« It Is All Clear Now | Main | The Anti-Consumer Agenda »

The Loving and Merciful Act of Foreclosure

posted by Adam Levitin

I missed this howler from a few months ago, but it's so outrageous that I've got to comment on it, even thought it's stale.  I'm amazed that this didn't get much more press.  In the course of a CNBC interview (full show here, foreclosure discussion runs from 4:07 to 5:23), JPMChase CEO Jamie Dimon stated that:   

"Giving debt relief to people that really need it, that's what foreclosure is."  

As he explained:

"[Homeowners] are probably better off going somewhere else, becuase they get releived almost 100% of the debt through foreclosure."

For real?  It's debt relief?  Why not just go old school with "let them eat cake"?   

"Debt relief" requires a forgiveness of debt. It's a gift, not an exchange. There's no quid pro quo. In foreclosure, however, the homeowner gives up the house, and doesn't necessarily get any debt relief. If the mortgage is recourse, there could still be a deficiency judgment. Does Dimon mean that JPMChase is forgoing all deficiency judgments?  I doubt it. And even if so, there's an exchange of debt for house. That's hardly debt relief. That's debt collection. 

There are, without question, some homeowners who feel quite relieved when the foreclosure is complete--the uncertainty of their living situation is finally resolved, and they aren't saddled with a mortgage any more. But they might now have a mountain of unsecured debt. 

I can't fathom how Dimon conceives of foreclosure as an act of mercy.  Whatever helps you sleep at night, I guess. 

Comments

He probably didn't say it in a PC kind of way, but what he was trying to say is that most people who are going through foreclosure are better off for it in that they are able to move on with their lives.

Yes, this is cold and heartless and probably doesn't mesh with the liberal sensitivity of this blog, but the reality is that people are in foreclosure for a reason - LOSS OF INCOME through either job loss, divorce, medical, and just plain bad luck. Despite how the MSM wants to spin it, people are not in foreclosure because of some big bad lender.

The vast majority can't afford their homes UNDER ANY CIRCUMSTANCES which is why there is a such a huge failure rate of loan modifications.

People are emotionally attached to their homes but the sooner they realize they need to move on and life won't end, the better off they will be instead of trying to hang on to a house they clearly can no longer afford to keep.

I only wish that Congress had expressed the same attitude when Dimon & co. came looking for their corporate welfare in the fall of '08.

@ Russ - not to betray my liberal sensitivities, but I recall plenty of conservatives up in arms about imminent domain and the Kelo decision a few years back. Your home your home, regardless of whether it is lost to a bank or to the government.

@ David, that isn't quite the same thing.

@ Jim, I agree, but that is a different topic.

Look, I am not saying the TBTF Banks are not cold and heartless, nor am I absolving them of any of the crazy things they may do.

Just pointing out the reality of the situation is that the vast majority of people in foreclosure cannot afford their homes under any circumstances, so the sooner they accept this and move on the faster the entire housing market can heal. I am not saying that foreclosure is not emotionally stressful and bad for everyone involved.

With all due respect Russ you raised the issue of liberal sensitivities. So do you consider Dimon and the Wall Streeters liberals or conservatives?

To me, a liberal, Dimon's attitude reflects the typical mindset of "conservatives" in corporate America: "Socialism for me, but not for thee."

Jim, I guess you missed the part where I said I agree with you.

"Giving debt relief to people that really need it, that's what foreclosure is."

I would expect something far more intelligent than this pap from Mr. Dimon, who surely knows better. That is the kind of thing I would expect from the local right-wing Fox News-brainwashed uninformed moron sitting on a barstool while sipping a Bud Light.

Foreclosure may ultimately provide some sort of emotional relief or what is more commonly called 'closure', but 'debt relief' is an entirely different concept (as ably explained above) and has nothing whatsoever to do with the resolution of stress ('relief') caused by an unaffordable mortgage payment.

I like to use analogies to illustrate someone's really stupid argument. A proper analogy is that what Dimon is saying is a lot like saying genocide is a way to resolve the issue of racism.


I only wish that Congress had expressed the same attitude when Dimon & co. came looking for their corporate welfare in the fall of '08.

I don't think Dimon ever went looking for corporate handouts. The government came to him and said "please buy Bear Stearns" and he said, "Fine, but not without some help from you guys." JPM was one of the banks that always claimed they didn't need TARP and were eager to pay it back, which they did as soon as they were allowed.

That first sentence above was supposed to be a quote from Jim O'Connor's post. I didn't realize this site does not allow HTML formatting in the comments.

TARP was certainly not the only government bailout program.

Many, maybe even most people are not in foreclosure mess because they lost their jobs. They are in foreclosure mess because bankers loaned money to them when they should not have, in order to pocket the fees and bonuses. They sold mortgages with huge future increases in payments to people who could just keep up with what they initially signed for. And now they are foreclosing on people in many cases without proper paperwork as many Banks cannot prove that they own the mortgage they are foreclosing on but are foreclosing on it anyway. The Government is not cracking down on the bankers, and programs put in place years ago like TARP are not being enforced: we have a government by bankers, for bankers.

Russ, it is actually not the case that the vast majority could not afford their homes under any circumstances. I suspect a large number could if the mortgage debt went through a cram down or was otherwise reduced to not more than fair value.

Dave:
Don't be so sure. After all, if not for government help Goldman Sachs would have gone belly up as would another bank whose name kind of rhymes with another word for crap. And if GS & C went under, I bet JPM would too because of counter-party risk and the like.

Chase went out of its way to change their image as a bank for commoners,and must now have sufficient commerce to still act like they're worse than Bank of America to customers and non-customers alike. Very dissapointed with Chase, the honeymoon must be over.

I can't say for everyone who has gone through or narrowly escaped from foreclosure, but for me and everyone I personally know in that situation it was loss of a job or income that pushed us there. Again, not categorical, but we could have kept the house if the bank had written down some part of the loan. The house was down 40% from purchase price. They lost much more than when they sold the place after we took a DIL than they would have on a principal reduction.

On an emotional level, Dimon the prick is correct, nearly a year later we do feel better. But that's because we are not living under false hope and crushing debt. As long as mark to fantasy accounting allows him to get his $15 million bonus, what does he care about anything else?

people's houses are worth squat because of banksters like Dimon. people lost their jobs because of banksters like Dimon. people can't sell their homes today and get out from under their debt because of bankster like Dimon. banksters like Dimon who capitalize profits and socialize losses. banksters like Dimon who have the ear of the president and suckle at the teat of the fed.

give people a chance for three years to make some kind of minimal mortgage payment if they're in trouble. just interest. force the banksters to do it. pass a law. maybe in three years main street will have recovered the way wall street has.

Only in Jamie Dimon World is taking someone's home and suing them for the deficiency, or 1099-ing them with a big tax liability, considered debt relief.

I used to be disgusted. Now I'm just amused.

Apologies to Elvis Costello...

Hopefully after Ibanez/Bevilacqua they wont get the opportunity to be so "nice" to the poor people who might lose homes. After all they wont be able to take something they never owned...

"On an emotional level, Dimon the prick is correct,"

Bovine scatology.

Dimon is nothing more than a fortunate carpet bagger.

a big number of people have or are losing their homes due to modification HELL!!! in my case, we asked for a refi to get me off the loan due to divorce. the lender(chase) told my x husband they could lower his payment too. you know the story from here on out... just send in x amount every month on a trial mod and we will get the paperwork together. next thing you know... foreclosure... without missing a payment.. not one payment was missed.. Chase is so kind to do that...

I can't say for everyone who has gone through or narrowly escaped from foreclosure, but for me and everyone I personally know in that situation it was loss of a job or income that pushed us there. Again, not categorical, but we could have kept the house if the bank had written down some part of the loan. The house was down 40% from purchase price. They lost much more than when they sold the place after we took a DIL than they would have on a principal reduction.

On an emotional level, Dimon the prick is correct, nearly a year later we do feel better. But that's because we are not living under false hope and crushing debt. As long as mark to fantasy accounting allows him to get his $15 million bonus, what does he care about anything else?

In my case, a Big Bad lender was the cause.
I had a 30yr mortgage and a 20yr personal loan (used to pay my little boy's hospital bills).
I had a good loan, but the mortgagee contacted me with an offer to lower my interest and payments. It had an appraisal done, and told us that we had enough equity to put both loans together into one. We paid $9,000 of closing fees, and got a 30yr mortgage payment that saved us $100//mo. The total interest rate was .75% less that what we originally had on both loans. The lender knew that our boy's hospital bills were ongoing, and that we intended to sell the house eventually to buy a cheaper one.
2 and one-half years later, we tried to sell. But, we couldn't, because the mortgage was double the fair value of our home - the lender had procured a fraudulent appraisal to qualify us. Also, we discovered that certain disclosures were not delivered to us at closing. We got a copy of the appraisal, which shows the false information, and we sent notice to cancel. But, instead of cancelling, the lender ignored the notice and did not release lien to allow us to sell to complete tender (the rest of which would be made by liquidating our 401K's), and after 3 months of waiting and discovering that TILA does not require us to make payment until the lender responds, we stopped paying, and bought the cheaper home. Then, the servicer filed foreclosure 5 months after that, and damaged our credit in order to prevent us from being able to sell or refinance our home. We were forced to leave our belongings in the new house and live in the old one to preserve our rights - now we had more bills, damaged credit, and we had to take out our 401k's just to maintain both homes meanwhile.
The bank lender trapped us into unbeneficial loan that could only result in foreclosure if we ever tried to sell. We took the matter to Federal court, and now, the servicer says it is the assignee (based on an affidavit filed after foreclosure), and that we have no right to rescind because we can no longer repay the lender (of course not after the financial damage it caused to us).
The District Judge seems to agree - that we have no claims because we now have no money. What I think is that it is all a scam to take the land from the people. It gets remortgaged and foreclosed over and over - a money wheel, which is why they need MERS.

The comments to this entry are closed.

Regulars

Occasionals

Current Guests

Follow Us On Twitter

Like Us on Facebook

  • Like Us on Facebook

    By "Liking" us on Facebook, you will receive excerpts of our posts in your Facebook news feed. (If you change your mind, you can undo it later.) Note that this is different than "Liking" our Facebook page, although a "Like" in either place will get you Credit Slips post on your Facebook news feed.

News Feed

Categories

Bankr-L

  • As a public service, the University of Illinois College of Law operates Bankr-L, an e-mail list on which bankruptcy professionals can exchange information. Bankr-L is administered by one of the Credit Slips bloggers, Professor Robert M. Lawless of the University of Illinois. Although Bankr-L is a free service, membership is limited only to persons with a professional connection to the bankruptcy field (e.g., lawyer, accountant, academic, judge). To request a subscription on Bankr-L, click here to visit the page for the list and then click on the link for "Subscribe." After completing the information there, please also send an e-mail to Professor Lawless (rlawless@illinois.edu) with a short description of your professional connection to bankruptcy. A link to a URL with a professional bio or other identifying information would be great.

OTHER STUFF

Powered by TypePad