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(BREAKING NEWS — OP-ED) — The author of this post is a paralegal and consultant to attorneys in foreclosure matters and issues involving “the system of things”. None of what you’re reading in this post should be construed as legal advice nor posited to guarantee a legal outcome.
UPDATE: Now that the legal community has had somewhat of a chance to review the previously discussed Fifth U.S. Circuit ruling (in THIS case), let’s see what one law firm has to say: 5th Circuit Holds Bankruptcy Stay Tolls Statute of Limitations | Weiner Brodsky Kider PC – JDSupra
This will certainly give you an idea of how the other side thinks.
As promised, I bring you the latest relevant case from the Fifth U.S. Circuit Court of Appeals in the Big Easy. But wait … it wasn’t a “big easy” for the borrower, whose case I worked on long ago (in doing a chain of title assessment for) and whose assignments of deed of trust I use in my chain of title workshops to show “document manufacturing gone wrong”. Wilshire Credit Corporation, used by Countrywide as one of its servicers, is to blame for that screw-up.
None of what you’re about to read in this ruling appears proper because no one ever attacked the assignments head on, even when it was suggested to do so. Remember, I can’t give legal advice and it’s sad when I have to read rulings like this, knowing what I know that should have been done, but wasn’t.
So … let’s read the ruling first, then we’ll analyze how the homeowner shot himself in the foot because he put his money where it shouldn’t have been put and didn’t put his money where it should have been put:
We’ll do a little analysis on the chain of title and show you what suspect document manufacturing looks like and my perspective on HOW it should have been challenged. Is it because of attorney ignorance or just plain and simple frustration?
Let’s see how sharp you are in detecting WHAT went wrong here:
ASSIGNMENT NUMBER ONE
NOTE: Click on the assignment to see it in larger print and click the BACK tab on your computer screen to get back to the article.
I put this assignment FIRST for a reason … look at the time (in the upper, right-hand corner) as to WHEN the assignment was recorded … 11:04:32 a.m. on July 14, 2009. I surmise that this document was manufactured by employees of the servicer, Wilshire Credit Corporation, to create standing for HSBC Bank USA NA as Trustee for MLMI (that’s Merrill Lynch Mortgage Investors) Trust Series 2005-WMC1. It should be clear to you that “WMC” in the REMIC series was a REMIC set up by WMC Mortgage Corporation, which was the alleged original lender.
The 5th Circuit has already ruled that it doesn’t matter if the original lender went bust BEFORE the documents were created. How could they do that? Corruption? Maybe? Maybe it was given the wrong information in the pleading. Maybe? The appellate court can only rule on the information it was provided and I don’t believe that any of this stuff I’m showing you here was properly vetted in discovery, was it?
Notice something else? The signer executing this document (a known robosigner), claims to be an “Attorney-in-Fact” for MLMI Lending, Inc., however; as I will show you, she’s not acting as an attorney in fact for WMC Mortgage Corporation, is she? There’s no written evidence of where the Limited Power of Attorney is recorded on this document, is there?
Also notice that Wilshire Credit Corporation (the mortgage loan servicer) prepared this document and after it was recorded, got it back through the U.S. Mail. This will be important to note for future discussion.
This recording was a 3-page document. Page 2 contained the legal description. Now … wait until you see Page 3!
What’s wrong with this picture? These F**KTARDS can’t even do their job right, can they? The executor of this document prepared this Allonge to show that the Depositor conveyed it into the REMIC on July 6, 2009. If you look at the Trust’s 424(b)(5) Prospectus (shown below), the Cut-Off Date for assigning the note and mortgage to the REMIC was January 1, 2005, because (according to the IRS’s Start-up Date for the REMIC) the Closing Date of the REMIC was January 27, 2005. This Allonge was done over 4-1/2 years later … in violation of the REMIC’s own regulations! Besides, what do $10/hour employees of Wilshire Credit Corporation know anyway, right? Who investigated this? I did! I told the Borrower long ago what happened to his chain of title. His attorney apparently didn’t care enough to depose anyone.
Here’s what wrong with this picture:
First, you attach an “Allonge” to the promissory note, NOT an assignment!
Second, the executor of the document, a robosigner-employee of the servicer, claiming to be an attorney-in-fact for MLMI Lending, Inc., not WMC Mortgage Corporation, executed this Allonge less than a WEEK PRIOR TO the actual recording of this assignment! How convenient is that, considering she is NOT the Lender.
Third, WMC Mortgage Corporation, owned by GE, was closed in 2007 due to the subprime mortgage collapse. So here we have a servicer’s employee, two years later, claiming she has “attorney-in-fact” status, when most powers of attorney expire when the company GRANTING the LPOA ceases to do business! It doesn’t take a rocket scientist to figure this out! AND …
Fourth, the signer of this document and Allonge is claiming she has power of attorney for MLMI Lending, Inc., right? Would you please look at the above list of Principal Parties and tell me you see MLMI Lending Inc. anywhere in that document as a listed party to the equation? So where is Treva Moreland’s authority as a $10/hour mortgage loan servicer’s employee attorney-in-fact status for a lender that closed up shop years earlier? Oh, wait, the Pro-Bank 5th Circuit doesn’t give a shit, do they? Or was it the Borrower or the Borrower’s attorney’s fault for not checking into this further?
But wait … it gets better! (That’s an Al West sarcastic remark!)
ASSIGNMENT NUMBER TWO
I put this assignment SECOND for a reason … look at the time (in the upper, right-hand corner) as to WHEN the assignment was recorded … 11:13:08 a.m. on July 14, 2009. This document was recorded SEVEN MINUTES AFTER THE FIRST ASSIGNMENT! Again, I surmise that this document was manufactured by F**KTARD employees of the servicer, Wilshire Credit Corporation, to create standing for HSBC Bank USA NA as Trustee for MLMI (that’s Merrill Lynch Mortgage Investors) Trust Series 2005-WMC1. Notice the same Oregon notary (Justin M. Burns) appears on this assignment as well, claiming that on July 6, 2009, the same day as Treva Moreland, the signer of the first-recorded assignment claims to have attorney-in-fact status …
Here comes Melissa Tomlin (another $10/hour Wilshire Credit Corporation F**KTARD employee), claiming she’s an Assistant Secretary for “MERS” as Mortgage Electronic Registration Systems, Inc. for then-defunct WMC Mortgage Corporation … AND … she’s assigning BOTH the Note and Mortgage to Merrill Lynch Mortgage Lending, Inc. from WMC Mortgage Corporation who (now-defunct) is a “valid Assistant Secretary” for MERS … WOW! MERS’s resolutions must really be legally sound to be able to have servicer’s employees creating shit documents out of thin air using MERS as a nominee for a closed company … Hmmm … I wonder what agency relationship existed between MERS and WMC after GE closed WMC over two years earlier?
This assignment was also 3 pages in length and was prepared and mailed back to Wilshire Credit Corporation after it was recorded. Page 2, like before, contains the legal description of the subject property. And now … for the GRAND FINALE … let’s see what’s on Page 3, shall we? (I am chuckling at this juncture, see if you can figure out why):
Notice what’s on the last page? AN INDORSEMENT STAMP to Merrill Lynch Mortgage Lending, Inc. by WMC Mortgage Corporation! Again, I surmise the following:
First, endorsements belong on either the promissory note or the allonge to note (if the promissory note is full of endorsements and cannot accommodate any more of them) … NOT ON A RECORDED ASSIGNMENT!
Second, the executor of the document, a robosigner-employee of the servicer, claiming to be an Assistant Secretary for MERS as nominee for then-defunct WMC Mortgage Corporation, HAD KNOWLEDGE OF what she signed when she affixed her signature to the document (that the indorsement stamp was affixed to page 3 therein), or should have had knowledge of it, right?
Third, you’d think she’d have every opportunity, being an Officer of Mortgage Electronic Registration Systems, Inc. (Assistant Secretary), by alleged resolution ONLY and not attorney-in-fact, that she’d have some smarts about stuff like this. Nope! Doesn’t appear that way, does it? In fact, I’m not even sure that Melissa Tomlin (after doing several signature comparisons on assignments from around the country) actually was the party executing this document!
Fourth, remember, WMC Mortgage Corporation, owned by GE, was closed in 2007 due to the subprime mortgage collapse. So here we have a servicer’s employee, two years later, claiming she has an agency relationship with MERS as an Assistant Secretary, when in fact she’s a Wilshire Credit Corporation employee (clearly, a misrepresentation of fact), when the company GRANTING the nominee status to MERS to create an alleged (unproven) agency relationship in the first place, is no longer business!
Fifth, it doesn’t take a rocket scientist to figure out that when a company goes bust, agency relationships can be challenged! I don’t ever see that happening in this case, do you? (If you do, please correct me in the comments section of this post so everyone can see how uninformed I am!)
But wait … it gets better! (That’s another Al West sarcastic remark!)
No one knows how this happened … BUT … either the documents were improperly submitted wrong by Wilshire Credit Corporation when they mailed the packet to the Dallas County Clerk’s Office for recording in his Official Real Property Records … OR … the Clerk’s office juxtaposed the documents … SO … here’s what happened (you may have already figured this out … this is a fun example of a brain teaser for you researchers out there) to screw up the borrower’s chain of title with suspect documents (fact check these if you will):
(1) At the time BOTH assignments were executed, WMC Mortgage Corporation was no longer in business (not that the 5th U.S. Circuit really cares).
(2) MERS was used to cover up the chain of title, even though the agency relationship more than likely ended when WMC closed up shop (there was never a repudiation agreement against the MERSCORP executory contract ever filed in WMC’s bankruptcy, if it fact, it filed for such).
(3) In order for the facts to present themselves in proper order, the second assignment SHOULD HAVE BEEN recorded FIRST to reflect the transfer of the Note and Mortgage to MLMI Lending, Inc. from WMC, so MLMI Lending, Inc. could properly convey it into the REMIC Trust.
(4) But wait! MLMI Lending, Inc. is nowhere to be found in the Prospectus for the REMIC under “Principal Parties”. The originating lender was subprime mortgage lender WMC Mortgage Corporation. True sale #1 would have been from WMC to the Seller, Merrill Lynch Mortgage Capital, Inc., an entirely separate corporation from Merrill Lynch Mortgage Investors Lending, Inc., right? So True Sale #1 was F**KED UP!
(5) True Sale #2 should have been from Merrill Lynch Mortgage Capital Inc. to Merrill Lynch Mortgage Investors, Inc., the Depositor for the trust, who, under the Pooling and Servicing Agreement found in the Prospectus, signed under penalty of perjury under the Sarbanes-Oxley Act, would have and should have completed True Sale #3 by transferring it into the REMIC itself, as the Issuer of the Certificates!
(6) All true sales had to be completed before the Cut-Off Date … so in fact we have a violation of the trust agreement and a misrepresentation in the Prospectus, if we are to believe what just happened here was factual.
(7) The misrepresentations contained within the Assignments themselves purport to have transferred everything (in order) from WMC to MLMI Lending, Inc. and from MLMI Lending, Inc. to the REMIC Trust; however, with them being recorded in reverse, it would have been impossible to represent this the other way around, so the entire chain of custody of the note is convoluted and so is the chain of title, creating suspect issues for discovery.
(8) Because MERS (Mortgage Electronic Registration Systems, Inc.) cannot convey Notes because it doesn’t have an interest in the Notes (it only allows lenders to record them in the MERS® System database), then the entire claimed transfer by the servicer’s employee (and NOT the lender itself, who was by then defunct) was also misrepresentative in fact.
(9) Further, all of these misrepresentations appear to constitute violations of the Texas Penal Code and the fact the U.S. Mails were used could constitute felony mail fraud (two counts), which is a 95% slam dunk for the prosecution. Thus, had “the system of things” played itself out the way it should have been played out, Treva Moreland, Melissa Tomlin and Justin Burns would all be doing time instead of going about their feeble lives doing whatever.
(10) Under “the system of things”, the attorneys for the bank relied on these assignments to steal Mr. Crum’s property and should be disbarred. The judge in the state court could obviously NOT be held accountable for the fraud on his court, because he wasn’t made aware of it at the time the suit was filed and answered (the Texas Constitution requires all HELOC’s to be judicial challenges under Rule 736 of the Texas Rules of Civil Procedure). If the judge was made aware, he could have lost his bond and have been removed from the bench and the headlines would have grabbed national attention!
(11) And now … for the piece d’resistance … the lawsuit filed by the alleged REMIC, for which it got a judgment against Mr. Crum, conveniently alleged that Mr. Crum was in default, when in fact, the REMIC’s own Prospectus required Wilshire Credit Corporation to make Mr. Crum’s payments on the home if he couldn’t make them … see here, see here:
Notice where is says (in Paragraph 2 of the foregoing paragraphs) that the Servicer (Wilshire) is obligated to make such advances with respect to delinquent payments of principal and interest on each Mortgage loan … how then, could Mr. Crum be in default? If MLMI 2005-WMC1 was never aware of the default, which we know probably didn’t happen since the servicer was making all of the advance payments, then WHO actually was foreclosing on Mr. Crum?
(12) Wilshire Credit Corporation … using what I claim are false and misrepresentative documents! But I’m not the expert witness here (but I have an attorney who is though). I still see a mess in the constructive notice to the world of when the documents were juxtaposed. Improperly recorded documents put the cart before the horse, didn’t they? Can you see it spelled out now?
Any decent, well-informed, non-agenda’d judge should have been aware of all of this … but then again, they only review what’s put in front of them and what’s challenged and why. You be the judge as to WHO failed WHO here and why.
I had all the facts in 2011. Now they’ve come home to roost over seven years later … in a bad way! I can definitely say discovery was sorely lacking here!
Join Dave Krieger and R. J. Malloy for another exciting segment of City Spotlight – Special Edition on WKDW-FM, 97.5 in North Port, Florida, this Friday night at 6:00 p.m. (Eastern) … the subject matter this week … blockchain, jurisdictional issues, societal breakdown and the latest from the ABA blogs! To listen to the show, CLICK HERE!
UPDATE FROM MIAMI —
Miami-Dade Judge Bronwyn Miller has rejected attorney Bruce Jacobs’ demands that Bank of America be sanctioned for withholding and destroying records … 1.8-billion of them! There was no specific reason given for the Judge’s decision. Bank of America (of course) argues that Jacobs’ claims were baseless.
Jacobs had accused the bank of purging the records while under a court-ordered subpoena (in another foreclosure case) to hide evidence of alleged fraud because the original records may have been altered. Bank of America responded by stating that the records were copied by an outside firm and returned to the bank and that it was the “outside firm’s copies that were purged”. Bank of America’s attorney stated that Jacobs’ claims were not relevant to this matter because they were based on claims from another case raised in bankruptcy court. (See the article below for clarification!)
See the following link:
NOTE: Bruce has asked me to repost this!
OP-ED — It is not surprising that the individual documents involved in the particular case are not a part of the scrutiny involved here. Anyone reading any “manufactured” Bank of America document could understand that in (for a time) in Simi Valley, California, tens of thousands of so-called fraudulent assignments of both mortgages and deeds of trust were created under the direction of Bank of America in order to create standing so it could foreclose on affected homeowners. Many of these documents contained “CoreLogic” on them. We know from a certain interview with a former contract worker at Simi Valley (in the document manufacturing plant there) that he was signing documents as a Vice President of Mortgage Electronic Registration Systems, Inc. and he didn’t even know who MERS was. Documents were always referenced back to CoreLogic in Chapin, South Carolina. Remember the LPS debacle?
Title companies and document processing plants that go out of their way to create documents (or be involved in the creation of them) are NOT your friend!
Many of these documents claim that Bank of America, NA ended up with (as an assignee, or transferred to another party as an assignor) an assignment of mortgage or deed of trust as the result of a merger involving “BAC Home Loans Servicing LP fka Countrywide Home Loans Servicing LP”, which we have researched thoroughly and found to be false, as Countrywide Home Loans, Inc. was not directly subsumed into Bank of America, N.A. Oops! We forgot Red Oak Capital and another merger entity. The point being … if the other side is going to claim that it acquired something by merger … don’t you think it’s necessary to make them prove it? We take too much of this for granted and don’t recognize when something is that obvious that we “forget” to challenge it. Every state in the U.S. has a civil component for attacking fraudulent documents. Why is no one using them to their fullest extent?
Of the documents we now find worthy of discovery: (a.) all assignments in the chain of title; (b.) limited powers of attorney recorded for the benefit of the assignee (Grantee); and (c.) agency and/or merger agreements. The Grantee (or Assignee) of an agency relationship cannot prove that relationship. It must be legally proven by the Grantor (or Assignor) of the relationship! For example … how can a Borrower “agree” that an agency relationship between Mortgage Electronic Registration Systems, Inc. exists on a mortgage or deed of trust when the Borrower has no proof or personal knowledge of such?
This is why homeowners should regard anything involving “MERS” as suspect and (as we suggest) … walk away from the closing table! It’s bad enough that over 80-million homes have issues involving their chains of title because of MERS and yet people keep going to the closing table and signing these documents without reading them because they just want the damned keys to the house, whether it financially and psychologically affects them in the future!
This is why we see increased bankruptcy filings, suicides and murder-suicides related to foreclosure cases all over America! There are portfolio lenders (like fsnb.com) out there … why aren’t we using them instead? And now another round of subprime mortgages has hit the national marketplace and people who got into trouble in Round One are the first ones standing in line for Round Two. When will we learn that those who are ignorant of history are condemned to repeat it?
In my next post, I’m going to present a 5th U.S. Circuit case where a REMIC won because of a homeowner’s failure to properly attack his case! This case involves not one but TWO Assignments of Deed of Trust that were not only servicer “manufactured” but recorded in “reverse”, which would appear to have negated the effectiveness of BOTH of them! You be the judge!
(BREAKING NEWS — OP-ED) — The author of this post does not posit legal advice here. It’s is food for thought for your own educational value!
Honolulu … Gary Victor Dubin has done it again! This time, it’s a rehash of the Reyes-Toledo case “perfected”!
I know it’s a week old case, but it’s worth the commentary because of something the Hawaii Supreme Court basically told the U.S. Supreme Court (who basically came up with their own “plausibility” pleadings scenario when they ruled in Bell Atlantic Corporation v. Twombly and Ashcroft v. Iqbal. It basically gave attorneys that represent the banks the opportunity to get 12(b)(6) dismissals of foreclosure cases simply by removing them to federal court and citing the two foregoing cases, which basically … in layman’s terms … requires a pleading to contain facts that are totally “fact”, enough to substantially prove their case. That also meant (in Hawaii) that their “Notice” pleadings weren’t sufficient. In the foregoing ruling, the Hawaii Supremes said otherwise! That is significant for homeowners living in Aloha because the judicial foreclosures commenced there (because Hawaii is a mortgage state) get to review cases that have minimal allegations instead of having to write a non-fictional “book” every time an attorney had to answer or file a complaint to shut down the other side’s foreclosure attack.
In the foregoing instance, the Hawaii Supremes told the Hawaii Appellate Court and the Circuit Court, “You BOTH got it wrong!”
First, understand that the entire merger scenario presented by Bank of America, N.A. is false. It did NOT happen that way. Every time Countrywide Home Loans is mentioned (in any form), Bank of America conveniently neglected to mention Red Oak Capital or any other entity involved in the actual acquisition of Countrywide Home Loans, Inc. That in of itself is false and misrepresentative and Bank of America had to have relied on an Assignment of Mortgage that was “manufactured” to create standing in order to bring its claim in the first place! Therefore, B of A’s attorneys should be brought up on charges to the Hawaii Bar and either get heavily sanctioned for wasting the Court’s time or face disbarment for committing repeated ethical violations! Yes, Hawaii does have “Misconduct” as a section in its Rules of Professional Conduct that mirror the ABA’s own set of rules.
Page 3 of this 44-page Ruling clearly cites how the Appellate Court applied the “plausibility” standard set by the U.S. Supreme Court, when in fact, Hawaii has its own set of pleading standards! Page 4 at Paragraph 2 REJECTS the plausibility standard. If this doesn’t send a clear message to all of the Circuit Court justices in Hawaii, nothing will. In fact, this Ruling should be shoved up every one of their asses until they “get it”! Otherwise, the system of things could see to it that each county in the State of Hawaii “pays dearly” out of its own coffers and each circuit judge is removed from the bench. This is why we have Appellate Courts (because Circuit Judges do not always, in fact almost always, DON’T DO THE RIGHT THING!) and in this case, the Appellates applied the wrong standard as well.
As to where MERS is concerned … I don’t believe that any Court in the land has been tasked with having MERS and its representatives answer to HOW an agency relationship was established and HOW MERS had any right to transfer a mortgage loan, given the fact that on its own website (owned now by ICE), MERS declares that it has no interest in loans and doesn’t take any monthly payments. Only one judge in Florida (that I am aware of) did the RIGHT THING in knocking out a servicer’s phony document from the land records because MERS never gave any rights to HSBC Bank USA N.A.! How then can MERS transfer interests it doesn’t have? It’s the phony document scam again. It always has been. And the banks’ attorneys keep relying on these phony documents to foreclose and no one does the right thing to expose the document for what it is and hold the attorneys liable.
You see, great discovery is like an enema. It’s supposed to help flush out the shit! Can I be any more succinct than that?
The problem is, MERS hardly answers any of the discovery propounded against it. And now that MERS is owned lock, stock and server by the parent company of the New York Stock Exchange, how much of a conflict of interest is there in our court systems now?!?!?!?!?!?!?!?!? MERS and its counsel seemingly don’t believe they have to answer any of the discovery served upon it. If it does, it’s with an objection. Homeowners would rather waste thousands of dollars plying discovery on MERS rather than go after the notary and the executor(s) of the phony document that contains the false representations the bank’s attorneys keep relying on! It’s no wonder they’re losing! Sadly, in one particular case I’m personally aware of, an attorney was paid $6,000 (by his client) to take the depositions of a notary and a robosigner that clearly lied on the assignment … and he took the money and spent it and did nothing. In fact, the attorney didn’t even plead the phony document was phony! When you have homeowner’s attorneys that can’t or won’t do their jobs properly, you wonder how homeowners are getting wins at all!
Such was the case in Alabama. The attached case made its way to the 11th Circuit Court of Appeals.
Needless to say, the attorney for the homeowners in this case is in real trouble! To my personal knowledge, this is not the first case he’s had that has been mishandled or improperly filed. (Let’s see what the 11th Circuit does!)
The foregoing represents a sheer waste of homeowner money and resources. The foregoing represents a delay game gone wrong. The foregoing represents clear attorney misconduct. The foregoing represents an opportunity for a federal appellate court to really mete out a severe punishment hefty enough to put the attorney out of business for good without even having to bring him on on State Bar ethical violations!
The irony of the fact that both cases involve Bank of America NA … and they ended up with different results.
The system of things worked superbly in one instance … and clearly failed in the other. Ah, the “learning curve” we all must face. At least the Hawaii Supreme Court appears to have its stuff straight!
For those dealing in Bank of America merger issues, it’s all going to be about the assignments and all of the false and misleading statements contained within them! Chase isn’t much better with its self-dealing assignments. Sadly, title companies and the U.S. government are all “in bed” with them. This is what happens when we move away from the truth and the liars are allowed to get away with it. They get arrogant and believe they can keep doing the same thing over and over again.
History Repeats Itself … get ready for another round of subprime mortgage lending … a New York attorney just sent me the linked article. Read it and weep.
SUBPRIME MORTGAGE LOANS BACK ON MARKET …
Listen to Dave Krieger on City Spotlight – Special Edition on WKDW-FM, 97.5 FM, every Friday night at 6:00 p.m. Eastern. This week, Dave will be discussing the attached article with co-host, R. J. Malloy (retired attorney and former Clerk to a U.S. District Court judge), along with Jacob Gil regarding Florida’s Amendment 2 campaign. If attorneys and judges are listening to Dave’s show, you should too! In fact, over 7,000 listeners dial us up every week on kdwradio.com from all over the globe! Knowledge is power!
(OP-ED) — The author of this post is a consultant to attorneys on matters involving chain of title, foreclosure matters and matters involving in “the system of things”. None of what you’re reading here is anything but common sense, not legal or financial advice … and a matter of fact explanation about how one manages risk!
PROFESSIONAL LIABILITY IN A LITIGIOUS SOCIETY
If “the system of things” teaches us anything, it would be what the legal costs would be for having to defend a professional negligence suit … anywhere from $66,000 to $250,000. If you have to retain an expert witness to testify on your behalf, fees could run has high as $10,000 … all this over about a two-year period. That’s two years of hell for anyone.
A lot of these attorneys representing the banks think just because their firm has E&O insurance, they have nothing to worry about.” That’s what they think.
Again, we think of professional liability carriers and wonder what exactly is covered under such an event as described above. Professional liability insurance places the law firm under a microscope. Insurance companies are by nature risk averse and so they’d be reluctant to insure anyone with a propensity to commit statutory or ethical behavior on an ongoing basis for which the insurance carrier would have to pay a damage claim for harm caused by the attorney.
Remember in previous posts, I mentioned how insurance companies became so filthy, stinking rich? They avoid paying claims on cases at all costs. They invest in things that will bring them a maximum rate of return and shelter their profits inside of real estate and other wealth-building mechanisms. But they will look to shave off dollars paid out in damage claims by settling for a lesser amount to keep more of what they make. I don’t mean to irritate you with more “facts”, but that’s the nature of the beast. This is why I wrote the ten-part series on “Gutting the Underbelly of the Beast”. Professional liability insurance, of which errors and omissions falls under, is there to help manage risk.
IT’S TOO BAD HOMEOWNERS IN THE NEW MILLENNIA WEREN’T RISK AVERSE
If homeowners (as borrowers) would have taken that to heart long ago, we wouldn’t be in such a mess nationally. The rate of foreclosures wouldn’t have been so damned high.
It’s sad that we’ve been so conditioned to want everything “sooner than later” and “more of it than less of it”. We’ve been programmed to have feelings of “entitlement” … to reward ourselves handsomely for a job well done. Hell, even Presidents of the United States have gone on TV and told us that we deserve the American Dream at a time when credit was plentiful and anyone could virtually buy the home of their dreams. With the Glass-Steagall Act being repealed, the banks became sponsor-sellers, the MERS® System took root and the end result was bad banking behavior which fueled the 2008 crash. It fascinates me that Wall Street would assume so much risk without first figuring out how to manage it. I’m talking about mortgage loans, student loans, car loans, payday loans, installment loans to buy appliances … and we’re not even touching credit card debt yet. Much of this debt has been securitized.
Student loan debt has now replaced mortgage debt as the number one crisis in America! Student loan debt collectors have become more unscrupulous in dealing with consumers. Baby boomers over 60 years of age are financially liable for $66.7-billion worth of student loan debt (whether co-signed or originally taken out to finance their own education).
I used to clean up people’s credit for a living. My success rate was 85% in removing negative trade line items from people’s credit reports. I decided to write a book about it: The Credit Restoration Primer. It was the first of many books that explained how the credit system works and how credit bureaus are governed by law to make sure your credit reports are accurate.
WHAT WE LEARNED IN PRINCIPAL ISN’T PRACTICAL
Mom and Dad always told me that if you want something bad enough, you save up and pay cash for it. Right? Radio talk show host Dave Ramsey promotes debt-free living.
But wait! The world won’t wait for me to save up for a house! Right?
By the time I save up enough money to pay cash for a house, prices would be so inflated I couldn’t afford to pay cash. Plus, I’ll be a retiring. (the afterthought)
Once health issues set in, it will be too late to take care of a home. It wouldn’t be advantageous to pay cash for a house in the future while I’m throwing away money on rent (paying someone else’s mortgage) while trying to save on my own terms just because mom and dad told me to avoid debt whenever possible. (just looking at semi-rational scenarios)
But wait! Mom and Dad worked like slaves to put food on the table and seemed to be doing okay. Or did they? Look at their outcomes. Work for the Company Man. Get a gold watch. Get a kick in the ass (out the door, to old to work when we can find younger people to replace you at less cost) and then retire, get sick and die. The “get sick” part is where the family again struggles to make ends meet while coping with huge medical bills because of lack of health insurance or high deductibles.
We’ve taken from what we’ve learned and decided that based on current data, we’d be better off in debt. How crazy is that? The banks and credit card companies would just love it if you got yourself in head over heels in debt. They’re rich and you’re broke. Yes, you may have “stuff”, but you’re broke!
BECOMING RISK AVERSE IN A SOCIETY THAT PROMOTES DEBT
Whether you like it or not, the Age of Entitlement is upon us. We have nice things because we want them, no matter the risk in obtaining them. We cannot become financially successful without a plan. Then again, there are some that are just happy being able to make ends meet. But it’s never enough, is it? You always want what your parents had and then some.
The media is guilty of putting ideas in your head. Ideas that promote debt. We allow it to permeate our thought processes because it expands our comfort zones and makes us feel better. We have become programmed to make bad decisions because we “want it now, not later”. Lacking legal and financial education seems to have been a deliberate thing, despite the fact the government keeps telling us it’s budgeted money to educate us in certain financial matters (like the money appropriated for “education” under the new Fair Credit Amendments Act in 2003). Where was that “education”? I sure didn’t see any of it.
Why didn’t they teach “Checkbook 101”, “Mortgage 101” or “Student Loan 101” in high school? I personally didn’t learn too much in civics class. Maybe my teacher really didn’t give a shit whether I learned anything or not. In high school, it’s all about the annual test scores and nothing else.
In the land of plenty, why are so many people starving? Why are there still homeless people? Have our principles simply been ignored?
Being homeless or without food presents a personal safety risk. Thus, the government steps in and has the answer: Welfare, Section 8 housing, homeless shelters and food stamps!
But wait! You have to fill out a form, giving Uncle Sam all of whatever personal information you can give, so the government can build a database with you in it.
The ideas that run through your head when it comes to food, water and shelter involve risk management (believe it or not). If you can’t plan for a rainy day, why take the risk? There’s always welfare. Someone has to pay for it. Let’s all have a pity party while we figure out who.
We have a government that writes checks its body can’t cash. Our national debt is into the trillions. Every time a new budget gets passed, a huge chunk of it is “pork”, so politicians will keep getting re-elected to keep the special interest groups that got the “pork” benefits happy. This is the Congress that is bought and paid for by lobbyists, like those who work for Fannie Mae and Freddie Mac.
Our government has set such a wonderful example for us, hasn’t it? Congress can’t balance its own budget, so why should we?
Spending makes us feel better. People get all emotional over colors, floor plans and styles, they forget practicality and price. To top that off, many buy over budget because they think they can afford it. Prior to the 2008 crash, people took out risky loans, most of whom could never repay them. Many folks allowed the lenders to inflate their earnings so they could buy more home, which was a great disservice. I’m not saying it’s all the homeowner’s fault. The lenders played right into the game, offering predatory loans which were risky in an already unstable, credit-saturated market. The teaser rate was merely a game played by unscrupulous lenders on uninformed borrowers who wanted their piece of the American Dream, only to find themselves on the street years later. Our government promoted all of this and America bought into it. Congress repealed Glass-Steagall through the Gramm-Leach-Bliley Act. It was a bipartisan effort. No one but the banks knew how they were going to use securitization to “rig” the economy. Notice how the government hasn’t put any of them in jail? Our executive branch is supposed to enforce the laws that Congress makes. Why did we forget that? Why wasn’t that drummed into our heads in high school?
Do we chalk up our current system of behaviors due to lack of knowledge? It’s no wonder insurance companies are rich. They avoid risk. Why aren’t we doing that?
CERTAIN WAYS TO AVOID RISK (MY PARTIAL LIST … TAKE IT FOR WHAT IT’S WORTH):
(1) Research your planned purchases BEFORE you spend money! See if you can get products that are either more durable or have a longer shelf life. America has been so conditioned to mass produced products we’ve become a “throw away nation”. We’re already seeing difficulty in America in disposing of trash. Spending a little extra for something that has a longer warranty or shelf life is more prudent in the long run. If you have to use credit to buy that item, make sure it fits within your budget and have a time frame set in your mind (and on paper) on when you intend on paying it off.
(2) Investigate all insurance policies BEFORE you invest … and don’t over insure! Compare policies. The last policy I got didn’t cover that much in computer replacement in case of a lightning strike, so I upgraded my policy for $204 more to cover replacement of ALL my computers in my home. Sometimes, not having ENOUGH insurance puts you at risk … and, in the alternative … sit down and total up all of your policies’ annual premiums. If you’re paying more than 10% of your income on insurance, you’ve bought too much in policy benefits (or you bought a policy that doesn’t fit your current needs). It’s like buying whole life insurance policy when pure term is cheaper and you can gage your financial position based on your age and what your current needs are and not get killed financially by changing face value amounts. Having insurance is part of managing risk. When homeowners default on their loans, hazard insurance is the first thing that gets cancelled for non-payment of premium. This is why I pay annually. It’s cheaper and you have a definitive date to plan for, so your risk is calculated. General liability insurance on the average runs $350 a year! If you’re going to protect yourself against high-risk situations, it’s a good thing to have. I’m not a big fan of homeowners’ indemnity policies. They essentially insure nothing and with MERS around, shit happens. There’s nothing like buying a piece of real estate with a tainted MERS mortgage somewhere in the chain of title. You never know what the future holds if your home’s fate is in the hands of some unknown REMIC.
(3) Avoid impulse spending! I go shopping just to see how informed the clerks are. I will rarely buy anything unless I absolutely need it. This type of buying is especially true in grocery stores. Why do you think they have food samples for you to try? To get you to buy extra! If you have a frustrating time buying groceries and stretching your family’s budget at the grocery store, you have no business going out to eat (because you’re frustrated with high grocery prices) and you’ve probably succumbed to the grocery chain’s slick marketing campaigns. The stuff they WANT YOU to spend extra on is always in the middle of the aisle or on the end caps. If you have to take your kids shopping with you, make them go into the check-out lane BEFORE YOU and make them watch the clerk load the cart to make sure nothing you bought was missed. That way, you give them something responsible to do and they’re not basking at the candy racks at the checkout counter and bugging you with “I want! I want! I want!” overtures. Hey! They learned this conditioning on television. It’s called cartoons (advertising targeted at children in between the cartoon segments).
(4) Plan your educational expenditures by properly planning your career move! Many folks went to college and majored in stuff that had no career future. They went to school and took classes they liked and spent a fortune (in student loan money) over-educating themselves in foolish majors (like forestry or liberal arts, for example). It’s one thing to double major in horticulture and business if you’re going to manage a food production facility (like a farm, poultry or egg production or similar skill set) or work for a Fortune 500 company with a guaranteed paycheck. But wait! There are risks there too!
First, there is no guarantee that you’re not replaceable! The first time you make a sexist remark in the workplace, you’ll be labeled a target of some political movement that is responsible for polarizing America. You’ll be shamed. This is what you have to look forward to in the national workplace now. Everyone’s got a political opinion. Everyone’s got Twitter. Everyone’s got Facebook. Everyone’s got Instagram. Ask Anthony Weiner (who’s getting out of jail soon) what the consequences are of putting sexually explicit pictures on your phone and sending them to someone.
Second, if you’re nearing retirement age, but have great experience factored into your work history, you can bet the company will be looking for someone younger with much less experience that they can pay less of a salary to. This posits a risk in this day and age.
Third, there are unplanned illnesses. You know your body better than your doctor does. If you have health issues, get them fixed FIRST before embarking down the path to a new career.
(5) If you have to retrain to get out of being unemployed or underemployed just to stay afloat … research self-employment FIRST … then the skilled trades!
Anything involving food, water, shelter and personal welfare (medicine, nursing assistant, dental assistant) are the BEST career moves NOW. I know for a fact that my kids are not like me. They do not have the discipline to be self-employed like I am. I always told my kids to work off the “trade side” and go to a short-term facility that offers grants more than student loans. In the alternative, attempt to get a job in a trade that is willing to train you while you work (OJT). True, it doesn’t pay much but the gains from improving your learning curve far outweigh the temporary disadvantages. If you’re going to have to take out a student loan, put a limit on what you’re willing to borrow. The average student loan debt in America at present is $30,000! That means, if you can stay at the lower end of that curve, say, $10-15,000, you’ll pay it off in less time. But you’d better have a job lined up (or at least research enough to know there will be a job in that career path for you) when you graduate. Paralegal certificates are easier to get these days and there are certain parts of the legal field where jobs are plentiful for lower-echelon workers.
Again, I like self-employment better. I can work from home and be a consultant when I want. I can do seminars when I want … or not. I can work as much as I want or as little as I want. Every day however, I’m up by 6 a.m. doing research for an hour or so! Old habits die hard.
I had fun as a mobile DJ. I made good money too and didn’t have to spend a fortune on equipment. I rented someone else’s gear first. When I got enough to buy my own gear, I continued to rent the gear for another DJ to use and over time, I was able to put 28 DJ’s to work and make damned near a six-figure income! That was in 1983. Imagine what self-employment could do for you and research all of the possibilities. In some trades or skills, you can rent what you need before you have to make a commitment to purchase stuff.
Avoid franchises! I know … they look attractive, but there’s a hefty price tag and a huge commitment to follow their schools of thought, whether they work or not. This is why they put ads in entrepreneurial magazines, to snag the ignorant who are attracted by their teasers. If you don’t have a couple of million bucks lying around, you’re not going to be able to get into a McDonald’s franchise or a Hooters franchise or any other franchise you think is sexy or at best attractive. A lot of people like to compete with Starbucks and open coffee shops or coffee carts. Not a bad living. Any kind of food cart is a cheap date, but you’ll face local licensing issues and potential consumer issues (conflicts on the street, hold-ups, shoplifters, etc.).
My mom had her own news stand inside the Rochester Gas & Electric building for a number of years before she passed. It was a safe environment (there was a security guard in the lobby near where her stand was set up, inside a rented nook in the lobby) and she made a modest living and did well despite renting a studio apartment (unfortunately, she never had the opportunity to own a home). She never got a college degree. Back then, you just applied yourself. But the work ethic has changed and so has the marketplace we live and work in. People seemingly care less about the end result (doing a good business) so long as they get a benefit from it (a paycheck with no commitments).
Self-employment is the “new shit”! Set up an LLC or a full C-Corp. I don’t know if you knew this or not, but the IRS audits full corporations and LLCs less than self-employed sole proprietors. LLC’s (I’m told by several credible CPAs) get up to 75 deductions a year, while sole proprietorships only get 35 deductions annually. Full C-Corps get up to 350 deductions per year! Put your personal property and your homestead into separate trusts as part of asset protection to guard your investments. Being a consultant or an investor is NOT a bad thing, especially with the right training. I spend a ton of time researching other people’s careers to determine their longevity. I can look at a credit report and tell a lot about the consumer (how leveraged they are). They may have a great cash flow and credit that sucks. That tells a lot about how they manage risk (0r don’t). When you can get to the point of investing in other people’s projects (with them doing all the work), then you’re really on top of your game!
(6) Learn to construct a financial statement! There are FREE classes both online and offered by community colleges and libraries that will teach you how! Once you know HOW to build a financial statement, you can then figure out what kind of a budget makes you more attractive to expand your horizons. It takes less than a day out of your schedule to learn how.
(7) Do NOT buy vacant land unless you intend on a pre-planned build job! There’s nothing worse than buying a vacant lot (and overpaying for it) only to find that you’re about to get hit with high sewer assessments or increased property taxes due to an unforeseen annexation. Don’t buy land in flood plains! I don’t care how glamorous the lot is. If you’re going to buy, buy in secure areas with a home-building plan. I actually acquired a 3/4-acre tract and put a used mobile home on it from a lot I bought through the Texas Veterans Land Board for $75 down and made payments on both until the timing was right to sell the 12-acre parcel. I ended up with a $222 a month land payment and a paid off mobile home, which I fixed up and later made a $27,000 profit selling it. In the process of selling the 12-acre lot, which was soon to be adjacent to a major toll road, I paid off $35,000 worth of debt! Being mortgage free is wonderful. I wish everyone in America could experience it.
Land purchases are great if you have a definite plan to build. Getting suckered into development purchases is penny-wise and pound-foolish! Avoid HOAs! Research chain of title to make sure there’s no restrictions on the lot you’re going to buy and that the title is clean. If you can buy 5+ acres, owner financed, even better. You can put a used mobile home on it and build as you go. A lot of people are doing that these days. I would do it again if I had to (in a heartbeat)! You can put in a garden, a well and eventually solar panels … and live off the grid.
AVOID buying second or vacation homes! I know this goes against the grain of you overachievers out there that think you deserve everything. Part of the problem is, second homes or vacation homes is nothing but an equity builder and equity is “fake” until realized. Many people rent out their second homes but with this creativity comes more legal restrictions. I just don’t like tying up money you could use to really build wealth owning a business. If you’re going to plan your career, look at self-employment and design your home purchase in an area as your principal residence that doesn’t have to support your business in order for it to survive. Truck farming is another creative way to stay “under the radar”, eat well and have plenty of fresh, healthy fruits and vegetables left over for bartering. Farm organic (but don’t advertise it … it raises an FDA red flag and subjects you to scrutiny). I’ll write another book about “being invisible” at some point.
From the investor’s perspective, forget the idea of a second home or a vacation home. Build a rental income portfolio by investing in distressed properties that you can rent out and make a decent return, while making the bank payments. There are people with money that have crappy credit, so option payment financing puts instant cash in your pocket you can use to buy another property or fix up your own place or pay down debt!
I know a couple that started out with a mobile home on 8 acres. They originally purchased a mobile home. They put up a garage and pens and she got her veterinary assistant’s certificate (short term skill training) and got a business license to open up a kennel. They eventually managed to build their mortgage-free home from scratch. Yes, it took time, but the rewards were realized in the profits they made from their home-based business! Ah, the peace and quiet of country living along with the security of knowing you’ll have lots of barking dogs to warn you of unwanted intruders! I know that a lot of you aren’t cut out for that kind of work, so I posit this as a creative example of “putting your mind to something” to have a working investment. Credit card companies are throwing credit card applications at these folks because they have cash flow. They are credit resistant though, because they’ve budgeted and saved for a rainy day, mixing old school principals in today’s modern times.
(8) Say “NO!” to MERS mortgages! Getting a loan that you know is going to be securitized is crazy because with the digital age, you’re putting your whole future at risk. Your chain of title is going to ride on someone else’s say-so! You don’t want an electronic database involved in your life any more than you’d want your mother-in-law calling every other minute to query where you’re spending your next dime!
(9) Bank with public banks and credit unions! Only go with banks that portfolio their loans (meaning they hold the loan in their own vault) and don’t sell them to any entity outside of their own bank! If the bank is a member/subscriber of MERS, go somewhere else. You don’t need to support these mega corporations any longer! Generally, the credit unions give you savings accounts and additional protections that the mega-banks take for granted (when they’re taking YOU for granted). AND … DO keep cash on hand. I recommend at least $500 for every person in your household.
(10) Consolidate and pay down on credit cards! Close the ones you hardly use, have high interest rates or hit you with annual fees. Unless there’s a real purpose for having a department store credit card … those cards should be the FIRST cards you get rid of! All your other plastic will work in those stores. I take issue with these low-dollar credit campaigns like Macy’s and JCPenney’s do as a means to get customers. It’s not worth the hassle of applying for a $300 credit limit just to get a deal on buying one item or saving money on your initial purchase. You’ll have an inquiry on your credit report, which could bring down your overall credit score. It’s too easy to forget paying on cards with really low balances, which could jack up your credit score when you least expect it. I find keeping a credit card available for travel or emergencies is the most prudent, don’t you?
TEN WAYS TO “CLOCK” YOUR OPPONENTS UP SIDE THE HEAD!
Read the 10-part series on this blog: “Gutting the Underbelly of the Beast”!
That way, you’ll learn how “the other side” manages risk.