It’s amusing to me that many on Wall Street still are living in this bubble. They act as if they understand how real estate and foreclosures affect local economies and what “really” happened in the mortgage market over the last few years. They voice their opinion on how they are opposed to any kind of bail out or massive loan modifications of these cancer ridden adjustable rate mortgages. They don’t care that good borrowers are stuck in and can’t get out of because of the tightening of the credit market and the vanishing loan programs.
Take for instance this article from a Bloomberg. com titled, `Subprime Chuck’ Schumer Plays Fool in Crisis: By Jonathan Weil. I’m not sure if these guys truly fricken get it. It’s like wake up and smell the shit. Cause it’s pretty damn shitty right now in America and it’s only going to get a lot more shitty. Your ignorance will only lead to your demise and most likely our country’s economy.
Jonathan Weil goes on to bash Senator Schumer, calling him “Subprime Chuck” for asking the big four accounting firms, PricewaterhouseCoopers, Deloitte & Touche, Ernst & Young, and KPMG to clarify to lenders and servicers the accounting rule that was publicly announced by the SEC that states “lenders and servicers that modify loans where a default is reasonably foreseeable, will not suffer adverse accounting consequences.” Meaning they will not be taking loses when they do this. All the Senator Schumer wanted in the letter was for them to “advise” them and inform them.
Here’s an excerpt from that article.
To see why, let’s take the senator’s request to its logical extreme.
First, we have a subprime lender about to send default notices to thousands of people who can’t afford to pay their mortgages now that the introductory teaser rates have expired. Then, hark! A partner from the company’s “independent” auditing firm swoops in, brandishing an apple pie, and implores: “Give the poor folks a break. Chuck wants it that way.”
Bowing to the auditor’s pleas for patriotism, the lender softens up. “Of course,” its chief executive says. “We shall extend the teaser rates indefinitely, never mind our investors. That should make you and Chuck happy.” And it does.
Yes, these borrowers (people) were in “teaser” toxic mortgages that have “now” adjusted and they can’t afford the “new” payment. They try to refinance Mr. Clueless Weil, but they can’t! Their equity is gone, zilch, nada because homes are being foreclosed on and sold everywhere at discount prices and in fire sale auctions. Driving values down further for “everyone”, including you!
Let’s do this “Clueless Weil’s” way.
“I’m sorry Mr. Borrower we can’t work with you. I know you have had great payment history, I know your ARM is now at 10% and your payment went up $1,000, your home has no equity and you can’t refinance to pay us off because there are no more mortgage programs out there.” “Here’s what we are going to do Mr. Borrower. We’re going to ruin your credit even more and take back your house. Who cares if it costs $50,000 out of my pocket to foreclose and then hope it sells in this sluggish real estate market that just keeps getting worse and I am going to make it even more terrible by taking your home and driving your neighbors home down, so now he can’t refinance either and bring money into the economy. I don’t care about a recession because you owe me money. You know why? Because I know it all and you didn’t pay us on time, so we’re doing what big bad debt collectors do. Be big bad tough guys. Even if it make us look like total idiots and eventually costs me my job and ruins our countries economy because I’m an ignorant buffoon.
Weil states:
“Under the Securities and Exchange Commission’s rules, that means the auditors, among other things, “must act in an unbiased and objective manner.” Lobbying audit clients to change their business practices is the mark of a biased auditor, not a disinterested one.”
Schumer was not asking them “lobby” to change their business practices but to “inform” them as it is their “job” to do so. This is a huge accounting issue that needs to be addressed and not ignored and these accounting firms need to do what is ethically right.
He ends it with:
“Doing it the Schumer way, though, only would put our economy at further risk. Auditors aren’t supposed to act as cheerleaders for the economy. Their job is to ensure that companies tell the truth about how well or poorly they are performing, so that investors and the broader economy can operate efficiently.
Butt out, senator.”
I’m sorry “Clueless Weill”, but doing it your way will bury our country into a financial recession like it’s never seen. You have no idea how many “bad” mortgages are out there. Your job is also to educate and inform your clients on accounting issues. So, do your job and get a clue that loan modifications are the only way to solve this mess.
{ 5 comments… read them below or add one }
It seems as though all the media outlets get it but how come the lenders won’t budge? A friend sent this article to me about countrywide…I am just sick to my stomach after reading this. Countrywide is like the Enron of the mortgage world. Greed, corruption and bad business that destroy the little people. Ugh I hate Countrywide!
http://www.nytimes.com/2007/08/26/business/yourmoney/26country.html?pagewanted=1&ei=5087&em&en=44bdb6aa047ed4b7&ex=1188446400
It seems as though all the media outlets get it but how come the lenders won’t budge? A friend sent this article to me about countrywide…I am just sick to my stomach after reading this. Countrywide is like the Enron of the mortgage world. Greed, corruption and bad business that destroy the little people. Ugh I hate Countrywide!
http://www.nytimes.com/2007/08/26/business/yourmoney/26country.html?pagewanted=1&ei=5087&em&en=44bdb6aa047ed4b7&ex=1188446400
Thanks for the article. I read it when it came out and this is how they operated and several other lenders over the last few years. The wild, wild west and snake oil pitches. The truth will come out in the end and the people who committed fraud will go down big time along with all of the predatory lenders who preyed on borrowers daily.
I hope so but these white collar criminals always seems to get off with just a slap on the wrist. I glad to see all this nonsense in the media though. People NEED to know what is going on behind the scenes and just how many people got screwed. And can I just say how sick and tired I am of hearing that the people screwed were irresponsible, ignorant and greedy and that they deserve to loose their house. I’ll step off my soap box for now but I just have to say I hope we keep hearing about all this until it finally sinks in with the people that can actually do something about it.
There will be some big people going down I’m sure over the next couple of years. Media is good to show how bad the problem is and get the message to congress to do something. However, it’s all doom and gloom with now real solutions being reported on. Some people were definitely irresponsible and mad bad choices. Some people were taken advantage of and they need to be worked with and so do the people in ARM’s that are exploding. I believe that there needs to be a huge “mediation” workout plan that needs to be orchestrated by the government to lesson the collateral damage and protect the economy.