You may remember that last month a court in Los Angeles declared the Defense of Marriage Act (“DOMA”) unconstitutional. What was interesting was that this was a bankruptcy ruling. The federal bankruptcy court in Los Angeles, the busiest one in the country, found the DOMA unconstitutional for purposes of determining who may file a joint bankruptcy case:
In this court’s judgment, no legally married couple should be entitled to fewer bankruptcy rights than any other legally married couple.…[T]he court finds that DOMA violates the equal protection rights of the Debtors as recognized under the due process clause of the Fifth Amendment.
The background: Gene Douglas Balas and Carlos A. Morales were married in 2008 during the short window of time when gay marriages were legal in California. The Bankruptcy Code allows a “joint case” to be filed by “an individual . . . and such individual’s spouse.” DOMA defines the term “spouse” for the purpose of applying federal law, as “a person of the opposite sex who is a husband or a wife.” The issue was whether that restriction violated this married couple’s equal protection rights.
To decide this issue, the court asked “whether dismissing the Debtors’ bankruptcy case pursuant to DOMA ‘advances an important governmental interest.’” It listed the following possible governmental interests, along with the reasons it believed that either dismissing the joint filed case or making the debtors file two separate individual ones would not advance any of them:
Encouraging responsible procreating and child-bearing (the Debtors have no children, and even if they did, there is no basis in the evidence or authorities to conclude that Debtors’ joint bankruptcy filing would affect Debtors’ children (if any, later) differently from children in other “traditional” joint bankruptcy cases);
Defending or nurturing the institution of traditional heterosexual marriage (the Debtors are already married to each other, and allowing them to proceed jointly in this bankruptcy case cannot have the slightest cognizable effect on anyone else’s marriage);
Defending traditional notions of morality (the Debtors’ joint bankruptcy filing is in no sense discernible to the court to be a validly challengeable affront to morality, traditional or otherwise, under the Fifth Amendment); or
Preserving scarce resources (no governmental resources are implicated by the Debtors’ bankruptcy case different from the resources brought to bear routinely in thousands upon thousands of joint bankruptcy cases filed over the years).
In this court’s judgment, no legally married couple should be entitled to fewer bankruptcy rights than any other legally married couple.
…
[T]he court finds that DOMA violates the equal protection rights of the Debtors as recognized under the due process clause of the Fifth Amendment.
Gene Douglas Balas and Carlos A. Morales were married in 2008 during the short window of time when gay marriages were legal in California, “and remain married today.” The Bankruptcy Code allows a “joint case” to be filed by “an individual… and such individual’s spouse.” DOMA defines the term “spouse” for the purpose of applying federal law, as “a person of the opposite sex who is a husband or a wife.” The issue was whether that restriction violated this married couple’s equal protection rights.
To decide this the court asked “whether dismissing the Debtors’ bankruptcy case pursuant to DOMA ‘advances an important governmental interest.’ It listed the following possible governmental interests and determined that either dismissing the joint filed case or making the debtors file two separate individual ones would
not advance any of the following governmental interests:
â Encouraging responsible procreating and child-bearing (the Debtors have no children, and even if they did, there is no basis in the evidence or authorities to conclude that Debtors’ joint bankruptcy filing would affect Debtors’ children (if any, later) differently from children in other “traditional” joint bankruptcy cases);
â Defending or nurturing the institution of traditional heterosexual marriage (the Debtors are already married to each other, and allowing them to proceed jointly in this bankruptcy case cannot have the slightest cognizable effect on anyone else’s marriage);
â Defending traditional notions of morality (the Debtors’ joint bankruptcy filing is in no sense discernible to the court to be a validly challengeable affront to morality, traditional or otherwise, under the Fifth Amendment); or
â Preserving scarce resources (no governmental resources are implicated by the Debtors’ bankruptcy case different from the resources brought to bear routinely in thousands upon thousands of joint bankruptcy cases filed over the years).
It is a question asked repeatedly across America: why, in the aftermath of a financial mess that generated hundreds of billions in losses, have no high-profile participants in the disaster been prosecuted?
The question, from a New York Times article published in April, is not a simple one. Criminal intent can be difficult to prove, especially in a highly complex financial environment, and there may be sensible reasons for the lack of major prosecutions. But as the article states, “[f]ormer prosecutors, lawyers, bankers and mortgage employees say that investigators and regulators ignored past lessons about how to crack financial fraud.”
Some examples:
“As the crisis was starting to deepen in the spring of 2008, the Federal Bureau of Investigation scaled back a plan to assign more field agents to investigate mortgage fraud.”
“That summer, the Justice Department also rejected calls to create a task force devoted to mortgage-related investigations, leaving these complex cases understaffed and poorly funded, and only much later established a more general financial crimes task force.”
“Leading up to the financial crisis,…regulators failed in their crucial duty to compile the information that traditionally has helped build criminal cases. In effect, the same dynamic that helped enable the crisis — weak regulation — also made it harder to pursue fraud in its aftermath.”
“[E]nforcement agencies traditionally depend heavily on referrals from bank regulators, who are more savvy on complex financial matters.” But “regulators have referred substantially fewer cases to criminal investigators than previously.”
The result has been “fraud with impunity,” according to William K. Black, who was the federal government’s director of litigation during the savings and loan crisis in the 1980s. Now a law professor who has testified many times before Congress, in a recent Bloomberg article he argues:
The defining characteristic of crony capitalism is the ability of favored elites to loot with impunity and the failure of regulators to do their jobs. . . . . The two great lessons to draw from this epidemic of fraud is that if you don’t look for it, you don’t find it and that wherever you do look, you do find fraud. The FBI was concentrating on retail banking, or individual borrowers and smaller lenders. But the big problems were being created in the wholesale end of the business, where loans were pooled, packaged, sold and securitized. Because the FBI only looked at relatively small cases, it found only relatively small frauds.
Under the current system, many homeowners are losing their homes unnecessarily simply because they are unable to navigate the Making Home Affordable Modification Program (aka “HAMP”). Many of these homeowners would be able to stay in their homes with a little help. At Seattle Debt Law, our attorneys have already attended training on the new law and we are prepared to assist clients through the process.
There are numerous reasons why you may need an attorney consultation even if you are following all the guidelines of the state sponsored program. The new law gives important deadlines and notices that you must comply with to take advantage of the mediation, but even if you miss those deadlines, you can still get help all the way up to the day before foreclosure. Don’t let the predatory lenders take your house—fight back and stay informed!
Check out “The Dark Side of Student Debt,” an article in the June issue of Kiplinger’s Personal Finance magazine. I was interviewed for this article, which explores the dangers of defaulting on your student loans and offers several ideas to help you get back on track. (We can help you take stock of your situation and decide which option is right for you—give us a call!)
The three major agencies, Equifax, Experian and TransUnion, keep a V.I.P. list of sorts, according to consumer lawyers and legal documents, consisting of celebrities, politicians, judges and other influential people. Those on the list — and they may not even realize they are on it — get special help from workers in the United States in fixing mistakes on their credit reports. Any errors are usually corrected immediately, one lawyer said.
For everyone else, disputes are herded into a largely automated system. Their complaints are often electronically ferried to a subcontractor overseas, where a worker spends, on average, about two minutes figuring out the gist of the matter, boiling it down to a one-to-three-digit computer code that signifies the problem — “account not his/hers,” for example — and sending a dispute form to the creditor to investigate. Many times, consumer advocates say, the investigation translates to a perfunctory check of its records.
We’re old-fashioned enough to believe that anyone who’s been unfairly denied credit or otherwise penalized deserves the VIP treatment from credit reporting agencies.
(Obligatory pitch: Contact us for help straightening out inaccurate or obsolete information on your credit report. We’ve made credit bureaus wish they’d put our clients on the VIP list!)
Singled out for criticism is the Office of Thrift Supervision, which oversaw some of the nation’s most aggressive lenders, including Countrywide Financial, IndyMac and Washington Mutual, whose chief executive was Kerry Killinger. Noting that the agency’s officials viewed the institutions it regulated as “constituents,” the report said that the office relied on bank executives to correct identified problems and was reluctant to interfere with “even unsound lending and securitization practices” at Washington Mutual.
The report describes how two risk managers at the bank were marginalized by its executives. One of them told the committee that executives began providing the regulator with outdated loss estimates as the mortgage crisis widened. After the risk manager told regulators that the estimates it had received were dated, Mr. Killinger fired him.
From 2004 to 2008, for example, the regulatory office identified more than 500 serious deficiencies at Washington Mutual, yet did not force the bank to improve its lending operations, according to the report. And when the Federal Deposit Insurance Corporation, the bank’s backup regulator, moved to downgrade the bank’s safety and soundness rating in September 2008, John M. Reich, the director of the Office of Thrift Supervision, wrote an angry e-mail to a colleague. Referring to Sheila Bair, the F.D.I.C. chairwoman, he wrote: “I cannot believe the continuing audacity of this woman.” Washington Mutual failed two weeks later.
Lobbying expenditures from the payday loan industry more than doubled from $2,045,000 in the 109th Congress to $4,182,550 in the 110th Congress, according to a new report from Citizens for Responsibility and Ethics in Washington (CREW).
The report, released Tuesday, finds that federal campaign donations by the employees and political action committees of 13 industry companies and trade associations “jumped 80% between the 2006 and 2010 midterm election cycles.”
The top three recipients, and five of the top nine, were Democrats–not particularly surprising, perhaps, because the Democrats were in charge during the last Congress, but discouraging for a party that’s supposed to be on the side of consumers. It will be interesting to see how things change this cycle.
Apparently you cannot even request the name and information of the owner of your loan without getting your credit report dinged. This sobering story from the Huffington Post tells the story of a poor chap who had a 780 credit score that dove to 740 after he simply asked the question of his mortgage loan servicer. (Notably, the credit expert noted in the article, Evan Henricks, is currently working with one of our clients on a credit reporting case. If your credit has been dinged due to no fault of your own, call us!)
