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Credit Crunch

As Duncan pointed out this morning, bankruptcy hearings just ain’t what they used to be:

"I’ve never seen anything like this before," Jaroslovsky said before the hearing. "I’ve never seen so many people care so little about losing their homes."

Which made me think about this WaPo story from the other day about the creative ways that lenders are tying themselves in knots to get payments on their "creative loans,"about which Tanta at Calculated Risk had this to say:

Spend decades building ever-larger, more consolidated servicing portfolios through mergers, acquisitions, and bulk purchases. Chase marginal improvements in efficiency with automation, out-sourcing and off-shoring. Wall yourselves and your "platforms" off in centralized compounds far from your customers and their local markets, withdraw behind consumer-proof phone menus, worthless web portals, and untrained "customer service representatives." Keep your performance statistics up with aggressive collection practices; keep your operating costs down with robo-calls and impenetrable scripting. Manage yourself quarter-to-quarter with frequent purchases and sales of loan servicing in rapid succession, confusing and alienating your current and former customers, losing track of payments and account numbers, cancelling automated payment provisions at a keystroke, performing three escrow analyses (with three payment increases) in a single year. Hire a subservicer to do the grunt work, adding another layer of impenetrability and forcing even more "cost-cutting" measures to keep the subservicer profitable. Outsource your default servicing and REO management functions to a third party who talks to your own staff via phone menus and searches for ever more creative ways to extract fees from consumers, since you don’t pay much. Encourage an entire cottage industry of hucksters, scammers, and pick-pockets to grow up around you, like fungus, in the name of providing "counseling" or "negotiation" or "foreclosure avoidance" services, assuring that your customers will no longer be able to tell who is legitimate and who isn’t. Demonize community-based homeowner-advocacy services until you need to co-opt them to bolster your own absent credibility.

Eventually you find yourself sending pleas to your customers to return your calls disguised as wedding invitations. You have borrowers who choose the lesser evil of losing their homes in silence rather than the greater evil of trying to deal with you. Your response is to use someone else’s letterhead. This, you think, will make you look trustworthy. After all, most of us already associate deceptively-packaged mailers with the same fast-talking brokers who got us into these loans we don’t understand. But if it worked once, it might work again. What other choice do you have?

And it is getting uglier. Pretty much everywhere.

Welcome to the GOP-fueled economic policy crapfest. Want more? Vote McCain, whose incomprehensive knowledge of economic policy could fit into a teaspoon and still have plenty of room to move about…had enough?

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Christy Hardin Smith

Christy Hardin Smith

Christy is a "recovering" attorney, who earned her undergraduate degree at Smith College, in American Studies and Government, concentrating in American Foreign Policy. She then went on to graduate studies at the University of Pennsylvania in the field of political science and international relations/security studies, before attending law school at the College of Law at West Virginia University, where she was Associate Editor of the Law Review. Christy was a partner in her own firm for several years, where she practiced in a number of areas including criminal defense, child abuse and neglect representation, domestic law, civil litigation, and she was an attorney for a small municipality, before switching hats to become a state prosecutor. Christy has extensive trial experience, and has worked for years both in and out of the court system to improve the lives of at risk children.

Email: reddhedd AT firedoglake DOT com