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Home free in Massachusetts: Not paying your mortgage is a less-significant moral fault than being sloppy with paperwork.

The Massachusetts Supreme Judicial Court makes a slam-dunk argument for free-market dispute resolution. Meanwhile, think twice before you lend money. You may never see it again.

Related posts:
  • Irony Can Be So Ironic (Massachusetts Edition)
  • It’s Not My Fault
  • On Mortgages and Moral Compunction

  • 22 comments

    22 Comments so far

    1. John January 7th, 2011 2:46 pm

      All I can say is incredible. And you think banks aren’t lending now?… just wait…

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    3. Meg Hurtado January 7th, 2011 3:06 pm

      I mean, yeah, it will make banks more skittish about lending. But what the banks have done to so many Americans amounts to highway robbery – if this ruling sets one case straight, it’s worth it.

    4. Greg Swann January 7th, 2011 3:13 pm

      > I mean, yeah, it will make banks more skittish about lending. But what the banks have done to so many Americans amounts to highway robbery

      I’m not seeing this. This has nothing to do with banks. It’s about third-party investors — could be your grandma — who are getting screwed out of their money over procedural errors committed by other people. This is a good example of statute law at war with substantive justice. The judges at the SJC would have had zero problems identifying the right thing to do had it been their own funds at risk.

    5. Jim Klein January 8th, 2011 8:16 am

      Moral? Here’s how I personally read your claim, Greg: “Non-coercive dispute resolution is simply not practical.” While the entire world population (minus a handful, maybe) would readily agree, I have to wonder why you so readily do. And naturally, this brings into question the more general claim, “The moral is the practical,” which is of prime interest to me.

      IMO the biggest clue here is your usage of “substantive justice.” What exactly do you mean by that? Is it distinguished from justice alone? What is justice? Me, I differ fairly widely from Rand on that question. In this context, you seem to be straightforwardly saying, “If you don’t pay for property that you have, or that was loaned to you, then it should be forcefully taken away from you.” But is that what you really believe? I have my doubts, so could you clarify?

      This is ALL about context, and ultimately it reduces to our property system being little more than a very fancy codification of the feudal system. Much like my comments about dual agency, I’m asking you to broaden the context a bit (or more than a bit!) and see where your knowledge and beliefs take you.

      Please don’t misunderstand. I am hardly arguing for the morality of not paying one’s debts. But I am questioning what YOU really believe ought to be done, when a person doesn’t. I guess an important question on that point would be, “What exactly is immoral about not paying one’s debts?” I’d say because it’s anegoic, mainly because these days I’m finding no other meaning for moral. Here, you seem to be saying it’s immoral because it screws the other guy; hence the “substantive justice” for forcefully taking the property away. Those are two entirely different answers, so which is it for you?

    6. Greg Swann January 8th, 2011 8:32 am

      I glossed this once before, but I’m not sure you’ve given what I said any thought:

      > Can a person contract themselves into a lifetime of slavery?

      Can a person consent to a contract of slavery for a term — once called indenture? How would you prevent this from happening without systemic coercion?

      (Agora ends in an ‘a’ because it is feminine in Latin, not because it is plural. Agorum would be neuter if singular, masculine if plural. More than one agora would be called agorae.)

      > More importantly, who do you propose shall set the rules?

      There are no fiat rules, which means that people can do as they choose, even if you would not make the same choices.

      Can a free man sell his kidney? Can he sell both of them?

      If your wife says, “Wanna fool around?,” has she not indicated a willingness to have her person repeatedly forcefully invaded?

      (This is why an agora is feminine, incidentally, because it is a thing that is entered, rather than a thing that itself does the entering.)

      Here’s where the question turns: Is coercion nothing but physical force, or is it any thwarting of the will? If the will is of two minds — another Latinly way of thinking — which is more significant, the prior formal consent or the contemporaneous resistance?

      My take: If the dispute resolution system turns on consensus for its de facto enforcement mechanism — as with the idea of boycotting in a Janioist agora — then this is not something either of us can decide. All we can do is wait to see how the marketplace responds.

      As a guess, I would expect most people to uphold reasonable prior contracts over later demurrers. Any other interpretation of human behavior would impoverish all the dentists with liability claims.

      Is coercion force, or is it a thwarting of the will?

    7. Matt Heisler January 8th, 2011 9:31 am

      Greg:
      I think we all agree that people should pay their mortgage. However I also think the MA court is right on this one (and not just because I live here). This particular crisis has so much blame to go around it makes me sick, but in particular, the banks dug their own grave here. The logic is like this:
      A) Banks knew there was a bubble. (We all did, don’t pretend you didn’t. Did we understand the scope of the future fall out? No. But we knew it was a bubble.)
      B) Banks wanted to capitalize on writing mortgages, but didn’t want them on their balance sheets. See securitization for more details.
      C) The banks, packaging these loans for whatever fool (US GOVT, that’s you, among too many others) was ready to part with his money, cared little, if at all, if the buyer could pay. If you had a heartbeat, you qualified. (And I think I read somewhere that a heartbeat was optional).
      D) With no accountability, the paperwork was put in place to play Hot Potato when it all went sideways. Put another way, the bank made money writing and securitizing the loans. A GOOD BANK MAKES MONEY LOANING ONLY TO PEOPLE WHO HAVE THE BEST CHANCE TO PAY IT BACK, AND IS NOT AFRAID TO HOLD/GUARANTEE THAT INVESTMENT.

      You can blame the homeowner for taking on a mortgage they couldn’t pay. But it’s not their job to limit what they can borrow, that’s the job of credit institutions. If they are too foolish/stupid to loan to people who have no chance – None mind you – of paying it back, and then can’t even bother to follow statutory regs to make sure they can get the asset, who is more at fault?

      Lastly, will this tighten up lending? Yes. And that’s bad for me. But over the long term it’s good for the SYSTEM, and that’s good for everyone. If the banks had tightened when they should have (2003), when it was obvious that credit worthiness was deteriorating, obvious that home valuations were soaring past historical rental norms, this whole mess could have been avoided. The underlying premise in lending: ‘I give you money because I believe you will pay me back’ was tossed aside, in the hope that making it someone else’s problem would prevent it from coming home to roost. How foolish. How sad for us all.

    8. Robert Worthington January 8th, 2011 9:34 am

      Great article to read of the ruling. Banks will actually think twice about lender to a subpar borrower. Banks, if you lend it, guess what….now you eat. Unless o b- a m a… thinks otherwise

    9. Jim Klein January 8th, 2011 9:41 am

      I always give your words thought, even as I admittedly don’t understand them all. To your question, I take “thwarting of the will” ontologically as synonymous with either “comatose” or “dead” in the human instance, as you yourself have frequently pointed out. Though I suppose a lot could rest on the precise meaning of “thwart.”

      Nonetheless, could I trouble you for a bit more direct, and perhaps simple, response? I’d prefer for the moment to hold my Crown of Opacity, though I freely admit you could probably beat me at that too!

      If that’s too much, could you at least precisely define what you mean by “substantive justice”?

      Or, if I owe you a thousand bucks and don’t pay, what do you believe is the substantively just thing for you–or heaven forbid, someone else–to do about it?

    10. Jim Klein January 8th, 2011 9:52 am

      >>>My take: If the dispute resolution system turns on consensus for its de facto enforcement mechanism — as with the idea of boycotting in a Janioist agora — then this is not something either of us can decide. All we can do is wait to see how the marketplace responds.

      I thought this was worthy of its own comment. I think you’ve got an error with, “as with the idea of boycotting in a Janioist agora.” Boycotting, particularly in a context of non-forceful dispute resolution, is hardly equivalent to “turn[ing] on consensus for its de facto enforcement mechanism.” This should be obvious to you since the “idea of boycotting in a Janioist agora” is a moral and peaceful idea in your mind, while “see[ing] how the marketplace responds” is exactly the situation we have now, technically. Hopefully you agree that those are not remotely similar, let alone equivalent!

      I’m pretty sure we solidly agree that we can only decide what actions are taken by our own bodies and souls. I’m just asking what you believe your body and soul should decide in the case of someone who reneges on a mortgage you hold.

    11. Greg Swann January 8th, 2011 10:43 am

      > I’m just asking what you believe your body and soul should decide in the case of someone who reneges on a mortgage you hold.

      When you contract with the dentist, you are consenting in advance to be injured in horrifyingly painful ways. When you sign a mortgage note, you are consenting in advance to a forcible detainer action in the event of non-payment. In the latter case, the force does not begin with the forcible detainer action but with the prior adverse possession. It’s important at this point to note that we are not talking about post hoc retaliation, the insipid joke that Batmaniacs use to rationalize the wanton crime-spree called government. We are talking about forceful repossession of the asset by prior mutual consent.

      I use the words “non-coercive dispute resolution” as shorthand to mean the absence of systemic, sanctified force deployed against non-volunteers to coerce “consent” — or its practical equivalent in subsequent actions. I don’t want to presume to have isolated the error in your thinking without having probed for it, but most of the dismay people feel, when talking to me, comes from what I would call subjunctive errors: The postulation of, and ultimately the preference for, an imaginary universe where something you don’t like no longer happens. The absence of a state does not imply the absence of crime, just the absence of an outsized super-criminal. The absence of non-consensual systemic force does not imply the absence of mutually-consensual force. The only way even to pretend to have done away with mutually-consensual force is by the postulation of an imaginary outsized super-criminal.

      Why do mortgages provide for forcible detainer actions in the event of adverse possession? To keep interest rates low for the borrower. Don’t want to be put out on default? No problem. Just pay a much higher risk premium. (A house bought with a credit card would create an unsecured home loan — at 18%+ per annum, compounded monthly.)

      As always, how does the actual entity behave in reality? You and your lender can arrange for you to lease money on any mutually-agreeable terms, and it would be criminal for me to do anything to impede your mutual consent. But I would be amazed to see even a niche market for mortgages that provide for on-going rightful possession, ad infinitum, if the borrower is not paying on the note. It’s possible, but it doesn’t seem likely to me. A forcible detainer action may seem unseemly, to you, in the abstract, but it is probably the optimax solution for the borrower and the lender — cheap money in exchange for a minimized, mitigated risk.

      Again:

      > I’m just asking what you believe your body and soul should decide in the case of someone who reneges on a mortgage you hold.

      I’m busy as hell scraping together the cash to save my own home from foreclosure — I am in adverse possession for non-payment, and I am surfing the letter of the note to retain possession until I can buy my way back into the lender’s good graces. But I’m also busy as hell building a property management brokerage. That business will be built on the idea of the forcible detainer action. Evictions will be done on a judge’s orders, because that’s the way we do things now. But, as I’ve said many times before, commercial contracts are built on free-market principles, even though the market for justice, at present, is a coercive monopoly run by Batmaniacs. In other words, my expectation is that, even if I were lucky enough to live in a Janioist agora, my property management business would still anticipate repossession of the rental properties, in the event of non-payment or other serious breach of contract, by forcible detainer action. Not “ideal,” perhaps, but the word “ideal” describes an imaginary universe. In real life, mutually-consensual forceful repossession is efficient and economical — moreso, I would expect, than any postulated alternatives.

    12. Jim Klein January 8th, 2011 1:11 pm

      Okay, I get the point. Thanks for clarifying, and I surely agree that “it’s important at this point to note that we are not talking about post hoc retaliation, the insipid joke that Batmaniacs use to rationalize the wanton crime-spree called government.” Though I might add that I’m not sure the two are as completely disjoint as you imply. An apt lawyer might argue that adverse possession is but an instance of the initiation of force. I’m confident Billy would, basically, and the argument has some merit. Calling the repossession something other than retaliation, doesn’t really make it so. This would be akin to the Batmaniacs putting folks in prison “to make things right.” I don’t mean to beg the question with that, just point out that it may not be as cut and dry as you imply…your usage of “substantive justice” is a clue to that as well. I’m still not sure what that means to you.

      Also, I wonder about this sentence: “But I would be amazed to see even a niche market for mortgages that provide for on-going rightful possession, ad infinitum, if the borrower is not paying on the note.” I wonder about this, as well as the instantiation of its negation and what that might look like. I’m sure you know it’s tough for most people to imagine the world you imagine; maybe this is the shoe on the other foot.

      This particular point might be clarified with a direct and plain answer to my question about what you would do if I owed you a thousand bucks and didn’t pay. My guess is, except for publication of the fact, “Effectively nothing.” Is that wrong? If so, how and what would you do? I find this question terribly important…not so much for you or me, but for the multitudes who read you and try to figure out your ideas. I’m confident they wonder exactly this.

      If my guess isn’t wrong, then maybe you could distinguish exactly the difference between that situation and a mortgage. “Securitization” won’t do the trick on its own, since the offering of my word is not wholly different than my offering everything that’s behind my word, which includes both my current property and my earning ability. If you are justified in taking explicitly pledged property forcefully, then you are justified in taking implicitly pledged property, are you not? After all, it’s the pledge that’s relevant, not the manner by which it’s expressed, right? Or, if you wish, you can make it explicit…”I will do everything within my ability and draw upon all of my resources, in order to pay you back.” What shall you do if I don’t? If the answer is anything but, “Move on and pick my spots more carefully in the future,” then I’m mighty interested too.

      Like it or not, we are arguing the subjunctive. Existentially, this is all about context and the relevant context of the point at issue in your post is, “the current legal context.” You’re offering “substantive justice” in the face of the Statute of Frauds and I’m not sure that is, um, justified. Of course, I’d prefer Damon to take up that part of the argument; I’m just trying to flush out some of the associated principles.

      After all, when it comes to the reality of this world at this time, you don’t need to be a philosopher to figure all of that out…we’re f***ed!

    13. Jim Klein January 8th, 2011 1:29 pm

      Oh…I should add that I’ve often been puzzled by your frequent emphasis on “systemic.” Basically, I just don’t get what that distinguishes exactly. For years, I’ve acknowledged that “my problem is that I just can’t see anything but individuals out there,” and I’m sure that’s my problem with this. Anything you could do to help me see the point would be greatly appreciated.

    14. Greg Swann January 8th, 2011 1:56 pm

      Systemic is distinguished from topical.

      Batman is a topical maniac. He argues to himself that fighting crime is such a great virtue that it licenses him to commit far worse crimes than those he claims to fight.

      The idea of “law enforcement” in the United States is systemic Batmania — an entire system of thought built around what would otherwise be just individual criminal psycho-pathology.

      In the absence of systemic coercive violence, there might still be topical Batmania around, here and there. But in a truly free civilization, it is plausible that most people won’t think like Batman, and that they will tend to celebrate the gradual extermination of individual Batmaniacs when their insane violence results in successful real-time retaliation. Live by the sword…

    15. Greg Swann January 8th, 2011 3:13 pm

      > An apt lawyer might argue that adverse possession is but an instance of the initiation of force.

      It is, in the sense that bodily possession is a kinetic activity. The question at bar would be, is this forceful activity for which the failure to respond forcefully right now could result in an even worse injury” “He’s trying to take my purse!” — attempted forceful adverse possession in real time — is very different from “He took my purse yesterday!” In the former instance, an immediate forceful response may be warranted. In the second, the horse is already out of the barn. There’s time to work things out peacefully in court.

      > Calling the repossession something other than retaliation, doesn’t really make it so.

      I wouldn’t call it that, and I don’t like the idea of retaliation at all. Other people can have bad intent, but it’s only their bad behavior that you have any moral justification in objecting to. Your concern should — note that word, not ontology but teleology — be with the restoration of your previous condition, not with saving souls. Only a “disinterested” third-party — a topical or systemic Batmaniac — would put the idea of “giving like for like” precedence over making you whole.

      > This would be akin to the Batmaniacs putting folks in prison “to make things right.”

      This is why the contract only provides for the recovery of the asset, not for an additional three-lashes-with-a-wet-noodle. I would add that, in my court, if your forcible recovery of your asset is unnecessarily forceful, absent forceful resistance from the lessee or mortgagee, I would find against you for any reasonable damages. We’re responsible for what we do even when we’re presumptively “in the right.”

      > your usage of “substantive justice” is a clue to that as well. I’m still not sure what that means to you.

      In a mortgage default, the actual injury is being committed by the borrower against the lender. If the borrower’s attorney raises a rash of incidental injuries to muddy the waters, it remains that substantive justice consists of making the lender whole, as much as is causally possible. If the judge elected to find against the lender, as well, for the incidental injuries, that’s fine. But if the judge — as in this case — dispossesses the lender of his property because his paperwork was not in order, this is a substantive injustice, Batmania at its worst.

      > I’m sure you know it’s tough for most people to imagine the world you imagine; maybe this is the shoe on the other foot.

      Every time I read an op-ed about how badly some profit-seeking company is doing its job, I wait for that expert to launch the giant-killing successor firm. Not impossible. Steve Jobs does it all the time. But most of the time, no matter how badly someone might be doing in business, he’s probably doing better than the kibitzers on the sidelines could do. If you can successfully sell mortgages without forcible detainer actions, please do take the world by storm.

      A question I’ve wondered about since this frist came up, months ago: What would you do if one of your drivers took one of your towncars home, declaring his intention to keep it for his own?

      > This particular point might be clarified with a direct and plain answer to my question about what you would do if I owed you a thousand bucks and didn’t pay.

      It would depend on the contract at the inception of the loan. In a pure pawn exchange, you would be leaving a physical chattel in my possession that is either itself worth more than the amount of the loan or, actuarially, promises to offset my risk on that one loan over a large pool of loans. The latter principle would apply in both credit card — unsecured — and hard-money — secured — loans, only then the risk would be offset by a high interest rate, perhaps with pre-paid “points.” In the case of an ordinary hand-shake loan, then this

      > My guess is, except for publication of the fact, “Effectively nothing.”

      is right on the money. This is the way people already behave.

      > I find this question terribly important…not so much for you or me, but for the multitudes who read you and try to figure out your ideas. I’m confident they wonder exactly this.

      People spend all their time worrying about things that never happen, and none of it contemplating the things that happen all the time, all around them. Cheating, in the way that most people fear it, happens in two places: TV cartoons and at the carnival. Business people don’t cheat, not if they want to be in business tomorrow. Carneys can cheat — which is not to say that all of them do — because they won’t be in business in your town tomorrow. Black-market vendors can be similarly situated, inasmuch as you have no recourse in law if you are cheated. But when normal people piss and moan about “cheating businessmen,” what they’re actually talking about is their own failure to negotiate the terms of the deal on the way in, then getting caught in breach — their own breach of contract — later on.

      Here’s how to avoid losing money on hand-shake loans: Don’t make any. If you’re not willing to codify the arrangement with a formal note-payable, then send your friend off to the nearest pawn shop. They’re in the business of not getting cheated — you had better know it — and you’re not.

      > If my guess isn’t wrong, then maybe you could distinguish exactly the difference between that situation and a mortgage.

      The note provides for the forcible recovery, by mutual consent. Same for every car loan you’ve ever signed. Same for every photo-copier lease from the well-dressed folks at Xerox. A properly-drafted commercial contract — and I’m not saying I love them now — creates its own “government,” in the sense that the contracting parties agree to govern their behavior according to the specific terms of that contract.

      > If you are justified in taking explicitly pledged property forcefully, then you are justified in taking implicitly pledged property, are you not?

      Not in my court. Not according to any rational reading of the contract language.

      > ”I will do everything within my ability and draw upon all of my resources, in order to pay you back.”

      This is not what you are promising. I will grant you that Our Mister Beasley may want for you to believe that, but that’s him hustling you into confusing commerce with religion.

      > What shall you do if I don’t?

      This again depends on the terms of the note — and statute law. In Arizona, the state’s Homestead Exemption is being interpreted to mean that the lender gets the secured asset — the house — only, with no recourse to a deficiency judgment. In a truly free market, I would expect the borrower to be liable for the full amount — or to a negotiated settlement — subject to the lender’s ability to collect. A question I ask my landlords, to emphasize the importance of tenant selection: “How many judgments does it take to make a big pot of judgment stew?”

      > If the answer is anything but, “Move on and pick my spots more carefully in the future,” then I’m mighty interested too.

      That’s actuarial science by rule of thumb. Incidentally, one of my plans for the property management brokerage is to rate my own performance at tenant selection.

      > Like it or not, we are arguing the subjunctive.

      Actually, the notion of subjunctivity is on my mind all the time right now. I think this is the actual bright-line distinction between the mammal brain and the thinking brain. Fathertongue, in its essence, is the voluntary postulation of worlds not in evidence. Humans can do this — learning to do this is how a genetic homo sapiens becomes a human being — and animals cannot. Human cognition begins not with the idea of “why?” but, rather, with “what if?”

      I’ll give you one more: Almost everything you find objectionable in the way people behave originates in one simple mothertongue emotion: Spite. We are all of us, in greater and lesser degrees, at war with the universe for not being what it is not — which means, most fundamentally, at war with the self for not being omnipotent. In preference to acknowledging and acting appropriately (I’m shoulding again!) upon the ontologically undeniable potency of the human will, we choose, again in greater and lesser degrees, to feign impotence. That’s the human drama, in its naked essence, in a hundred simple words.

    16. Greg Swann January 8th, 2011 3:44 pm

      The title of the novella I wrote over the holidays is Christmas in spite of itself. Here’s a chunk of it, using my own smashed elbow to illustrate the idea of subjunctive cognition:

      Naso was stopped, snuffling at something, and I was stopped with her. And in that moment, she afforded me an opportunity to demonstrate an essential difference between human beings and animals.

      I was thinking, staring at nothing. The whole world was before my eyes, fully apprehensible to all of my senses, but I was consciously aware of none of it. Instead, I was seeing everything I could infer about Tigan’s family, and everything I could imagine doing to change her situation, to make her life not just better but infinitely better.

      This mental state is subjunctivity, to give it a name. The real word was visible but unseen because all I could see, in that moment, was the imaginary world behind my eyes. When you say, “Let’s go to the mall,” that’s a subjunctive statement, the projection of an imaginary world. “Hoist the sails,” is the same kind of subjunctive. “If I were King for a day.” “When we sell this harvest.” “Once these clouds clear.” “When I was a boy.” These are all statements about potential or possible or at least conceivable worlds — none of which are in evidence. Because we are capable of thinking subjunctively, we can conceive of anything, even the impossible: “If I could fly unaided…”

      This is an amazing power, and only human beings have it. Naso actually can conjure up worlds not in evidence — but only in her dreams. She hunts in her sleep, and her sweetest dreams involve running and smelling, tracking down some mentally-conjured scent. That much is akin to the subconscious mind in human beings. Naso sees like I do, and she dreams like I do, her mind contriving seemingly perfect fake realities while she sleeps.

      But what she cannot do, what only human beings can do, is consciously induce unreal realities in her mind. She cannot imagine or hope or wish or hypothesize. She cannot stare off into space and see the life Tigan could have and should have had, the life she may still have if her circumstances change enough.

      And I was standing just like that, still as a post, almost ready to speak, when Naso saw a duck on the tarmac ahead of us. She cannot ever see the multitude of imaginary worlds behind her eyes, but she cannot ever stop seeing the real world before her eyes.

      She took off after that duck with a leap, and she took me straight down to the ground in an instant of time too short to measure. I had her lead in my right hand. As she jerked away, my feet slipped out from under me and I fell — very hard, no control — on my left elbow.

      I have a pretty high tolerance for pain, but there are limits. For a second — lasting who knows how long — all I could think of was the agony in my arm. I actually let the lead slip, but Tigan was quick enough to snag it. Naso was perfectly solicitous, expressing her concern for me by nudging at my elbow with her snout.

      I sat up enough to look at it. It was nasty, bruised and ungainly and misshapen. No blood beyond a scrape, so I didn’t think it was broken. But it was ugly. I had had my breath knocked out of me, and I had no desire, in that moment, to rejoin the ranks of the upright-standing, ambulating human beings. I was content, just then, to sit and wait for a more propitious moment to regain my footing.

      Tigan was staring at me in horror. Her mouth was open, but no sounds were emerging.

      Just to say something, I said, “That’ll teach me to watch where I put my feet.”

      She laughed, and that was good enough. I needed for her to put things into perspective, but, to say the truth, I needed to do that for myself, too. My world is mine to control, even when it might seem otherwise. I spoke to calm Tigan, but I spoke, too, to reassert my control over my life.

    17. Jim Klein January 8th, 2011 6:20 pm

      On the subjunctive, obviously I agree. Indeed, I take that as my specialty. Free will hasn’t been even a tiny riddle to me for a very long time now.

      On the car, I suppose I would take it back. Period. But that’s me…the next guy would do whatever he would do, maybe take it back plus a punch. Like I say, this is my “problem;” I just can’t see anything but individuals out there. This is why I have trouble discerning your “systemic;” just offhand it sounds like a whisker/beard thing to me.

      Not being a hypocrite, I don’t think I’d ever sue. I’ve never been a Plaintiff and I doubt I’ll ever be, though I have seriously considered it against agents of the State, particularly when it would be a slam-dunk. But even then, I didn’t. I say “suppose” because through the majority of my career, I was witty enough to not make the cars mine in the first place. I try to avoid trouble like the plague, but somehow it manages to find me anyway!

      I have to press you on the point of the contract. If I explicitly agree that ”I will do everything within my ability and draw upon all of my resources, in order to pay you back,” then that is what I am promising. Does this now give you just cause–YOU, not what any law says–to come and take my stuff on default? Why or why not? And how exactly is this a different case than retaliation?

      You speak of being “made whole,” and that is intelligible enough in a money context. But I wonder (wonder!) if you are drawing artificial lines, much as the family of the murder victim believes they are being made “more whole” when the murderer hangs.

      Does “being whole” in the Splendor sense, involve property? Surely property is among the manifestations of it, but is property the thing itself? I’m inclined to think not, but that may just be me rationalizing an anticipated dearth of property!

      I don’t want to sound too disagreeable, since the one fundamental thing we agree about is this…

      “But in a truly free civilization, it is plausible that most people won’t think like Batman.” My only gripe is that “plausible” isn’t nearly strong enough. “Guaranteed” is much closer IMO.

      We further agree that they don’t really think like that, even now. But the opinions of the mob and the desire for acceptance are formidable forces indeed. I’m inclined to think that’s about all that stands between here and there.

      It’d better be, eh?

    18. Jim Klein January 8th, 2011 6:39 pm

      Here’s something else…

      >>>The judges at the SJC would have had zero problems identifying the right thing to do had it been their own funds at risk.

      I’m not sure that’s right, and there’s a darn good chance that some of their own funds are at risk, albeit indirectly. More judges are investors than mortgage defaulters, I’m sure.

      This goes back to context, and this world being as it is. The judge swears to uphold the law and, at least in theory, be thoroughly impartial to anything but that. If the letter of the law says such-and-such, on what basis should any judge decide that “substantive justice” commands otherwise?

      I understand the concepts of chancery and equity, but you’re talking some mighty fundamental rules when you deal with stuff like the Statute of Frauds. I suppose that if there’s any point to this, it’s not that the judges are doing the right thing; it’s that the law simply can’t. I’m pretty sure that’s another fundamental point about which we agree!

    19. Steve King January 9th, 2011 6:18 pm

      From my understanding of the Massachusetts Supreme Judicial Court decision, it is basically a decision on property laws and what should be common sense and generally accepted practices by all lenders. It is something that the Bankers and principals of the MBS operations have known and which they desire to dismiss in hopes that the public does not rise up against them. The mainstream media does not appear to be up to following this major disclosure and further unraveling of the reasons behind these bankers actions over the past years regarding these MBS.
      Comment:
      Had it not been that the particular two major banks not proceeded with those two foreclosures – which prompted the suit action by the home owners; the banks would have probably NOT shown up to defend their actions of possible instituting those foreclosures proceedings.
      Reasoning:
      The banks would not want to promulgate the situation in which they knowingly where in violation and creating more wrath than already building in the country with more and more information being disclosed of the workings behind these particular MBS operations.
      No proof of the documents assigning the mortgage/deed of trust being held by the initial mortgage broker. No filings, if such were available, had been filed properly by the banks regarding the underlying ownership of those deeds of trust/mortgages. Although I have recently read additional news releases from another state official’s report that discloses that at least one or some of the banks involved in their investigation, actually do have the original notes, according to testimony from personnel.
      I have also heard of earlier reports on the failure or inability of banks to provide the names of the mortgage or deed of trust owners, to the delinquent borrower/owner so that they could attempt to work out an alternative solution or modified loan payment in order to avoid foreclosure proceedings by those banks. It is my understanding that those owners then had no further proceedings or contacts from the lender?
      Although I do not live in a major adverse foreclosure area such as many areas throughout the country, I have noticed two recent situations of interest involved in vacated homes being held in what I would describe as “Never-land”. Both of these homes were vacated according to the owners of record due to foreclosure procedures pending by their banks regarding their inability to make their payments. Although, both of the homes have been vacated by the owners for over one year due to inability to pay and were involved in initial foreclosure proceedings well over a year ago; neither have been foreclosed upon by the lenders as of this date. Although the threat was initiated by each of the banks, they failed to proceed with going to a foreclosure sale of the property.
      One of the homes remained on a real estate listing under short sale provisions during this entire time of vacating the home over a year ago. The lender is pressing the borrower to cooperate with the listing procedure as a short sale versus proceeding with a foreclosure and then probably listing the home with as an REO. Incredibly the bank, some nine months later, proceeded without notice to the owner or other departments of the same bank, instructed the Trustee to proceed with the announcement of the sale of the property by foreclosure. Prior to the property going to the sale date at the courthouse steps, the Trustee was advised by their bank contact to stop proceedings and remove the property from the sale. Although the Trustees are not allowed to divulge the Banks contact persons or the reasons for the withdrawal, it is most probably due to the timing of at least two banks that they were halting all of their foreclosures until they had a chance to review their files and procedures. Again, neither the property owners of record nor the real estate listing agent nor the bank department that was in contact with them to try to proceed with a listing under short sale provisions had any knowledge from the bank or trustee during any period of this procedure.
      The other home is still sitting and vacant and with no real estate listing. The owner is dismayed, that they have not proceeded to foreclosure proceedings as initially indicated to him well over a year and a half ago. The property titles still remain as is with the delinquent borrowers. The homes continue to deteriorate. Needless to say, none of the lenders are able to provide any information or contacts regarding the properties when contacted locally. It is though a vast quagmire was created to divert everyone from any contact including their own personnel from answering or discussing items regarding their transactions or procedures. This in itself leads to many questions of those banks in regard to their actions, or inactions of these banks, both legal and accounting issues as a minimum.
      If a lender has a legal mortgage or deed of trust instrument and does not proceed with foreclosure proceedings on default of the installment note, I would think that they would be subject to legal action for breach of their fiduciary capacity to the note holders. A declining market, allowing deterioration of the real property improvement by allowing extended periods of vacancy, with no action in behalf of owners of the notes. Regardless, if the MBS notes do not have properly perfected mortgage or deed of trust filings attached to their promissory notes issued, then do the lenders not have a responsibility to reduce those defaults into judgment and initiate a sale of the property by the local courts for their distribution in accordance with the current law.
      This of course leads to more questions about the dubious practices that were ongoing throughout the MBS operations. Hopefully more will be divulged and proper actions will take place against those involved; however, I would not count on that happening. The banks are already flooding capitol hill with lobbyist to get them a free pass on their MBS operations and their lack of even basic due diligence in business practices. How? The lobbyist will be “recommending” to our politicians that they can take care of all of this with some creative legislation. They will get their pass with our politicians providing validation of their operations and past misdeeds, retroactively.

      Concluding Remarks
      In my opinion, the banks are left with two alternatives.

      One alternative might be to reduce the unpaid debt of the promissory note (if indeed they have proper titles of ownership) to judgment and lien status and then proceed to court action to have the property sold with the proceeds distributed to all lien holders of record in order of their preference of filing and payment under current commercial laws. This of course does not provide the banks with what they want us to assume that they have perfected as a mortgage attachment, but a “promissory note” for which they only hold title. So they may have to do what any other business would have to do when they have violated these common business laws which have been established over centuries. If they knowingly act as though they have those rights and do not, they are in violation of a great deal more than mere errors and omissions on a random basis. They would also be subject to further suit action regarding promotion and selling of their MBS notes as having been backed by valid mortgages or deeds of trust as collateral against those notes and falsely indicating that transfers were properly filed per current laws and regulations. Any shortfall in the difference in the collection of that debt could be a potential liability with the MBS holders. If fraud was proved, then it is possible that a great deal more is at stakes with these lenders.
      Another alternative which is already being implemented is to plow enough money towards influencing our politicians with the assistance of their lobbyist and friends to divert and suppress their actions and deeds or misdeeds, until they figure a way out for themselves. Namely, to obtain the politicians agreement to legislate a retroactive law, allowing for their actions to be considered legal.
      This would seem to be an insane option to contemplate, except for the fact that we are probably talking about the same people that created this fiasco to begin with and skipped down from Wall Street to Constitution Avenue to collect their pot of gold. To them, this is probably just a glitch to fix with some spare change.

    20. Meg Hurtado January 10th, 2011 11:24 am

      It’s not a victory for the oppressed American homeowner, or anything. But in principle it IS a stand against “utter carelessness”, and it is a refusal to simply take a bank’s word for it that they own a mortgage. That sort of thing has to start somewhere.

    21. Jim Klein January 10th, 2011 7:07 pm

      I agree with the sentiment in both of your comments, Meg. Personally, I’m having trouble discerning much of any principle in the whole thing. I guess that’s why I’m arguing with Greg over tangential ethical points. To the direct topic itself, I think Steve has it mostly right in his closing remarks…

      “Another alternative which is already being implemented is to plow enough money towards influencing our politicians with the assistance of their lobbyist and friends to divert and suppress their actions and deeds or misdeeds, until they figure a way out for themselves. Namely, to obtain the politicians agreement to legislate a retroactive law, allowing for their actions to be considered legal.
      “This would seem to be an insane option to contemplate, except for the fact that we are probably talking about the same people that created this fiasco to begin with and skipped down from Wall Street to Constitution Avenue to collect their pot of gold. To them, this is probably just a glitch to fix with some spare change.”

      That’s closest to the facts of the matter IMO, much as Greg and I would like to believe that there are actual moral principles involved. Or at least I would, but that’s just me stubbornly pretending that there could be such a thing as Rule of Law, probably out of old habit. Talk about subjunctive!

    22. Dave Kinkade January 13th, 2011 12:23 pm

      Steve’s right; this was a ruling about property law and actually makes good sense. I know it isn’t right for people to take advantage of the banks – just like it isn’t right for the banks to attempt to game the system they helped to create with the slew of lost paperwork. Is it really any different that you or I attempting to return merchandise to a store but not having kept our receipt? No receipt, no refund! The lenders and the secondary markets allowed this crisis to occur by not insisting on full documentation for each mortgage. Any homeowner who would use this as an excuse to not pay is committing evil and forcing their problem onto everyone else who agrees to honor their contracts and play by the rules.