what if it had an earth shattering impact… shook the servicers to their core… finally gave the citizens of this country some of their power back… demanded that the abuse stop… I would have looked like I was asleep at my post had something like that happened.

I made fun of the whole process a few weeks back, when I wrote that article about how they might discipline the banker/servicers by getting rid of the hot towels in the rest rooms… ‘cause bankers need hot towels.  I’d hate to see a banker have to go without hot towels in the rest room, it just wouldn’t be right.  Like looking at a dog with nowhere to lay down or something.  Who wants to see something like that?

And in case you missed it, the folks over at American Banker magazine sort of took offense that I said something about how it would be fun to push around one of the insipid sycophants they were quoting in the meaningless drivel they called an article.

The guy over at AB took the position that I was being too harsh and cynical about the whole “we’re going to discipline the servicers” thing by quipping about how they may get rid of the hot towels and stuff like that, and that they were going to take the more responsible journalist approach and wait and see what happens before saying anything.  The clear implication being that were I a serious journalist, I would do the same… and refrain from suggesting that anyone kick anyone’s butt in a parking lot.

I didn’t waste even a single minute reading any of the articles that were published to track the progress along the way… I just ignored the whole affair.  And if I had been wrong to do so, then I suppose the guys at AB would have been able to gloat at how I was wrong and how they are the superior journalists, and I was just an immature hack throwing spitballs at the back of the class.

But that’s not what happened, is it American Banker people?  No, that’s not at all what has occurred?

See, I’ve started to realize that all those serious journalist rules that the serious journalists are so fond of drawing like a gun whenever a blogger is in the room… why I’m pretty sure they’re for the writers that sort of wander around with one of those little pads, because they can never remember what someone has told them, that barely know what’s already happened let alone what’s going to happen next… the conformists that can’t see around corners at all.  That’s who those rules are for, they certainly can’t apply to me.

If you’re not quite sharp enough to see the way something is going to work out, then I guess you do have to wait and see what unfolds, but if on the other hand, you’re me… well, then you can pretty much phone it in three weeks ahead of time and then just sit back and cackle when what ends up happening is precisely what you said would happen.

Which, as you’ve no doubt surmised through my self-congratulatory strutting about, is precisely what has happened in this particular case… right AB people… only they’re not even going to get rid of the hot towels, now are they?  No… they’re not, although I cannot wait to read your take on this whole regulatory and investigative charade.

And now a brief word from our sponsor…

This portion of Mandelman’s column is brought to you by CHASE… When you need a loan modified, it’s our name that says it all.  Call us at 1-800-CHASE THIS.  That’s: 1-800-C-H-A-S-E-T-H-I-S.

And now, we return to Mandelman’s regularly scheduled column…

Okay, so I’m done… did it feel good?  You’re damn right it did, but let’s get to the meat of what went on here…

Well, what they’re calling the Attorneys General “Term Sheet” is out and to kick it all off, I went with an analysis of the AG’s work product written by Joshua Rosner, who is Managing Director at independent research consultancy Graham Fisher & Co.  According to his bio in Huffington Post, Josh “advises regulators and institutional investors on housing and mortgage finance issues.”

So, that’s a pretty solid guy to check in with on this topic, right?  Not someone terribly biased against servicers, in fact, he could be a little banky, you never know…

According to Josh’s take on the Term Sheet being circulated:

The document demonstrates an intent of regulators and government enforcement to settle with servicers without first assessing the damages. Neither the states nor the OCC has carried out any meaningful investigation of the accuracy or completeness of mortgage loan files nor have they earnestly investigated servicer related pyramiding practices.

If a private-sector lawyer, representing any harmed party, settled for damages without an investigation of actual damages they would likely be exposing themselves to malpractice, why would that not be the case here?

It is unclear if this is merely a series of best practices or if this is an actual settlement that, if adhered to, would preclude legal actions by state or federal bodies. If it were the latter, this agreement would be one of the greatest abdications of governmental responsibilities to both borrowers and investors in modern history.

Ooooh, SNAP!

Now, I don’t want to decide for you, or even tell you which direction you should lean on this, and darn the luck, I probably can’t find a place to bet this thing, but for the record. I’m going with:

“… one of the greatest abdications of governmental responsibilities to both borrowers and investors in modern history.”

SURVEY SAYS…

Ding! Ding! Ding! Ding! Ding! Ding!

Announcer: “Congratulations… you’ve just won an all-expense paid, four nights and seven days at the Best Western Banker Hotel and Slug Farm in Charlotte, North Carolina… the creditor capitol of the United States!

Announcer: Some ancillary charges do apply, and winner must take the trip up to three days prior to or immediately following the Summer Solstice in a Leap Year, winners are responsible for all taxes, surcharges, late fees and penalties, residual interest, impounds, VAT, sales tax, incremental charges, one time assessments, impervious provisions, anaphylactic overtones, obligatory encumbrances, dependent imperatives, and discretionary transaction costs, also, we reserve the right to increase any amounts paid by winner retroactively and without remorse.

That is so cool… I never win anything.

Okay, back to Josh… go  on, my boy… you’re doing fine…

While the document does send the right message on principal reductions, requiring second liens to be written down proportionally with the first mortgages, it is unclear what legal authority states have to enforce this requirement. Moreover, rather than just accepting a negatively amortizing open-end second lien loan that is making minimum payments to be classified as current, were federal regulators to require accurateconsideration of the likelihood of full repayment of such an open-end second lien in which the borrower had negative equity in the first lien then the proportional write-down would not be necessary. After all, with the proper write-down of such seconds the servicer would have little incentive to avoid an NPV positive write-down of a first-lien.

Well, I don’t actually have any idea what Josh is talking about there, but follow my lead on this… the only sentence you really need to focus on in that paragraph is the following:

“… it is unclear what legal authority states have to enforce this requirement.”

See what I mean?  When ever you’re reading something about bankers or servicers, and you see those words or anything like them, just assume that that’s the end and don’t bother paying attention after that.

Back to my man Josh… okay Josh, but what aboutn the whole principal reduction thing… where’s that part…

Also, even if the industry is expected to pay around $25 billion towards principal write- downs, that amount of money is clearly inadequate to cover the necessary principal reductions where will the other monies come from? There is nothing in the document that precludes inappropriate costs, which should be borne by the sell-side, from coming from the pockets of investors in the same manner that Countrywide settled its actions against state AG’s with investor funds.

The document does not prevent investors from being assessed the costs of bringing servicers into compliance with practices that should already exist.

So, there’s the $25 billion for principal reductions… but Josh the amount of money is clearly inadequate, and I can’t understand why… I mean, by my calculations it comes to… let’s see here… seven minus four… divided by nine… carry the three… about $8,000 per household, could that be right?  That seems awfully generous, doesn’t it?  I better get someone to check my math, as I’m all a flutter when it comes to numbers… LOL.

Personally, I think they should deliver the principal reductions to everyone’s door personally… hand whoever answers the door a 1099, spit in the person’s face and then kick him or her in the shin, yell out, “deadbeat,” and then run like the dickens… and I don’t mean Charles.

Then just tell homeowners that they’ve got fifty feet for a clean kill and no questions will be asked.  Beyond the fifty foot mark and the guy from the servicer goes free… or maybe a better way to put that would be, lives to improperly charge another fee.

And what a fabulous idea for a reality television show, don’t you think?  You better believe it is… what about calling it… American Shyster?

Oh come on… that’s perfect… shystermeans “a person who uses unscrupulous, fraudulent, or deceptive methods in business,” I looked it up.  I was thinking of going with “shylock,” you know, from Shakespeare’s “Merchant of Venice,” but it seemed too poetic, in sort an anti-Semitic sort of way, of course.

Okay, Josh… got any other gems you’d care to share with the class… because Lord knows I’m not reading this thing…

Section I C – Documentation of note, holder status and chain of assignment: This section appears to give the servicers, originators and Trustees cover for problems not actually related to the back end but rather to the front end, or pooling and assignment of mortgages and notes.

This suggests that the settlement would, once signed onto by states, preclude the ability of AG’s to take actions for improper assignments, fraud in the creation of trusts and other front-end problems. Thus, the scope of this settlement would be more far-reaching than just a back end, or foreclosure settlement. As a result it would negatively impact investor’s private rights of action.

As example sub-point 4, which prohibits servicers from intentionally destroying or disposing of original notes or like documents appears to ignore any prior such actions and proposed no punitive damages or remedies for such past actions.

Section I D – MERS: Ignores all issues relating to MERS.

Oh, and will you look at that?  Well, batter my bread… Shut the front door… what the f#@k does that mean, do you suppose?  (Sorry about the language there, it just slipped out.)

Is that a “GET OUT OF FAIL FREE” card?

Don’t even tell me… I don’t want to know.  And what about the hot towels… they get to keep those too, don’t they?  Anything else Josh… get it out… and then I’m going to bed…

What do they have about loan modifications:

Loss mitigation duty:

Which requires consideration of appropriate loss mitigation is already required by the FHA and the GSEs and, by agreement, HAMP and Help for Homeowners. Consideration of NPV positive modifications is already allowed or required by nearly all pooling and servicing agreements. All incremental costs of compliance with these practices that should already exist would likely be passed on to investors rather than be borne by servicers.

Aare you kidding me?  We had 50 Attorneys General investigate and negotiate to correct the servicer abuses related to loan modifications, and that’s what these clowns come up with… a requirement that the servicer must consider the appropriate loss mitigation strategy?  Just like it says they’re supposed to do know?  Are you friggin’ kidding me?

Oh, this is so stupid…

And check out this next one…

Section II C – Single point of contact:

Requires a single point of contact for borrowers and government oversight. This is not particularly novel and also reflects practices that should already exist. All incremental costs of compliance with these practices that should already exist would likely be passed on to investors rather than be borne by servicers.

So, in other words… it’s a way for servicers to increase the amounts they charge investors?  Oh, hell yes… hell yes… I’m starting to get the way this works…

Next slide please…

Section II D – The loss mitigation communication requirements with borrowers:

Seems to intentionally allow servicers to pass their basic responsibilities on to investors and requires them to inform borrowers of the name of a particular investor that opposes a modification for any reason, valid or invalid. This will act to undermine investor’s ability to assert their rights for fear of valid or invalid public criticism.

Or, since 99.9 times out of a hundred, when a servicer says the investor won’t modify it’s a bald face lie, this paragraph could mean nothing.

Next slide please…

Section II E – Protections for military personnel:

This is also a restatement of existing law. All incremental costs of compliance with these practices that should already exist would likely be passed on to investors rather than be borne by servicers.

A restatement of existing law?  Oh, dear God… Yoohoo… Attorneys General?  Anyone, anyone… so, which is it… is that one in there because the servicers think you guys are stupid, or is it in there because you guys think that we’re stupid?  Either way, it’s way stupid.

Next slide please…

Section II F – Development of comprehensive loan portals:

This section appears to, without first listing deficiencies in loan servicing tracking platforms (particularly LPS), direct servicers to create a better and more comprehensive and publicly transparent servicing tracking system. There is no discussion of the timeframe this would require or the feasibility of such a platform. All incremental costs of compliance with these practices that should already exist would likely be passed on to investors rather than be borne by servicers.

Yeah, that’s just perfect… classic: “There is no discussion of the timeframe this would require or the feasibility of such a platform.”

Beauty… that one is a real beauty… move on… next friggin’ slide… wait until you see this next one… I took a peek ahead…  you’re gonna’ die… are you sitting down?  Well, then sit.

Section II M – Principal loan modifications:

This section, while appearing appropriate, are highlighted by underlined text which reads “Note: the provisions in this subsection are in addition to the loan modification initiative that is referenced in Section VI and reserved for further discussion”.

Did you see that… did you see what they did there… principal write downs… and it says… “reserved for future discussions?”  What the heck have all your discussions to-date produce… nothing… the only thing you went there to discuss in the first place…. CLOWNS!  Attorney General CLOWNS!

Oh wait… I missed a couple of small ones… not that I care at all what else happened here…

Section II K – General loss mitigation requirements: All incremental costs of compliance with practices that should already exist would likely be passed on to investors rather than be borne by servicers.

 

Yeah, yeah… we get it… all the costs for everything go to the investors… we’ve got it.

Section II L – Proprietary loan modifications: This section requires basic disclosures of policies and basic fairness in rates and terms.

 

Fabulous as well… “Basic disclosures” and “Basic fairness.”  Well, that’s certainly a relief.  Because I checked “YES” on basic fairness… no, doubt.  That’s asshats!

Section II N – Second lien relief:

This section which includes only one sub-point requires, at the time of a permanent modification of a first lien, seconds to be written down proportionately. While this is laudable and probably acceptable to most investors, it is worth noting that where a first has substantial negative equity the second should, in most cases, be assumed to be worthless.

Okay, that’s it for me… enough is enough… I’m not going to comment on that last one… who cares… I’ve done my part, right.  I was having so much more fun when I was ignoring this whole thing… time to go back to bed…

Oh wait… one more… because I’m not quite annoyed enough… this last one is on “Monetary relief”…

Monetary relief:

Section VI: This section is vague and states (reserved for further discussion).

Beyond that is states servicers shall provide monetary relief as compensation or penalties for unlawful conduct, to settle claims owed to the government, and/or to fund programs to help homeowners avoid foreclosure, including support of non-profit housing counseling, legal aid assistance, hotlines, web portal access, borrower education and outreach, mediation, post-foreclosure relocation assistance and similar efforts. Servicers shall also establish a fund to compensate victims of servicer misconduct. It also states that a substantial portion of the funds will support and enhanced program of loan modifications.

There is no consideration of harm to investors resulting from illegal or poor servicing practices nor does it address the likely costs that will be passed on to investors.

It really is unbelievable… I mean EVERY SINGLE time there’s even a modicum of a chance the servicer could possibly, maybe have to pay out a nickel, it’s “RESERVED FOR FUTURE DISCUSSION”.  Why is that Attorneys General?

Do you even know, because I’m thinking your were all under the desks of the servicers most of the day.  Kind of hard to hear down there, I’d suppose.

For those of you that want to read the rest, here’s Josh’s document in its entirety.

Wow, I’m blown away… but at least I ignored it these last few weeks… and I’m still pissed off, imagine if I was actually following this stupidity and then this is what I got in the end.  Oh my God…

And get this… The Departments of Justice, Treasury, and Housing and Urban Development all support the proposal. So do the Federal Trade Commission and the nascent Bureau of Consumer Financial Protection.

So what?  Good for them… are any of them losing a house to foreclosure.  That’s it people… we’re done here.

“Laws were not being followed by the servicers,” Illinois Attorney General Lisa Madigan said Monday. “That absolutely has to change.”

Oooh… you’re so tough, Lisa, so tough…

Mandelman out.

Just like I promised, the document in its entirety:

Ag Term Sheet

Comments

  1. jrysk says

    Your commentator is quite wrong about the Terms, and the letter sent today by Republican members of Congress show that they agree that new rights are contained in the Terms. I have all along argued that U.S. ownership interests in, and servicing agreements with, financial institutions have raised the level of scrutiny for housing and housing related facts, including but not limited to income--above Lindsey v. Normet minimum scrutiny--thus creating an individually enforceable right to housing--and promulgate an entitlement in the general public by way of a policy of minimizing the risk of loss of housing and housing-related facts including but not limited to income.

    The letter of the members of Congress rightly points out that the terms "require write-downs of mortgage principal.’ Letter at [1]. This alone shows that the Terms raise the level of scrutiny for housing above minimum scrutiny.

    The questions posed by the members of Congress also show that they are quite well aware that the Terms, if accepted, raise the level of scrutiny. Just take a look at what they are asking:

    ‘What specific legal authority grants federal and state regulators and agencies
    the power to require mortgage principal reductions when the House and Senate
    have voted down such proposals?’ Letter at [2].

    ‘What specific legal authority grants federal and state regulators and agencies
    the power to effectively legislate new rules and standards for the mortgage
    servicing industry?’ Letter at [2].

    ‘How do the proposals in the draft settlement term sheet relate to parallel
    investigations or enforcement actions being carried out by the federal banking
    regulators?’ Letter at [2].

    ‘Under the draft term sheet, it appears that monetary penalties collected from
    servicers will be used to support mortgage modifications—including principal
    write-downs—for borrowers who were not affected by the foreclosure documentation
    irregularities that are at issue. What is the legal basis for using funds
    collected in an enforcement action to benefit parties who have not been harmed
    by the purported wrongdoing?’ Letter at [2].

    ‘Will forcing servicers to fund principal reductions for underwater loans they
    service affect the incentive of mortgagors to stay current on their loans?’
    Letter at [3].

    ‘Recent estimates suggest that more than eleven million mortgages in the U.S.
    are currently underwater. Consequently, the financial institutions named in the
    draft term sheet service many more underwater loans than could possibly be
    written down as part of this settlement. What standards will govern the process
    by which servicers select which borrowers receive a principal writedown?’ Letter
    at [3].

    I wish your readers were a little more--just SLIGHTLY more--aware of the OBVIOUS Constitutional stakes involved in this issue. Then they would realize that the level of scrutiny for housing has been raised. Funny, these Republican members of Congress are WELL AWARE of this.

    Why aren't YOU?

  2. mandelman says

    I honestly don't know, but I'm going to try my best to get in this discussion you keep raising that I clearly don't understand. An individually enforceable right to housing?

    And, "promulgate an entitlement in the general public by way of a policy of minimizing the risk of loss of housing and housing-related facts including but not limited to income?"

    I want to understand that sentence, I really do... but I don't. Is there anything basic I could read that would get me closer to being in the game here?

  3. jrysk says

    Read Lindsey v. Normet. Then read West Coast Hotel v. Parrish and United States v. Carolene Products.

    You are right to try to get in on this discussion, because what is being debated now is being debated entirely by lawyers: Justice Department lawyers, White House lawyers, lawyers who are members of Congress.

    Look for and read articles on how much Scalia, Roberts, Alito, Kennedy LOATHE the scrutiny regime. Understand WHY they loathe it. Understand how ANXIOUS they are to get the opportunity overrule it.

    The moment any so-called "economic" or "social" fact is raised above minimum scrutiny, everyone knows that the scrutiny regime is over. That is why these Republican members of Congress are so anxious to know by what right the Administration imposes a higher level of scrutiny for housing by fiat. THEY ARE QUITE WELL AWARE OF WHAT IS AT STAKE.

    And don't kid yourself: any idea that modifications in mortgages are MANDATORY, raises the level of scrutiny for housing. Ask any lawyer to explain this to you.

    That is why the entire discussion is now honing in on the idea of mandated modifications.

    Frankly, I think the U.S. read the Judge's opinion in Marques v. Wells Fargo (Southern District of California) and realized it was game over for the scrutiny regime. The U.S. ownership interests in financial institutions, also means there is a Fifth Amendment Due Process right to a mortgage modification.

    The Terms show that the Administration has conceded the point: THERE IS AN INDIVIDUALLY ENFORCEABLE RIGHT TO A MORTGAGE MODIFICATION.

    Again, the members of Congress who wrote this letter to Geithner understand this. WHY DON'T YOU????

    For decades, it was considered that, yes,you can have a higher level of scrutiny for speech or even exercise of religion, because these are "political" facts. But "social" facts such as housing or medical care belong in the political system, because the fear was that a higher level of scrutiny for "social" facts such as medical care or housing, would impermissbly violate the separation of powers, drawing the courts in to make social policy.

    But if the U.S. ITSELF has, by its ownership interests in financial institutions and its servicing agreements, created an entitlement in the general public (and it is quite clear that if mortgage modifications are mandatory, equal protection means that all housed individuals must have their individual circumstances taken into account in order to KEEP them in their housing), then the "social" vs. "political" fact distinction has been abolished.

    This distinction and this distinction alone has kept the scrutiny regime of West Coast Hotel v. Parrish-United States v. Carolene Products, in power. Again, ask any lawyer or law professor and she or he will emphatically agree.

    What is more, the Government has not simply raised housing above minimum scrutiny. It has made it clear in HAMP and now through the proposed settlement Terms that a HOST of other things (everything from employment to the cost of medical care) must be taken into account in order to keep people in their housing because these things are in FACT related to housing. This means that those facts too have been raised in their level of scrutiny.

    This means that housing policy can no longer pass Constitutional muster as long as it is "rationally related to a legitimate government purpose" (minimum scrutiny). Now it must at least "substantially advance an important government purpose." One of those purposes CANNOT be vindicating a Due Process right to property, because mandatory reductions in principal abrogate that doctrine, at least in the housing context. However, vindicating a Due Process right to property is one of the reasons the Lindsey Court refused to raise the level of scrutiny for housing. So the grounds on which Lindsey was decided have been eroded, and the U.S. government has simply conceded that it, by its OWN policies, has raised the level of scrutiny for housing.

    Do you understand now why these Republicans are asking the questions they are asking? It is because they want to make SURE that the United States is doing what it appears to be doing in these settlement Terms: RAISING THE LEVEL OF SCRUTINY FOR HOUSING. Because if it has, THAT MEANS THE SCRUTINY REGIME IS OVER. THE QUESTION THEN BECOMES: WHAT IS THE CONSTITUTIONAL REGIME? THAT IS REALLY THE QUESTION THEY ARE ASKING IN THEIR LETTER.

    To show you the ijmportance of the scrutiny regime to power in the United States, John Roberts was required to state IN WRITING that he supported the holding in West Coast Hotel v. Parrish, the case which established the scrutiny regime.

    HE DID SO. His answer is even online, in the reply to questions posed to him when he was up for confirmation as Chief Justice. It's right there on the web.

    This is why you HAVE to educate yourself, if you don't want to sound like an ABSOLUTE CLOWN.

    EVERYONE in government at ALL LEVELS knows it's ALL about the scrutiny regime, because that is the POWER REGIME in the United States. Now does it make some sense to you to educate yourself about it? HOPE SO!!!!

  4. catinflorida says

    You are right about the Constitutional stakes being very high. As a conservative registered Republican, I couldn't agree more that the Federal Government has overstepped its bounds in regards to housing. The problem is that they did this long ago on the front end of this housing nightmare and it has now come back to bite them. I do NOT think housing is a right and is a privilege, period!

    Instead of letting the free market prevail and letting the TBTF banks implode as they should have for risky and unethical (I'll even go so far to say criminal) behavior, the Federal Govt decided to bail them out using taxpayer money. In fact I would argue that the Federal Government is continuing on this very same path with further bailouts in the form of accounting rule shenanigans, 0 interest loans, settlements without disclosure and investigation of criminal actions, etc.

    The Attorney Generals are representatives of their individual states and should be enforcing State Laws that take precedence over Federal ones period!

  5. catinflorida says

    My FL Attorney General did an investigation and found overwhelming evidence of criminal conduct. This housing debacle has devastated my state and the banks actions have caused it great economic harm. It is my AG's duty to enforce the laws and prosecute wrong doing. That is the crux I believe in Mr. Mandlemans piece. The report the AG's presented is only a restatement of laws already on the books and that have thus far not been enforced.

    The Representatives question of parallel investigations and enforcement actions by Federal Regulators is a joke. There are none! I am a victim of one of the TBTF banks that STILL has not paid back TARP. This bank violated their own contract with me, but more importantly violated Federal laws and FL statutes. When I finally found the only regulator that has authority over this bank, I was told there was nothing they could do and they recommended I get a good lawyer. The bank in question has a seat at the board of directors at that same regulating agency. How much enforcement gets done by the Federal Reserve when the CEO's of the banks are sitting at the same table?

  6. buyerbeware says

    mandelman wrote:
    I honestly don't know, but I'm going to try my best to get in this discussion you keep raising that I clearly don't understand. An individually enforceable right to housing?

    And, "promulgate an entitlement in the general public by way of a policy of minimizing the risk of loss of housing and housing-related facts including but not limited to income?"

    I want to understand that sentence, I really do... but I don't. Is there anything basic I could read that would get me closer to being in the game here?


    I'll take a stab at this, Martin. If I am wrong, jrsky will probably let us know.

    The federal government's ownership stake in Fannie and Freddie extends to the taxpayer and implies the taxpayer/homeowner into the servicing agreements that F&F have with servicer banks. Thus, the homeowner becomes a third party beneficiary to those servicing agreements.

    Inasmuch as HAMP is a de facto amendment to those agreements, it must be made available to all homeowners:

    "Servicer shall perform the Services for all mortgage loans it services, whether it services such mortgage loans for its own account or for the account of another party, including any holders of mortgage-backed securities (each such other party,an “Investor”). Servicer shall
    use reasonable efforts to remove all prohibitions or impediments to its authority, and use reasonable efforts to obtain all third party consensus and waivers that are required, by contract or law, in order to effectuate any modification of a mortgage loan under the Program."

    HAMP necessarily raises the level of scrutiny for housing to that of any other constitutional fact. As such, access to housing becomes a 5th Amendment Due Process claim.

    I don't pretend to know if I am right. I'm just takin' a stab at it.

  7. jrysk says

    The federal government's ownership stake in Fannie and Freddie extends to the taxpayer and implies the taxpayer/homeowner

    THIS CREATES THE FIFTH AMENDMENT DUE PROCESS RIGHT TO A MORTGAGE MODIFICATION. THIS IS AN INDIVIDUALLY ENFORCEABLE RIGHT AND A RAISED LEVEL OF SCRUTINY FOR HOUSING.

    into the servicing agreements that F&F have with servicer banks. Thus, the homeowner becomes a third party beneficiary to those servicing agreements.

    THIS CREATES THE FEDERAL COMMON LAW THIRD PARTY BENEFICIARY RIGHT TO A MORTGAGE MODIFICATION. THIS IS AN INDIVDUALLY ENFORCEABLE RIGHT AND A RAISED LEVEL OF SCRUTINY FOR HOUSING.


    Inasmuch as HAMP is a de facto amendment to those agreements, it must be made available to all homeowners:

    "Servicer shall perform the Services for all mortgage loans it services, whether it services such mortgage loans for its own account or for the account of another party, including any holders of mortgage-backed securities (each such other party,an “Investor”). Servicer shall
    use reasonable efforts to remove all prohibitions or impediments to its authority, and use reasonable efforts to obtain all third party consensus and waivers that are required, by contract or law, in order to effectuate any modification of a mortgage loan under the Program."

    HAMP necessarily raises the level of scrutiny for housing to that of any other constitutional fact. As such, access to housing becomes a 5th Amendment Due Process claim.

    AND A FEDERAL COMMON LAW THIRD PARTY BENEFICIARY RIGHT.

    HOWEVER, SINCE THE LEVEL OF SCRUTINY FOR HOUSING QUA HOUSING IS RAISED, THE NEW RIGHT EXTENDS TO ALL HOUSED INDIVIDUALS, NOT JUST HOMEOWNERS. THIS IS AN IMPLIED FIFTH AMENDMENT EQUAL PROTECTION RIGHT. AND NOTE THAT STATES ARE IMPLICATED IN HAMP, AS WELL AS THE SETTLEMENT TERMS, SO WE DON'T EVEN HAVE TO LITIGATE WHETHER THE FEDERAL RIGHT TO HOUSING IS INCORPORATED BY WAY OF THE FOURTEENTH AMENDMENT. HOWEVER, NOTE THAT THIS DOES MEAN THAT THE SAME NEW RIGHTS UNDER THE FEDERAL CONSTITUTION, ARE ALSO INDEPENDENT RIGHTS UNDER ALL STATE CONSTITUTIONS. NOTE THAT THE ATTORNEYS GENERAL OF ALL STATES SIGNED OFF ON THE SETTLEMENT TERMS. SEVERAL STATES HAVE ALSO JOINED THE 'IMPLEMENTATION' ADMINISTERING HAMP MODIFICATIONS AS STATE PROGRAMS.

    I ASSUME NOW YOU CAN SEE THAT IT IS OVER FOR LINDSEY V. NORMET MINIMUM SCRUTINY FOR HOUSING. THAT CASE IS OVERRULED.

    WHAT IS MORE, IF YOU NOTE THE DTI QUALIFICATIONS AS WELL AS OTHER FEDERAL PRONOUNCEMENTS SUCH AS THE INTERNAL REVENUE SERVICE'S COLLECTION FINANCIAL STANDARDS, YOU WILL NOTE THAT IT IS THE UNITED STATES ITSELF WHICH HAS ARRIVED AT THE CONCLUSION THAT THERE ARE FACTS WHICH ARE OBJECTIVELY RELATED TO HOUSING. THEY ARE, IN FACT, INDICIA OF HOUSING. THESE INCLUDE

    EDUCATION

    MEDICAL CARE

    LIBERTY (THIS MAY COME AS A SURPRISE--BUT IT IS ALSO THE IMPLICATION OF LAWRENCE V. TEXAS, AS WELL AS HELLER/MCDONALD, THE GUN CASES)

    MAINTENANCE


    THE LEVEL OF SCRUTINY FOR ALL OF THESE IS NOW RAISED. IT ALSO APPEARS THAT THE FOLLOWING FACTS HAVE THEIR LEVELS OF SCRUTINY RAISED AS WELL:

    EMPLOYMENT

    PROPERTY (LONG A GOAL OF THE RIGHT, ALTHOUGH THEY HAVE DONE A LOUSY JOB OF ARGUING IT IN COURT)

    MONEY

    INCOME

    TRANSPORTATION

    FINANCE

    POWER

    DISCRETION

    DEFERENCE

    SCRUTINY

    GOVERNMENT

    MILITIA

    PEOPLE


    IN SHORT, BECAUSE OF THE POLICIES OF THE UNITED STATES, FACTS WHICH PREVIOUSLY WERE DEEMED PART OF THE POLITICAL SYSTEM, ARE NOW RECOGNIZED BY THE UNITED STATES GOVERNMENT ITSELF AS BEING IMPORTANT FACTS, THAT IS, INDIVIDUALLY ENFORCEABLE RIGHTS. IT MAY SEEM ODD THAT GOVERNMENT IS AN IMPORTANT FACT, BUT IT IS CLEARLY STATED IN MARBURY V. MADISON. FOR THAT MATTER, THE MAINTENANCE DOCTRINE WAS CLEARLY STATED IN WEST VIRGINIA V. BARNETTE, BUT IT HAS BEEN SLOUGHED OVER. IT WILL BE NOTED BY HISTORIANS THAT IT REQUIRED THE UNITED STATES GOVERNMENT ITSELF TO DIVEST ITSELF OF VARIOUS FACTS, FOR HITHERTO IGNORED CONSTITUTIONAL DOCTRINES TO COME TO POWER IN THE FORM OF INDIVIDUALLY ENFORCEABLE RIGHTS.



    I don't pretend to know if I am right. I'm just takin' a stab at it.

    YOU DO ALL RIGHT. HOWEVER, YOU COME UP SHORT ON THE IMPLICATIONS OF THE CHANGE. YOU SHOULD NOTE THAT THE SUPREME COURT HAS BEEN MOVING AWAY FROM THE SCRUTINY REGIME FOR YEARS NOW. IN FACT, HELLER IS NOT A CAROLENE PRODUCTS CASE AT ALL.

    I MAKE THIS LITTLE DIGRESSION BECAUSE IT IS IMPORTANT TO UNDERSTAND THE NEW REGIME DOCTRINE. WE ARE NO LONGER UNDER THE SCRUTINY REGIME DOCTRINE, WHICH IS DERIVED FROM WEST COAST HOTEL AND WHICH SAYS THAT THE CONSTITUTION RATIONALLY RELATES TO A LEGITIMATE GOVERNMENT PURPOSE.

    WE ARE NOW UNDER THE MAINTENANCE REGIME DOCTRINE, WHICH IS DERIVED FROM WEST VIRGINIA V. BARNETTE AND WHICH SAYS THAT THE CONSTITUTION ONLY MAINTAINS IMPORTANT FACTS. IMPORTANT FACTS ARE:

    1. FACTS OF HUMAN EXPERIENCE
    2. WHICH HISTORY DEMONSTRATES
    3. ARE UNAFFECTED BY ATTEMPTS UPON THEM.

    THIS IS WHY IT IS IMPORTANT TO READ HELLER CAREFULLY, AND NOTE THE IMPORTANCE GIVEN TO HISTORY IN THAT DECISION. THE FACTS SHOW, NOT THAT ARMS WERE TAKEN AWAY IN INDIVIDUAL CASES, BUT RATHER, THAT KEEPING AND BEARING ARMS PROVED ROBUST AND RESILIENT TO ATTEMPTS TO TAKE AWAY ARMS.

    ONCE YOU UNDERSTAND THAT, YOU BEGIN TO UNDERSTAND HOW THIS DECISION MOVES AWAY FROM THE SCRUTINY REGIME TO THE MAINTENANCE REGIME. HERE IS THE ANALYSIS:


    What is the Constitutional regime presumed by Heller? Clearly it is not the scrutiny regime, which is the regime laid out in United States v. Carolene Products. The latter case stands for the proposition that economic facts enjoy only minimum scrutiny, and that legislation affecting them is presumed valid. Political facts, and facts specifically protected by the Constitution, enjoy a higher level of scrutiny.

    However, Heller is not a facial challenge and the Heller Court does not find the Heller facts to be political facts. Nor does the Heller Court find the facts to be economic in nature. Instead, the Heller Court proceeds from the Constitutional regime doctrine that the Constitution maintains facts of human experience which history demonstrates are unaffected by attempts upon them. This is the doctrine of West Virginia v. Barnette, and is an entirely different Constitutional regime. The Barnette test is the one applied in Heller, which is why you see so much history being recounted in the case. Two things would have made it clear that the Heller Court has overruled the scrutiny regime: explicit mention of Barnette, and dispensing with vestigial scrutiny regime rhetoric, since it plays no part in the analysis and has only confused the courts and litigants. (There is also vestigial scrutiny regime rhetoric in Lawrence v. Texas, which clearly establishes a liberty right, overruling the scrutiny regime doctrine that there are only liberty interests.)

    The Carolene Products Court, in footnote 4, states that economic facts enjoy only minimum scrutiny:

    "[T]he existence of facts supporting the legislative judgment is to be presumed, for regulatory legislation affecting ordinary commercial transactions is not to be pronounced unconstitutional unless, in the light of the facts made known or generally assumed, it is of such a character as to preclude the assumption that it rests upon some rational basis within the knowledge and experience of the legislators."

    The same footnote goes on to suggest facts, legislation regarding which is subject to closer scrutiny:

    "There may be narrower scope for operation of the presumption of constitutionality when legislation appears on its face to be within a specific prohibition of the Constitution, such as those of the first ten amendments, which are deemed equally specific when held to be embraced within the Fourteenth."

    Heller is not a facial challenge: “We must also address the District’s requirement (as applied to respondent’s handgun).”

    The Carolene Products Court suggests that political facts—facts involved in the political process—enjoy a higher level of scrutiny:

    "It is unnecessary to consider now whether legislation which restricts those political processes which can ordinarily be expected to bring about repeal of undesirable legislation, is to be subjected to more exacting judicial scrutiny under the general prohibitions of the Fourteenth Amendment than are most other types of legislation."

    This is particular true when the legislation is aimed at minorities. However, nowhere does the Heller Court find that the regulations restrict the political process, with respect to minorities or anyone else. Indeed, the Court finds that, if the Heller facts have anything to do with the political system at all, they relate to it only in the sense that the political system has ceased to exist: “It was understood across the political spectrum that the right helped to secure the ideal of a citizen militia, which might be necessary to oppose an oppressive military force if the constitutional order broke down.”

    Finally, how does the Heller Court regard the Heller facts, if not as economic or political facts? It needs to change the fundamental regime doctrine if the facts are not Carolene Products footnote facts. It does so. The Court regards them as facts which inhere in the individual, and therefore the rights in those facts are secured to all individuals. As the Heller Court says:

    "Three provisions of the Constitution refer to 'the people' in a context other than 'rights'—the famous preamble ('We the people'), §2 of Article I (providing that 'the people' will choose members of the House), and the Tenth Amendment (providing that those powers not given the Federal Government remain with 'the States' or 'the people'). Those provisions arguably refer to 'the people' acting collectively—but they deal with the exercise or reservation of powers, not rights. Nowhere else in the Constitution does a 'right' attributed to 'the people' refer to anything other than an individual right [but in the Second Amendment]. What is more, in all six other provisions of the Constitution that mention 'the people,' the term unambiguously refers to all members of the political community, not an unspecified subset."

    According to the Court, the Heller facts are facts of human experience which history demonstrates are unaffected by attempts upon them. This is the test of West Virginia v. Barnette, which examines the facts in that case as showing themselves to be robust and resilient in response to attempts on them. Note that the Court’s insistence on the conjunction of “the people” with individual right, is a clear rejection of the Carolene Products doctrine that the Court separates economic from political facts. Certain facts inhere in individuals---no analysis can sunder them. The Court’s reason is that such a distinction is not sanctioned by the Constitution, that is the formulation of government on which the people have decided, and government is an important fact.

    Finally, the Heller Court should have made it clearer it was responding to an actual Constitutional test in concluding that the facts were robust and resilient in response to attempts upon keeping and bearing arms. Such efforts were not successful, even though they were attempted time and again throughout American and English history as the Court recounts. Keeping and bearing arms survived such attempts. That also should have been made explicit.

    Obviously, the Court feels there is something problematic if even one gun is successfully taken from one individual. However, the idea that these instances refute the notion that the fact is important, is countered by the Constitution’s own statement that the fact is important. That is, the investigation has already been carried out by the Framers and the confirmation of the fact is the wording of the Constitution itself. The fact in question is the militia. The Constitution presumes attempts on the facts, and that presumption includes the evidence of the investigation: that specific instances occurred of government taking arms away from individuals. However, the Framers concluded that the militia is also an important fact, and includes keeping and bearing arms. That this included instances of seizure of arms, was indeed part of the basis for their conclusion that the militia was robust and resilient in response to attempts upon it. It had survived such attempts in fine fashion.

    The advocates of regulation thus missed their mark: they should have argued (assuming they could have done so) that the facts show that the regulations are irrelevant to the militia, not that the Heller facts are irrelevant to the militia.


    But it is clear beyond any doubt that the Heller Court is proceeding under a new Constitutional regime.

    It is also clear that the United States is proceeding under a new Constitutional regime.

    It is also clear that each and every state is proceeding under a new Constitutional regime.

  8. achtung says

    So, Lingle, Gov. of Hawaii v. Chevron U.S. causes no impediment to your theory of increased scrutiny for housing?

    Seems that it would put the burden of proof on the property owner to prove a violation of due process.

  9. jrysk says

    What an increased level of srutiny does with regard to housing, is make problematic the concept of property in its relation to housing. It opens up civil discovery to understand the background of whatever property right is asserted. If anything, an increased level of scrutiny for housing means that there is a property right in the housing in a housed individual, that property is an indicium, a fact related to, housing. These ideas are not considered in the regulatory takings cases.

    This is why it is important to see that an increase in scrutiny for so-called "economic" facts makes the scrutiny regime framework problematic. The scrutiny regime itself is overruled now in cases such as Lingle. It means that the facts in Lingle would have to be subject to an entirely different set of laws. For example, does the notion of a property "interest"--a scrutiny regime term developed because the Court would not raise the level of scrutiny for property and applied to a host of facts--still exist now that the scrutiny regime is no longer with us? What about the notion of "regulation." Does that term have any meaning in the maintenance regime where the issue is one of maintaining important facts?

    A lot of concepts under the scrutiny regime are simply arcane under the maintenance regime. If Lingle were now litigated under the doctrine that the law maintains important facts, an entirely different analysis would emerge which would bear little resemblance to the current Lingle analysis.

  10. achtung says

    jrysk wrote:
    What an increased level of srutiny does with regard to housing, is make problematic the concept of property in its relation to housing. It opens up civil discovery to understand the background of whatever property right is asserted. If anything, an increased level of scrutiny for housing means that there is a property right in the housing in a housed individual, that property is an indicium, a fact related to, housing. These ideas are not considered in the regulatory takings cases.

    This is why it is important to see that an increase in scrutiny for so-called "economic" facts makes the scrutiny regime framework problematic. The scrutiny regime itself is overruled now in cases such as Lingle. It means that the facts in Lingle would have to be subject to an entirely different set of laws. For example, does the notion of a property "interest"--a scrutiny regime term developed because the Court would not raise the level of scrutiny for property and applied to a host of facts--still exist now that the scrutiny regime is no longer with us? What about the notion of "regulation." Does that term have any meaning in the maintenance regime where the issue is one of maintaining important facts?

    A lot of concepts under the scrutiny regime are simply arcane under the maintenance regime. If Lingle were now litigated under the doctrine that the law maintains important facts, an entirely different analysis would emerge which would bear little resemblance to the current Lingle analysis.


    The court had its chance to raise the level of scrutiny in Kadrmas v Dickinson Public Schools 1988. But did not, and that had a direct economic impact.

    Besides, how can we think that the rational basis test, will not be used in testing any housing case that will arise in the future?

  11. jrysk says

    The court had its chance to raise the level of scrutiny in Kadrmas v Dickinson Public Schools 1988. But did not, and that had a direct economic impact.

    HERE NO ONE IS ASKING THE COURT TO RAISE THE LEVEL OF SCRUTINY FOR HOUSING. IT IS THE UNITED STATES ITSELF AND THE STATES THEMSELVES WHO HAVE CREATED AN ENTITLEMENT IN THE GENERAL PUBLIC.

    Besides, how can we think that the rational basis test, will not be used in testing any housing case that will arise in the future?

    RATIONAL BASIS IS A SCRUTINY REGIME TERM, AND
    THE ANTI-SCRUTINY REGIME ON THE COURT HAS LONG SAID THAT THE PROBLEM WITH ALL THE SCRUTINY REGIME TERMS IS THAT THEY DO NOT DISTINGUISH ONE FACT FROM ANOTHER FOR PURPOSES OF THE CONSTITUTION. INDEED, SCALIA MADE JUST THIS POINT IN FOOTNOTE 27 TO HELLER, WHICH IS SHAPING UP TO BE THE 'ANTI-CAROLENE PRODUCTS' FOONOTE. HE SAYS:

    "Justice Breyer correctly notes that this law [THE PROPOSED HELLER REGULATIONS], like almost all laws, would pass rational-basis scrutiny. Post, at 8. But rational-basis scrutiny is a mode of analysis we have used when evaluating laws under constitutional commands that are themselves prohibitions on irrational laws."

    IN SHORT, IT DOESN'T ADVANCE THE ARGUMENT TO INVOKE RATIONAL BASIS. THE QUESTION IS, WHAT IS THE NATURE OF THE FACT. IT'S TOO BAD THE COURT DIDN'T INVOKE BARNETTE IN HELLER, THEN THERE WOULD BE NO MORE QUESTION. BUT IT IS CLEAR FROM THE CASE THAT THE COURT IS QUITE FED UP WITH THE SCRUTINY REGIME AND ALL ITS CHRISTMAS TREE OF LEGAL CONCEPTS AND TESTS. THEY WANT TO THROW IT ALL OUT THE WINDOW.

    YOU SHOULD REALLY JUST STOP USING ANY SCRUTINY REGIME TERM. THIS WILL FORCE YOU TO THINK, INSTEAD OF JUST PROCESSING THE FACTS THROUGH SCRUTINY REGIME DOCTRINE, OR TRYING TO SEE EVERYTHING IN SCRUTINY REGIME TERMS. THOSE TERMS ARE DEFUNCT.

    YOU KEEP THROWING SCRUTINY REGIME TERMS AND DOCTRINES AT ME, BUT THERE IS NO MORE SCRUTINY REGIME.

  12. achtung says

    This whole entire "raising scrutiny levels" apparently is a perception of things to come, and not what is here today.
    You can argue that the level is raised, but it is not, Yet. Until it is, we are still in the same minimum scrutiny with regard to housing.

    This is not the Woodrow Wilson Progressive movement here. There are no New initiatives to raise housing to a FACT, in order to raise the level of scrutiny.

    If I am wrong, and housing becomes the impetus for doing so, the economic crush will destroy the country and its constitution. There is no SCOTUS that will enable that to happen.

    Commerce will win the day, if not, commerce will most likely be crippled for generations to come.

  13. jrysk says

    This whole entire "raising scrutiny levels" apparently is a perception of things to come, and not what is here today.


    NOT REALLY. READ THE JUDGE'S COMMENTS IN MARQUES V. WELLS FARGO (SOUTHERN DISTRICT OF CALIFORNIA). AND THIS COMMENT IS SIMPLY BIZARRE. YOU NEED COUNSELING:

    Commerce will win the day, if not, commerce will most likely be crippled for generations to come.

  14. achtung says

    jrysk wrote:
    This whole entire "raising scrutiny levels" apparently is a perception of things to come, and not what is here today.


    NOT REALLY. READ THE JUDGE'S COMMENTS IN MARQUES V. WELLS FARGO (SOUTHERN DISTRICT OF CALIFORNIA). AND THIS COMMENT IS SIMPLY BIZARRE. YOU NEED COUNSELING:

    Commerce will win the day, if not, commerce will most likely be crippled for generations to come.



    This is an open public forum. You are allowed to post whatever comment you want. Even if this was an Amazon.com book review, you can comment whatever you want.
    Just because YOU do not understand a comment, Does not mean i need counseling. It means you need education.

    You are wrong, to get to the short and quick of things. There is no basis for raising scrutiny. I don't find your arguments compelling or logical.

    You overlook or dismiss every decision that does not support your case.

    How is that working for ya? Seems that the more you say the weaker your case gets.

  15. buyerbeware says

    Mr. Ryskamp,

    I have found several posts with your name on them throughout the internet, especially when Googling "scrutiny regime". They appear to be consistent in content and are routinely dismissive and grumpy. I can only conclude that you are a misanthropic legal savant or a fool with a persecution complex. Based on the reactions you elicit, I assume the former is more accurate.

    Those reactions reflect a combination of bourgeoisie angst and hoi-polloi ignorance (a category that includes me). Your argument is inconvenient to the status quo but your style limits access to the point you're trying to convey. That's unfortunate. To use a hoi-polloi aphorism, you attract more flies with sugar that with shyt.

    Nonetheless, your unsympathetic countenance, while unfortunate, is beside the point you are trying to make. As difficult as it is to ignore your arrogance, I do recognize what you are saying.

    The arcane political tyranny of the scrutiny regime seems to be on the wane. HAMP, as law, harmonizes with the constitution, particularly the 5th amendment. If the Supreme Court has truly abandoned the scrutiny regime, HAMP need not survive a political rational basis review. It just is.

    "....nor be deprived of life, liberty, or property, without due process of law; nor shall private property be taken for public use, without just compensation."

    Finally, take a deep breath. The peacock-on-a-high-horse-in-an-Ivory-tower bit is tiresome. Your rabid desire to acquit your righteousness, with its accompanying ad hominem attacks, leads people to think you might be full of krap.

    In short, lighten up dude.

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