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aude sapere

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Everything posted by aude sapere

  1. Do I take your silence to mean you have passed neither the bar nor the CPA exam? I'm a relatively new poster, so let me introduce myself. I have a BS in Business Administration and a Masters in Accountancy. I've taken time off to school my dc, so I don't currently practice, but I have passed the CPA and CFE (Certified Fraud Examiner) exams. So, yes, I'm quite familiar with business law. I'm still not certain what my grasp of the UCC has to do with the ethics of honoring a contract. What conversation would you like to have?
  2. I happen to be an accountant, thanks for asking. How is this relevant to the concept of honoring your word? (Why is it you believe only lawyers and accountants can discuss honor and integrity?)
  3. Quote: Originally Posted by aude sapere All legal agreements should be honored. A contract is a legally enforceable agreement between parties. The parties should conform to what is agreed upon. This is not to say I don't have sympathy for others facing hard times. Rather, I believe in the nobility and the dignity of the individual. I'm actually quite familiar with business law, thank you. I'm not discussing the legality of contract negotiations. My point (from the original post) is a person should sign a contract, and then abide by the terms. On a small scale, we expect people to honor their commitments. Vendors should ship what is paid for - witness the "fire sale" commentary last week. Why should this not apply to bigger dollar amounts? When refinancing a mortgage, the borrower is, in fact, asking the bank to accept less money for the same property. This would be like a vendor sending less merchandise for the same payment. Who among us would agree to a shipment of 1 book, instead of 2, when we've already paid? A person's word should be their bond. This is the essence of character training, IMHO. How many of you teach your dc to keep a promise? To follow through on what is started? To accept responsibility for mistakes made? And to take their lumps? Or do you teach them to bargain when caught in a bad situation? To negotiate, attempt to cast blame on others, and diminish or avoid the consequences?
  4. You've obviously never worked in a bank picketed by ACORN...
  5. Thanks for the FYI. Yes, the CRA was enacted in 1977. It also went through a series of legislative upgrades in the 90s. I was affiliated with the banking industry for 20+ years. My branch was picketed by ACORN. This article, a portion of which is pasted below, is a fair reflection of my experience. "When the CRA was created during the Carter administration, the administration also funded with tax dollars numerous "community groups" that have helped the Fed, the Comptroller of the Currency, and other federal regulatory agencies to enforce the act. Under the CRA, if a bank wants to make virtually any change in its business operations — merging, opening up a new branch, getting into a new line of business — it must first prove to regulators that it has made "enough" loans to the government's preferred borrowers. The (partially) tax-funded "community groups" like ACORN (Association of Community Organizations for Reform Now) can file petitions with regulators that stop the bank's activities in their tracks, perhaps defeating them altogether. The banks routinely buy off ACORN and other "community groups" by giving them millions of dollars as well as promising to make even more dubious loans. In order to try to diversify the risk of these loans, the Federal Home Loan Mortgage Company ("Freddie Mac") pioneered the "securitization" of bundles of these high-risk loans so that they could be sold on secondary markets. Such "securitization" exploded during the 1990s as a result of government regulation. As Fed Chairman Ben Bernanke himself stated in a March 30, 2007 speech entitled "The Community Reinvestment Act: Its Evolution and New Challenges" (published online by the Fed), Securitization of affordable housing loans expanded, as did the secondary market for these loans, in part reflecting a 1992 law that required the government-sponsored enterprises, Fannie Mae and Freddie Mac, to devote a large percentage of their activities to meeting affordable housing goals. (p. 3) In 1994 the Riegle-Neal Interstate Banking and Branching Efficiency Act loosened up the regulatory barriers to bank mergers. Consequently, said Bernanke, "As public scrutiny of bank merger and acquisition activity escalated, advocacy groups [like ACORN] increasingly used the public comment process to protest bank applications on CRA grounds." In other words, there was a burst of additional legalized extortion perpetrated by the Fed and its pet "activist organizations" beginning in the mid-1990s. As a result, says Bernanke, "banks began to devote more resources to their CRA programs." What an understatement. Also in 1995, the US Treasury Department created the multibillion-dollar "Community Development Financial Institutions" fund to "provide banks with access [i.e., taxpayers' dollars] to new opportunities to finance community economic development" as "encouraged" by the CRA, said the Fed chairman. The government also "streamlined" the regulatory requirements for CRA loans in 1995, allowing — and indeed pressuring — banks to make such loans without the benefit of many traditional credit-worthiness criteria, such as the size of the mortgage payment relative to income, savings history, and even income verification! Instead, the Fed told banks that participation in a credit-counseling program, many of which are federally funded, could be used as "proof" of a low-income applicant's ability to make his mortgage payments. In other words, federal bank regulators required banks to make bad loans based on nonexistent credit standards. The myth that the CRA would not be harmful to bank-industry profits was hidden for years by the Fed-created housing bubble, which allowed for easy refinancing of all the bad debt. "[The] CRA increased lending and homeownership in poor communities without undermining banks' profitability," Robert Gordon proudly proclaims. But now that the bubble has burst, all those unqualified borrowers — whom the government calls "subprime," as though their credit ratings are only a tiny, tiny smidgen below "prime" borrowers with the very best credit ratings — are defaulting on their mortgages in droves. Bank profitability has been extremely "undermined," to put it mildly. The bursting of the Fed-generated housing bubble is the reason why the CRA scam was not exposed until now, despite having been in operation for some thirty years." The CRA, including it's legislative enhancements in the 90s, eroded the bank's ability to measure (or even inquire) about an applicant's credit worthiness. Did people who weren't the original focus of the CRA obtain loans? Of course. But the CRA started it all.
  6. The banks made the loans to poor credit risks at the behest of government through the Community Reinvestment Act (CRA) and the the Financial Institutions Reform, Recovery and Enforcement Act of 1989 (FIRREA). This was done an effort to create an equality of outcomes - home ownership for all. The banks loaned money to people who couldn't pay it back. The banks tried to repackage these sub-prime mortgages as 'mortgage backed securities." But, as the mortgages were non-performing (if the homeowners don't make payments, there is no revenue stream), the securities became worthless. Had people been making their mortgage payments, the securities would not have been worthless. The housing bubble collapsed because people who couldn't afford homes bought homes and then couldn't pay for them.
  7. All legal agreements should be honored. A contract is a legally enforceable agreement between parties. The parties should conform to what is agreed upon. Otherwise, why contract in the first place? But then, I'm (obviously) a firm believer in personal accountability and personal responsibility. This is not to say I don't have sympathy for others facing hard times. Rather, I believe in the nobility and the dignity of the individual. It is the nature of the human spirit to triumph over adversity. Rarely is such triumph accompanied by a government handout. FYI, according to the Wall Street Journal in June 2010: "the redefault rate within a year is likely to be 65% to 75% under the Obama administration's Home Affordable Modification Program, or HAMP"
  8. If one renegotiates the contract, one is not honoring the original contract. Home owners should honor the original contract. As stated in the OP: "If the home buyer defaults, the home buyer should accept the consequences. When a Well Trained Mind board member recently had a "fire sale," collected money for goods, and then didn't ship the books promptly, the customers in question wanted either their money back or the books they purchased. They didn't offer term modifications ("keep all the money, send me half of the books I ordered"), or donate the money ("sure, you need the money, feel free to keep mine"). They, rightfully, wanted the seller to honor the terms of the deal, and threatened legal action (i.e. pay pal disputes, etc), to compel performance. Why should it be any different for lender and home buyer. Obviously, the dollar amount is bigger, and there's more at stake. But, in my mind, that's even more reason to honor the terms of the contract. Why should the home buyer unable to meet his/her obligations get special treatment?"
  9. Quote: Originally Posted by aude sapere A home owner asking the bank to lower the payments IS violating the terms of the original mortgage. A fixed-rate mortgage is (hence the name) for a fixed rate of interest and principle payments. My mortgage contract includes an amortization schedule, with the principal and interest payments, at a fixed amount, for the life of the loan.. I cannot speak to ARMs, or other financing instruments. That being said, I cannot find the "my life is tougher than I thought it would be, so don't make me pay" clause in my mortgage. Neither can I find the "life is unfair and my neighbor is doing better than I am, so take their tax dollars to pay my debt" clause. There is a section titled "Borrower's Failure to Pay as Required" which outlines the steps the bank will take to recoup the money lent. Again, these remedies do not include renegotiating the contract because I'm unhappy with how my life has turned out. Maybe your mortgage is different?...
  10. A home owner asking the bank to lower the payments IS violating the terms of the original mortgage. The original mortgage is for a stated interest rate and principle payment. Changing either of these after the fact is violating the contract. This makes a mockery of the contract process, and harms the housing market as a whole. Further, tax payer dollars were used to fund TARP and the Making Homes Affordable programs. Which means money was taken from tax payers and used to subsidize, even indirectly, home buyers who could not or would not fulfill the terms of their original mortgage agreements.
  11. "Well, everybody else is doing it..." isn't legal justification for violating the terms of a contract.
  12. Have you heard of TARP (Troubled Asset Relief Program)? TARP allows the United States Department of the Treasury to purchase or insure up to $700 Billion of "troubled assets", defined as "(A) residential or commercial mortgages and any securities, obligations, or other instruments that are based on or related to such mortgages, that in each case was originated or issued on or before March 14, 2008, the purchase of which the Secretary determines promotes financial market stability; and (B) any other financial instrument that the Secretary, after consultation with the Chairman of the Board of Governors of the Federal Reserve System, determines the purchase of which is necessary to promote financial market stability, but only upon transmittal of such determination, in writing, to the appropriate committees of Congress."[7] In short, this allows the Treasury to purchase illiquid, difficult-to-value assets from banks and other financial institutions. The targeted assets can be collateralized debt obligations, which were sold in a booming market until 2007 when they were hit by widespread foreclosures on the underlying loans. TARP is intended to improve the liquidity of these assets by purchasing them using secondary market mechanisms, thus allowing participating institutions to stabilize their balance sheets and avoid further losses. (this is from Wikipedia) Taxpayer dollars. Used to purchase bad mortgages. Further, the Making Home Affordable program "The Obama Administration’s Making Home Affordable Program includes opportunities to modify or refinance your mortgage to make your monthly payments more affordable. It also includes the Home Affordable Foreclosure Alternatives Program for homeowners who are interested in a short sale or deed-in-lieu of foreclosure." (from makinghomeaffordable.gov) More gov't dollars.
  13. I'm not judging. Yes, life does happen. Life is hard. No one sets out to have difficult times. But I still don't see why that should invalidate a mortgage contract. Or why the government should reach its hand into wallets of the homeowner's neighbors (via tax dollars) to smooth the way for said homeowner. The posters to this thread have shared heart wrenching tales of life gone awry. You have my utmost sympathy. But a mortgage is a legal contract, signed by two willing parties. Why shouldn't the terms of the contract should be honored? On a larger scale, the housing market can't ever stabilize if one party to the mortgage can declare "my life got messy, so I shouldn't be held accountable." Banks have tightened lending standards for "prime" borrowers, with strong credit histories and high credit scores. The element of uncertainty ("will they or won't they honor what's been signed") is increasing the costs for all market participants, even those most likely repay.
  14. Modifying loans to allow homeowners to remain in the dwelling without honoring the terms of the original mortgage hurts the capital markets, the housing markets, and, ultimately the taxpayers. By interfering with 'natural' supply and demand, it also prevents the housing market from stabilizing.
  15. I have sympathy for those individuals who cannot make their mortgage payments. Having said that, I don't understand why the banks should modify the terms of the mortgage contract. Or why the gov't (i.e. taxpayers) should shoulder the burden of someone else's poor judgement/bad circumstances. The home buyer and the lender agree to the terms of the mortgage -- loan amount, duration of the loan, interest, and remedies upon default. No one signed this document under duress. If the home buyer defaults, the home buyer should accept the consequences. When a Well Trained Mind board member recently had a "fire sale," collected money for goods, and then didn't ship the books promptly, the customers in question wanted either their money back or the books they purchased. They didn't offer term modifications ("keep all the money, send me half of the books I ordered"), or donate the money ("sure, you need the money, feel free to keep mine"). They, rightfully, wanted the seller to honor the terms of the deal, and threatened legal action (i.e. pay pal disputes, etc), to compel performance. Why should it be any different for lender and home buyer. Obviously, the dollar amount is bigger, and there's more at stake. But, in my mind, that's even more reason to honor the terms of the contract. Why should the home buyer unable to meet his/her obligations get special treatment?
  16. What intent? He didn't pay. Whether deliberately or not, he didn't pay. When a bill is due, "I forgot to pay it" doesn't change the fact it wasn't paid. The theory of "I forgot to pay" doesn't absolve one of the responsibility -- have you tried "oops, I forgot to pay" with your mortgage? A health insurance premium? An auto insurance premium? Non-payment is non-payment, regardless of cause. And has the same result - no payment, no service.
  17. His lack of personal responsibility is tragic, but doesn't change the fact that he did not pay.
  18. LisaK, Informative post. However, if this family wanted fire service protection, they should have paid the fee. Would a responsible homeowner a) play by the rules, and pay the fee or b) think maybe I'll be covered... let's just wait for the fire The blame for this incident rests solely on the shoulders of the homeowner.
  19. So, if the police are doing a speed enforcement detail, pull someone over for doing 65 in a 55, but don't issue a ticket, does that nullify the speed limit law? Now, is the speed limit unenforceable because someone was issued a warning instead of a ticket?
  20. The City of South Fulton offered the service, for a fee, to rural residents. This family chose not to participate.
  21. Because the family had not purchased fire protection services. No payment = no service agreement = not in service area. Neighbors paid = in service area. Call from area under service coverage answered. QED
  22. The right thing to do is to live with the consequences of ones actions. Should they choose to continue to reside in the same area, I hope they remember to purchase fire protection services from the city.
  23. How about the morals of the Cranicks, who didn't pay for the service, and then expected the fire department to provide it anyway?
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