He's Taking Law Into His Own Hands To Help Broke Homeowners

WSJ ^ | 06/06/08 | MICHAEL M. PHILLIPS

[SoFloFreeper]

PHILADELPHIA -- Sheriff John Green has spent 37 years in law enforcement. But these days he's best known around town for the law he won't enforce.

With the economy soft and thousands of Philadelphians delinquent on their mortgages, Sheriff Green this spring refused to hold a court-ordered foreclosure auction. His move raised eyebrows on the bench and dropped jaws among lenders and their attorneys, who accuse him of shirking his duty to enforce legal contracts.

[Larry Lucido]

Okay, then, no more secured loans for anyone living in that county until things get straightened out.

[DannyTN]

"ordered to ignore "illegal" alien status"

I think it's the same thing. The difference here is that in New Yorks case they are refusing to enforce a law. The Sherriff is refusing to enforce a court order, which makes it more likely that there will be consequences.

[SoFloFreeper]

sounds good to me.

[MES401067]

Imagine its a tough gig but you signed up for the job do it.

[DesScorp]

Businesses should pull out of the area. If elected officials are going to ignore contracts on a whim, you can’t trust those people with your money. Every grocery store, shop, and professional service should pull out of Philidelphiastan.

[Prokopton]

Aren't the people the law?"

No.

[count-your-change]

A sheriff’s auction is one of the legal duties of a sheriff that cannot be handled by others. He is charged by the law to act as the enforcement arm of the state so that when he refuses to act he making his own law.
In the case of the police it is not the individual officers who are refusing to perform their duties but the state through the superiors of the police officers.
Difference? In one case the individual officer, sheriff, is making decisions on his own against the law and in the other it is the state itself acting.
Neither is proper. How is the sheriff’s actions different from those of a white sheriff refusing to investigate the robbery of a black or vice versa?

[DesScorp]

"I'm kind of betting these folks are Democrats."

SoFlo, even worse, they're hypocrites. Look at what they said again...

"It's the sheriff's job to serve the people who elected him. Because he was elected by the people, he has to listen to the people. Aren't the people the law?"

However, if the people are the law, then why doesn't our voice count on things like illegal immigration or gay marriage? The importance of the "people's" voice with Democrats depends on whether the cause is liberal or conservative.

[GovernmentShrinker]

I’ll back the sheriff on this for now, though I’d like to have more specifics about how he’s applying this policy. Obviously it’s not an acceptable long term solution, but I get the feeling he’s trying to head off a domino effect in which everyone loses, and buy time for better solutions to be found. Doing anything like this long-term needs to be applied only to very low end homes.

Philadelphia has a pretty huge stock of run-down rowhouses that are teetering between being being occupied by civilized homeowners or renters, and becoming officially unoccupied but actually crackhouses, or occupied by various unsavory and destructive renters and squatters.

There’s a risk, of course, of scaring off lenders from underwriting mortgages in the city in the future. But I suspect well over half of these homes facing foreclosure are owned by people who are poorly educated and financially clueless, and were taken advantage of by predatory lenders (a lot of whom were flat out breaking the law with their activities). If THAT sort of lender gets scared off in the future, it would be a GOOD thing.

[AndyJackson]

I’ll back the sheriff on this for now, though I’d like to have more specifics about how he’s applying this policy

If it was mafia loan sharks behind our current lending mess eveyone would be for enforcing laws against the mafia. In this case, the predatory lending practices were by so-called legitmate banks and mortgage lending companies actively encouraged and underwritten by Greenspan's monetary policies accompanied by his and broader federal regulatory lack of oversight and lack of due diligence.

Their are several parties to this loan mess, and the "homeonwers" are only one of them. Their a scoundrels all around and I don't know why the banks should be the ones to come out "clean" at everyone else's expense. They are the one's who loanded money on the basis that houses were worth far more than the burst bubble market could bear, thereby financing the bubble in the first place. Their losses are as much their own fault as anyone elses and they were in a far better position to have the big picture than anyone else.

So, no tears for any of them.

[ikka]

Just another corrupt Philly pol, remember “the brothers and sistahs are running this city now!”

[count-your-change]

“...a lot of whom were flat out breaking the law with their activities). If THAT sort of lender gets scared off in the future, it would be a GOOD thing.”
If the lenders were breaking the law then the contracts could be contested in court not in the sheriff’s office. Perhaps some sheriff will decide not to enforce a law that protects YOU and then you’ll find a new respect for the enforcement of the the law.

[timm22]

Obviously it’s not an acceptable long term solution, but I get the feeling he’s trying to head off a domino effect in which everyone loses, and buy time for better solutions to be found. Doing anything like this long-term needs to be applied only to very low end homes....

If THAT sort of lender gets scared off in the future, it would be a GOOD thing.

You may very well be correct. However, those kinds of decisions and policies are best set by legislatures- not sheriffs.

[brityank]

If the lenders were breaking the law then the contracts could be contested in court not in the sheriff’s office.

I'll go along with GS on this, as it appears that is exactly what the Sheriff is doing, getting all the parties on the same page. The folks who can't pay the ruinous increases to their predatory mortgages will find it damn hard, individually, to come up with the retainer and court fees needed to go up against the lenders and their legal staff.

[GovernmentShrinker]

Actually very few of the predatory and otherwise fraudulent mortgages were originated by banks. Many of them were SOLD to banks, accompanied by falsified documentation prepared by the originator. In some cases, developers, appraisers, real estate agents, and mortgage originators were conspiring together to inflate the values of homes and talk prospective buyers into believing they could afford the homes at the inflated prices. In one version of the scam, one or more of the conspirators would assure the buyer that that if the buyer had trouble making the payments during the first 6 months, the conspirator would make the payments. And the conspirators DID make the payments, for just that length of time, to create a paper trail showing the mortgage payments had been kept current for the required length of time to be sold to banks, Fannie Mae, etc. The massive fees and other profits that the conspirators made from closing these deals were plenty to cover 6 months of payments and still make a bundle.

[gura]

TRAFICANT 2008

[count-your-change]

Again outside his authority. He was not appointed to get everyone on the same page. He is not an arbiter of legal contracts or court orders.
“Predatory montages”? This just means a loan the buyers can't afford but signed for anyway. They got themselves into a tough situation but the larger the commitment the greater scrutiny required. Another case of ‘I'm a victim being preyed upon’.

[count-your-change]

“In one version of the scam, one or more of the conspirators would assure the buyer that that if the buyer had trouble making the payments during the first 6 months, the conspirator would make the payments.”
If this wasn’t in the contract with the lender then the buyer becomes a co-conspirator in that he expected he would not be able to make payments he agreed to make.
When a buyer agrees to such things how is HE not acting in a predatory fashion?

[GovernmentShrinker]

There were a lot of unsophisticated buyers involved. This particular scam rarely involved buyers as co-conspirators, because there was nothing in for the buyers. Foreclosure proceedings would begin soon after the 6 months were up and the loan was sold, and the buyer ended up with no home, out a down-payment, and with major damage to credit (which may have been sketchy in the first place. This often went on in bubble areas (like Florida) where big developments were going up and prices all over the area were climbing fast. It was tough for an unsophisticated buyer to figure out the scam, since even if s/he knew how to look up sale prices of nearby homes in the same or similar developments, most would have been at comparable prices, and there would have been a pattern of rapidly rising home prices — i.e. creating confidence that if making the payments turned out not to be feasible, the home could be sold at a profit. I doubt the covering payments promises were in writing, but it wouldn’t have been hard for conspirators to produce neighbors who would verify this had been done for them, and many buyers are in an overly optimistic frame of mind when buying and are pretty confident they won’t really need the payment help. Few buyers were aware that the mortgage originators needed to create a 6 month payment history and then would be able to unload the mortgage onto some other party, while keeping fat fees.

An example of someone I know who bought a house in one of these Florida developments a couple of years ago (and last I heard was still doing okay financially), was a native Spanish speaking lady who worked in our office cleaning and restocking the pantries. She’d been at this 20 years or so, and was eligible to retire with a decent little pension, and move out of NYC to a house probably at least 5 times the size of any apartment she’d ever lived in, and with a yard to boot. She would not have had the faintest clue as to the specific financial roles and motivations of the developer, real estate agent, appraiser, and mortgage originator were, nor the faintest clue how to gauge local home values beyond looking at the various billboards advertising homes at different new developments in the area. She’ll probably make out okay, even with a mortgage rate re-set (though maybe not if she has a short term balloon mortgage and/or if we go through a period of high inflation). In addition to her modest pension, she’s working part-time cleaning and stocking the restrooms at a nearby amusement park.

[count-your-change]

I helped a family make their first home purchase about a year ago. They certainly were not sophisticated by any means but did look at the price of the house, its location, and their ability to make the payments on a fixed mortgage.
They bought it as a place to live not sell next year on spec. Had someone offered to make payments for them I would beaten that person as I won't engage something that smells that bad. Why should anyone want to make payments for me? Out the goodness of their heart? Unsophisticated questions both that should be seen as red flags by anyone.
Buyers that buy with the knowledge that they are unlikely to be able to make the payments are not being honest in one of the largest transactions in their life. They aren't buying a vacuum cleaner and they have an obligation to inform themselves and not join (co-conspire) in something deceptive.
Those who bought houses with the belief that they could flip it if the payments became onerous are speculators (not dishonest but risky) and in that game sometimes you bite the bear and sometimes the bear bites you. That's the game and crying over the rules means stay out of the game.
Foreclosures certainly cause pain but decisions have consequences and defaulting on a loan should have some pain associated with it in some way.