Megan McArdle comments on the following questions
There’s a sort of fair question highlighted at Balloon Juice–why aren’t libertarians proposing solutions for the foreclosure crisis? There are serious paperwork issues, which banks seem to have tried to solve by throwing together some highly suspect legal documents. As Mistermix says, “Since the basis of libertarian philosophy is property rights, I would have expected a little more outrage from places like Reason about robo-signing”. ED Kain adds “In any case, I say mistermix’s critique is fair because it is – libertarians are not proposing meaningful solutions to the foreclosure problem as far as I can tell.”
I don’t know about the Reason guys but I can say that I was more or less hoping the whole thing would blow over and that in the wake of it we could get serious about electronic documents and get rid of the paper crap all together.
The reason I’m not more outraged is that I have seen little evidence that actual property rights were infringed. Property rights are often represented by pieces of paper but they are not created by pieces of paper. They are created by mutual consent and a meeting of minds. To my knowledge almost all of these cases involve people who believed that they were taking out a mortgage and banks who believed that they were providing a mortgage. That’s a solid transaction.
Now to the extent there were people who were tricked into certain deals, that is a problem whether the paperwork checks out or not. In those cases there was no meeting of the minds and the existence of a confirmed paper trail doesn’t change that.
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Thursday ~ January 13th, 2011 at 3:18 pm
sardonic_sob
If you look at her later column on reader comments you see a comment from reader “KindaSorta” that pretty much nails it. Excerpt:
“As succinctly as I can put it: banks can fix this issue under existing law. They can hire the lawyers and title examiners necessary to find the last recorded interest on properties they believe to be theirs. They can work it out with the holder of the last recorded interest, or go to court and prove by other evidence that they own the right to payment from the homeowner as well as the right to foreclose. [...] The libertarian solution is the correct one: do nothing and let the banks, who made this problem, fix things with their own money.”
More discussion at Volokh Conspiracy: http://volokh.com/2011/01/12/adam-levitin-on-the-new-massachusetts-court-foreclosure-decision/
Thursday ~ January 13th, 2011 at 5:39 pm
sardonic_sob
Incidentally, I keep seeing people wonder why libertarians aren’t more “outraged” about the activities of the banks. I’m not a libertarian but I can be mistaken for one in bad light, and I’m pretty damn outraged. Breaking into people’s houses, stealing their stuff, tossing them on the street? I don’t care if you did it on a work order or you just needed meth money, that stuff don’t fly. Whoever signed the paper, at the least, is responsible for the crime if they weren’t honest when they signed it. And if some locksmith working for BoA gets shot trying to break into the wrong house, I’ll be upset – at BoA, for getting him killed. I do not have an obligation to let you cast me out into the street because you work for a liar.
Thursday ~ January 13th, 2011 at 8:10 pm
Mike
“They are created by mutual consent and a meeting of minds.”
Huh? We are dealing with laws surrounding secured credit and trust law, two fields where strict requirements are essential. These are the dot-the-i’s cross-the-t’s fields, fields where it has long been established that these things matter. The servicing of these mortgages are exempted from taxation through REMIC and trust law, and that’s not just a hand-wave thing; there’s very good reason to be strict about this (and the law is strict).
As for being wronged, there are no vigilante foreclosures. For you to be foreclosed on, the other party has to have standing. This is law 101. And again for good reason, there’s well-documented evidence of abuse when it comes to notes:
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1027961
Thursday ~ January 13th, 2011 at 9:48 pm
MorallyBankrupt
About a year ago I was on the Acela, traveling from NYC to Boston, and ended up sitting next to this Indian guy that saw me drawing process flow charts and asked about them. I explained that I was a Software Architect and was working on a 100% paperless workflow solution for the retail brokerage that employed me. So we get to talking and it turns out he works in financial technology too, also paper shuffling. Turns out the guy had two big products, one a risk management product at JPM that helped mortgage bankers evaluate borrowers quantitatively to get a rough estimate of whether they were any good or not, he quit when he found out management was circulating a “cheat sheet” for bankers to circumvent the software.
After that, he told me about how, inspired by the mountains and mountains of paper from securitized mtges, he formed a new company to develop a comprehensive imaging and indexing solution. paper-free workflow and multiple entry points for docs (stuff faxed in would be index immediately using bar codes and never, ever be printed). He told me they thought they had struck gold because at the price they were asking, the break even for the system would pay for itself in fedex and iron mountain savings alone in ~three years. He never managed to sell more than a handful of licenses because “nobody’ll ever need to see that paper” and “3 years is too long a break even considering how quickly they are called away for refis”
I don’t know if he was lying or not, but he definitely knew what he was talking about and didn’t seem like the kind of guy that would want to lie about this. I have his card somewhere I think, he’s got a consulting and software engineering firm nowdays