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Paulson on CNBC now along wit some women from HopeNow alliance. According to Telegraph in the UK the PPT has met this week in the Whitehouse. Looks like this may soon lead to a great opportunity to add to short positions.
sorry about my comment above being OT.
More OT:
Credit-Default Swaps May Lose $250 Billion, Pimco's Gross Says
By Emma Moody
Jan. 8 (Bloomberg) -- Credit-default swaps, used to help protect against the risk a company won't pay its debt, may be the ``most egregious'' instruments created by the banking system and could cause losses of $250 billion, Pacific Investment Management Co.'s Bill Gross said.
Assuming default rates on corporate bonds reach historical averages of about 1.25 percent, $500 billion of credit-default swap contracts will be triggered, causing losses of $250 billion to the party that wrote the contract, Gross wrote on the company's Web site today.
[snip]
Sounds like they took a page out of the Bush Administration's run-up to the war in Iraq: The proof of what we said is in the fact that we said it, and we keep repeating it. See! It's true!
This explains a lot, and also indicates just what a royal pain it is going to be to sort out this whole mess.
Bravo! A must read post.
I feel like the guy in the Monty Python skit who sugggests that little tiny pebbles also floats after reading your posts.
Tanta, I can see the insular thinking, but am still mystified that the CFC attorneys didn't get the potential problem with attaching recreated docs to a court filing. Isn't that just the type of thing an attorney is supposed to red flag for a client?
Could it be that other CFC attys have been able to blow this type of thing by less-focused courts (perhaps in situations where the hapless homebuyer did not have the means to hire a lawyer) and get away with it?
Tanta-
You are too kind to the lawyers employed by the servicer. I can understand running back to the automated system to generate the letters, but sending recreated copies to the BK court should have been stopped by the lawyers.
If this is just one mistake, OK, lawyers are human. But how often does this happen?
-JLR
Never assume conspiracy what can be easily explained by incompetence. I'm sure you're right that once the "bankrupcy proceedings" flag was taken off of the record, the system automaticly processed the arrears for the escrow account. But I'm not convinced that the person who put the ex post facto generated letters into the court file didn't think that they had, indeed been sent. "The system automaticly sends these letters," sounds ALOT like "The system automaticly SENT these letters." And once they go into a court filing, we must NEVER admit our mistake, but rather defend our actions no matter what.
The banal flavor of evil is still evil.
Plus we'll send you a nice pen with a logo. Would that be OK?
no! i demand either a tote bag or a glitter-filled magic wand!
Of course I don't "know" what happened here any more than anyone else on the outside does.
But I will say that it is my experience that people answer the question they are asked. If you want all the information you need to decide how to proceed--this is as true for a corporate lawyer as it is for anyone else--you must put a little bit of thought into what you ask.
So I suspect that it started because the first question was not "Why did the system kick out a NOD?" The first question was, "Does she really owe us $4,166?"
My long rambling point was that it's highly likely that she did, really, owe CFC the money. (At least, the original escrow analysis was valid. She probably shouldn't owe any late fees on that, and it looks like CFC's counsel waived those immediately.)
But that wasn't the right question to ask. It wasn't about whether the original payment increase was valid. It was about how escrow increases that were deferred during a CH13 somehow created a "past due balance" that kicked out a NOD.
But someone was asked to verify the charges, not examine the failed process. So that someone answered the question that was asked.
After that, the rest of this insanity was probably predictable.
For every Ms. Hill there are probably 20 people who let the house go to back into foreclosure, don't understand the contract, or can't afford a lawyer.
but am still mystified that the CFC attorneys didn't get the potential problem with attaching recreated docs to a court filing. Isn't that just the type of thing an attorney is supposed to red flag for a client?
Of course they should have known better--the DB lawyers should have known better, too--but it's probable that this got handled by the "technician" without routing it through corporate counsel or local counsel. To be "efficient," you know.
I sense that the CFC counsel quoted in the article was trying hard to defend her client, and probably ripping them a new one behind the scenes.
If I had a dollar for every time someone said "Should we run this by counsel" and someone else said "No, we're already over our legal budget for this quarter," I'd be rich.
"They don't think they're committing fraud; they believe their own stories." - Tanta
DING! That's it. If anyone out there is wondering what happens at places like Enron, Tyco and all the dead lenders. That is it! I've been nearly finished audits where the management team thought I was "on-board" with whatever they were smoking, only to get our report at the end.
Wow, this stuff is off the chart.
By the way, Marc Aurel, check out what the Bush administration is claiming about Iran "agressive bahavior" today. I think it should be taken with several spoonfuls of salt.
We're talking elementary stuff here, as convolute as it may sound to you civilians.
btw, i think someone stole your "d". the security around here is terrible.
i suspect lama. that guy is shady.
Having had experience in reviewing documents supporting legal actions (forensic engineering), it was always astounding to me how much faulty evidence and inappropriate analysis was included in the submissions--and this was before computers, too!! Now, most people don't even question what is popped out by a computer program--a giant mistake!!
I also was involved in a series of cases where the defendant(a Fortune 25 company) had actually retouched photographs of a building to claim "no damage". Easily exploded defense by a visit to the building and a unretouched photograph--how stupid was that??? A giant corporation, a nationally known law-firm, a doctored photograph of a still existing condition. End result---triple damages and a RICO action.
People and people in big corporations do stupid things that they think will save their ass.
There will be a lot of profitable work for those lawyers who are able to pick apart the shoddy work, bad documents and broken chains.
Actually, Mr. Dr. Rev. Bacon Dreamz, Esq., I meant "convolute." It's an adjective. Ask the dictionary. I know "convoluted" is more common, but. Um. I have that fancy-arsed liberal education to waste, you know.
Glitter filled magic wand? Hahaha.
OOOh, and strap on fairy wings? But not the dollar store ones. My son tore those up in one day (dont ask) demand the disney store ones. yeah.
Thank you Bacon dreamz for the giggles.
fancy. i'm not on speaking terms with my dictionary.
I also was involved in a series of cases where the defendant(a Fortune 25 company) had actually retouched photographs of a building to claim "no damage".
The thing for me is, as awful as such outright fraud like that is, most companies won't engage in it. Most employees won't roll over that far.
The ones that worry me are like the appraisal I saw years ago in a loan file that showed, right there in the photo of the subject, the banners and flags and sign that said "Model Open."
It was not a loan for proposed construction or for a model lease-back. It was supposed to be for an existing home. In other words, the asses who cooked that one up should have retouched the photo, but didn't.
And they got away with it because nobody looked at that picture. It was not a subtle thing like missing some storm damage. I'm talking a picture of waving flags, literally.
I mean, if we as an industry can be defrauded by people who don't even bother with PhotoShop, then we're doomed.
Yet more proof there is justice for those who can afford lawyers, and not quite justice for those who can't.
bacon dreamz - you have reminded me that while John Mayer may be asking "whatever happened to my lunch box", I should be asking "whatever happened to my glitter filled wand with Elvis and his Pink Cadillac inside"?
I worked for CW for 15yrs and this is standard procedure for them. Try to get the money owed at any means possible then worry about getting caught. It's time to shoot the "crazy monkey" and put everyone out of it's misery with these deceitful tactics. They almost never caught doing this stuff. They made a fortune in the past with homes appreciating and putting the borrowers under the gun to make payment arrangements on owed escrow shortages. Have you seen what they charge for forced order hazard insurance? Could this be some of the $4k? Probably....
I hear ya talkin' about the letter generation issue. In the corp I work for, we refer to it as "killing trees for (insert name of office bldg here)". What is weird is that they insist on a 'paperless office' system, but once anybody above the level of third assistant janitor gets involved, you have start printing things...for THEM.
Add to this the attrition issue, i.e. whoever knew about this has about a 40% chance of still working there, and, well, it's not gonna get better soon.
I do not, by the way, think of this as an example of people desperate to save their own asses. Would that it were so. That's easier to fix than the kind of deep conceptual gulf I think we're dealing with here.
I mean, shit happens. I cannot believe anyone would have been fired by CFC over a mistake made while overriding an escrow analysis for a CH13 borrower. Good God almighty. What's next, firing people for a paper jam?
Maybe the person does have a jerk for a boss, and has been driven into this kind of instinctive CYA behavior. But I have seen this kind of thing happen before when there is really no threat to the employee. It isn't fear-driven; it's SOP-driven. Somebody asked for information about an escrow analysis. Somebody dealt with that by regenerating old letters. Somebody looked at the old letters, interpreted them as "proving" what wasn't at issue--the system's escrow math--because that person wasn't informed enough about context, so that person passed them on to Ms. Hill's attorney.
Only now is there any ass-covering needed. And it's not about the original mistake; it's now about what looks like submitting fraudulent documents to an officer of the court.
I guess I'm saying it's the stupid, stupid. There was a moment in which CFC could have taken a different path, but someone's unwillingness to believe that internal processes could be flawed started the whole ugly chain.
There have actually been cases in the banking world in which employees accused of embezzlement argued that while yes, they did create a chain of fake transactions, it wasn't to steal money. It was to try to make the system match whatever documents they had in some file someplace.
And you know what? They were telling the truth. They may have ended up moving the money into a friend's account because they just couldn't think of anywhere else to put it that wouldn't be noticeable. But it didn't start out as stealing money. It started out as that belief that if the computer shows something, reality will conform.
A batch process that generates letters by computer program produces 3 letters over separate runs that don't actually get enveloped and sent out and are backdated ?
Programmers are honest folks( yeah right !) - the date field in any template letter is usually the "current date" ( of the computer) - as per usual business practice. In fact people rely on that as part of any automated process.
Of course these fields can be overridden by user inputs but that's manual intervention - i.e. not an computer snafu but a deliberate BACKDATING user input and some flag set to "do not send" - i.e. a one-off process not an automated one and thus not some computer screwup.
And that's well - I'm at a loss for words that a company does that. I'd love to see an actual copy of the entire letter - Often the reference number, footers use sequencing systems that are easy to decode and figure out when it actually was created.
Separately, unlike B&N, when a book (Easy way to give up smoking - Allen Carr - works too !) sent using AMZN UK to a Brit address in Sep. never arrived and I only asked for help 2 days ago, because I never bothered to ask whether it had got there until Xmas - they just said sorry, we'll send another one at our cost.Way to go AMZN. (and for the record, I've shorted it 3 times in the 6 last months)
-K
To your point on customer service. I am suprised how often a business tries to make their problem the customer's problem. It often does to work to simply point out that the wrong delivery, mispricing, failure to deliver on time is their problem, not mine and they need to fix it. First the startled look, then the action follows. (Works in other places in life too, my relative's, co-worker's, etc. problems are not my problems, but if you ask remotely nicely I will help)
Tanta -
Your post, and True Hollywood's comment about it, somehow triggered a couple of synapses in my pea brain this morning. To wit, it might really generally be a conspiracy, not incompetence.
Say in a market where home prices were rising everywhere, some McKinsey-esque consultant or internal analyst took a look at ways that the company could "grow the bottom line". Say they decided that the occasional time they got caught being "incompetent" wouldn't cost them near as much as they made on all the instances in which they didn't get caught.
Sounds crazy right? I would have said the same about insurance companies intentionally defrauding their customers:
Tunnell joined thousands of people in the U.S. who already knew a secret about the insurance industry: When there's a disaster, the companies homeowners count on to protect them from financial ruin routinely pay less than what policies promise. Insurers often pay 30-60 percent of the cost of rebuilding a damaged home--even when carriers assure homeowners they're fully covered, thousands of complaints with state insurance departments and civil court cases show.
Bloomberg.com:
Bloomberg Markets Magazine
Shipping: At this point I make enough money that I examine how long it will take me to figure what the heck went wrong with something. If tracking down the status for an online order takes more than a few minutes, I won't do it. It's just not cost effective. If I really want what I ordered, I will buy from somewhere else. For anything under about $25, this is a more efficient use of my time.
The upshot is that I will never, ever support tort reform. Without the threat of billion dollar judgements, corporations could very easily just NOT ship a certain percentage of product while keeping the money and telling the customer to p!ss off.
What does this say about me as a customer? Well, it means that I don't take anything in "customer service" personally. I will simply take my business elsewhere if possible.
But that's not always possible, or if possible, massively inconvenient.
This is where I have to part company with CR. If any of the sales clerks in the businesses I patronize locally, that are withing walking distance, are jerks, I have to suck it up and be polite about it. Why?
Because the alternative is I have to get in my car and drive!
Customer service will get much, much better if we have a solid downturn, where people are grateful for being employed, and customers don't have anything better to do than use up hours of a company's payroll time quibbling over getting ripped off for $4.95.
There was a moment in which CFC could have taken a different path
Perhaps. It's also possible you have an organisational culture similar to the one John Dean described way back when.
"Actually, I don't think anyone even considered that we NOT cover up."
Plus we'll send you a nice pen with a logo. Would that be OK?
Roach clip keychain and magnetic dashboard bottle opener or no deal.
What I find troubling is the negotiating down. Either the charge is defensible or not. Perhaps you could comment on my take; the defendant's lawyer reads the (re)created (back)dated (un)recorded documents and responds with copies of the court approved and properly recorded legal documents that state in no uncertain terms that the bk procedures were proper and the mortgage status was current at that later time of acceptance that no doubt included CFC in the terms.
MLM, I cannot (and would not) ever rule out intentional behavior here.
But by that same logic--ruthless bottom-line thinking--you only screw people who aren't currently represented by a lawyer and not in federal court.
In other words, the minute the borrower's lawyer calls, you would claim this was a mistake even if it wasn't. That's the only rational response.
Effing around with a federal court judge and a borrower with competent counsel for a few thousand in fees is so stupid I can't believe that idea came from McKinsey.
So if they do have basic fee-gouging processes in place--I wouldn't put it past them--they're still suffering in this case from incompetence. Too stupid to know when to quit.
I mentioned a while ago in a post about recourse loans that the last thing I'd ever do is go to court for a deficiency judgment if I had any reason at all to think anyone on my staff might have been complicit in making a misrepresented loan. It isn't just that I'm an honest sort, although I am. I also have the kind of fear of foreclosure court judges that allows my kind to live long enough to reproduce.
Yoinks.
And to think.. this whole thing would have been prevented if some consultant had been able to sell them on the fact that first time quality (FTQ) is cheaper than shoving error-laden missives out the door....
But I'm just a lowly pig with an education and experience in process improvement. How dare I question the processes of a corporate monolith!
I can see why people would want to buy securities based on these sorts of things.
rolls eyes
Cheers,
prat
Rob, about the "negotiating down" part: I suspect what happened here is that the $1,500 is the actual required escrow increase that was deferred during the repayment plan.
The balance was late fees added to that, probably by the computer, because obviously this loan wasn't coded correctly. (A correctly coded system would not have added late fees to payments that are officially deferred; that's the point of the "override" to officially defer them. Therefore a correctly coded system would not have considered the loan past-due as soon as that BK code was removed, and would therefore never have generated an NOD.)
It's also possible that CFC "negotiated down" because the addition to the escrow analysis was to "cushion" the account (to collect slightly more than the total of payable items to, basically, "smooth out" any future increases and not coincidentally make life much easier for the servicer). It's one thing to FC over true escrow shortages; it's another thing entirely to FC over a "cushion" shortage.
The whole thing boils down to the fact that what the borrower should have gotten was not an NOD, but a notice that deferred escrow adjustments during the CH13 now needed to be made up. That is acceptable servicer behavior, and the borrower would have been obligated to make the higher payments. It is not nefarious to increase escrow payments when the analysis shows that more money is going to be payable out of that account.
The whole FU is in the NOD and considering this "past due." The whole reason why letters had to be "regenerated" is because they were never sent. I really believe CFC's claim that they didn't mean to imply that these were copies of letters that had been sent. They really did expect Ms. Hill's attorney to read their effing minds and understand what they were trying to say. It's like working with small children. (Only CFC is a small child in a position to create a lot of economic chaos.)
I'm sure that that the entire staff at Countrywide is now in cover-your-ass mode. When their systems and processes had an issue with this slightly unusual situation that probably triggered an internal chain of people trying to pretend that everything is OK with their department.
I'm sure this has a lot more to do with employees there trying to keep their jobs and blame someone else. The actual homeowner is probably very remote from the concerns of the chief business analyst for escrow systems who doesn't want to be seen as less necessary than the assistant technology architect for escrow systems....
Dave Doolin, my problem with B&N was that I had, in good faith, induced them to send me another book because the post office told me that the first one was lost.
When the post office brought me the first one, if I had done nothing I would have ended up with two books for the price of one. B&N would never have found out that the PO found my first book and delivered it.
Because my mother raised me right, I called them to request that they stop the second shipment, on the grounds that it was fair to them. Why should B&N pay for my post office's honest mistake? Why should I profit from it?
Well, I sure didn't expect to be punished for that by being forced to pay for two books, then have to send the second one back to get a refund.
And at the time, not that it makes any difference, I was recuperating from surgery and in chemotherapy. I walked--short distances--with a cane and was not supposed to go out in public where there were too many germs for my immunocompromised body to handle. Buying books through the mail was a godsend to me. I would have paid extra for it.
I have purchased from Amazon for years and only strayed to B&N because someone gave me a gift card. I'll never go back because I don't have these problems with Amazon.
I dunno about not intending to represent those letters as actual letters. Why wasn't there a stamp across the letters "NOT ACTUAL CORRESPONDENCE" ?
Business processes, whether automated or manual are careful about this; otherwise its not a business process - its some Mafia shakedown outfit and deserves to be treated as such.
And the "computer did it", the "technician did it" is the usual blame the computer, blame the little guy crap.
I'm with Judge Agresti here:
I just, I cant get over what Im being told here about these recreations, Judge Agresti said, and what the purpose is or was and what was intended by them.
-K
It wasn't about the fact that the second book had already shipped; it hadn't. It was about her "procedures" being unable to handle an unusual situation (I have a small-town post office supervisor), and her initial reaction to my story, before she really understood it fully, suggesting to her that I was trying to cheat B&N.
To follow up on sk's comment - the whole thing sounds like 'ERPitis'... where the enterprise computer system is constrained by design so as to not only be 'efficient' but also keep the implementation & maintenance cost down. The more options you throw in the bigger and messier the system so try to keep the menu short as possible. The users & operators literally CAN'T make options outside the menus even if they are completely reasonable and rational.
I see this all the time in mfg - where it is cheaper to just 'make junk' the first time then re-enter the work order and make over right than try to stop an order to 'fix' it the initial run... the whole system (and thus company) would grind to a halt if they did.
I would not be surprised to learn that CW has the kinds of issues. And in that kind of an environment it is real easy to learn to 'justify'. The system trains & reinforces that behavior... first justify then roll over and apologize... but always try to justify first.
The cost to the system to sort this out had to exceed the $4K charge - they need a 'forgetaboutit' override button that erases all mistakes. But then I'd like one of those too. SAP, Oracle, etc., usually doesn't come with those...
I buy the chain of blind process deluded fools. A shame isnt it, that t can be just as easily assumed to be a revelation of dirty intentional crap.
Hey, I would looooove to hear the lawyer verbally slapping her client. Anyone know of any good blogs or sites that cater to embarassed lawyers kvetching about clients that made them look like fools in front of judges? Thanks.
I agree that this is likely the result of a computer-based snafu caused by an over-automated system. Something once handled by competent live people is now handled by an automated system, with a few undereducated "technicians" moving the physical paper around, and not surprisingly things sometimes go wrong.
I do wonder about the underlying motivation, however. The obvious "savings" for the move to automated systems are from reduced payroll--instead of paying highly skilled college graduates, they can slide by with just a few community college graduates running the machines, with obvious (short term) cost savings.
But the "technicians" don't have the ability to actually do anything about difficult situations--and, I would propose, that is not an unintended side effect, but rather the point of it all! When people are taken out of the picture, any chance for compassionate, "let's work it out with the borrower" attitude gets removed, replaced instead by a computer that spits out letters demanding that unpaid balances be paid. The consultants (and yes, McKinsey is stupid enough to come up with this stuff) put it in a nice way, with pretty words about "consistency" and "efficiency", when in fact the idea is to pump up charges and recovery rates by taking people out of the equation and letting ruthless machines handle collections.
I suspect that the problems with working out loans is not just that the industry is short on people who can handle that kind of work, but that the industry acquired an attitude that having real live people work with borrowers who are in trouble is, itself, a fundamentally bad idea. What attention has been paid to working out loans has seemed to me (admittedly an outsider) as simply an effort at good public relations and customer service. I wonder if the mortgage servicing industry really understands that it is in its best (financial) interest to have highly skilled (and highly paid) representatives working out loans with distressed borrowers, or if, deep down, they see it as nothing more than a waste of money.
You're rambling again...
CR,
This is one of the best descriptions of corporate "group-think" I've read in a very long time. Your analysis of participants' assumptions that "we do it that way, therefore the whole world may/should/oughta work this way" is just dead on.
I agree with your statement: "I think that's actually way more worrisome than "BK fraud." They don't think they're committing fraud; they believe their own stories."
They feel they're right, hence, that everyone else is wrong and why doesn't the world do as we say?
Awesome post
Just as a coincidence... I got this email solicitation from one of my mfg systems newsletters (btw these NLs are free 'cause they are constantly spamming me with crap like this)... about some asset management wonderware:
Asset management - i.e., the acquisition, use, maintenance, modification and disposal of critical assets and properties - is vital to most businesses' performance and success. The more capital-intensive the operation, the more business performance is tied to the availability, maintenance and deployment of the assets. Good asset management leaders pride themselves on being able to deal with tough asset situations and solving problems with their equipment, vehicles and property. But are most managers spending their time reacting to breakdowns and emergencies, or planning ahead on how they optimize their assets for business performance?
This paper will discuss key perspectives and strategies for new asset management programs within the most capital intensive and revenue producing area of today's businesses.
If it doesn't have a 'letter regeneration' subroutine then I'm not interested, thank you very much.
sk, with all due respect, I've been in enough of these situations--trying just to figure out how something went wrong so that it never happens again--where I got exactly nowhere with the systems people because they couldn't quit saying "Everybody always blames the computer! It's not the computer's fault!"
That's so often just the other side of the same defensiveness that says "It's not the escrow analyst's fault!" and "It's not the attorney's fault!" and blah blah blah.
I have no desire to participate in the "blame the little guy." The big guys are responsible for corporate culture. Period. That's what we're paid the big bucks for.
I'm trying to say that there's an elemental blindness in corporate culture that leads to someone not realizing that documents should have "not a copy" stamps put on them or date fields should not be updated or something like that because they do not realize that the rest of the world doesn't "get" what they're trying to do.
To me it's more like raising your voice to talk to a non-native speaker of English. The problem isn't that they cannot hear you; it's that you need to translate some words. It sounds to me like CFC sent those regenerated letters as a kind of just "talking louder."
CFC services around 9mill loans (something like 1 out of every 6 mortgages in the country). Does this example really demonstrate a pattern of abuse or the limitations of a highly automated system? Centralization has left us with something like the top 10 servicers servicing 80% of the countries mortgages. The upside to all of the centralization is that it's made mortgages cheaper. The downside is the kafkaesque intransigency in dealing with anything outside of the box.
If you genericized this a little it would be a great training document for any corporation with a captive customer base.
Gretchen, as usual, wants to cast the story as hero v villian, with Countrywide as Snidely Whiplash:
SW/CFC: So, my dear Ms. Hill, these letters prove that you didn't pay your escrow. So we're taking your house! And these little late payments too!! {twirls moustache}
Ms. Hill & counsel: We didn't get any letters. I don't think you ever sent those.
SW/CFC: Curses! Foiled again!
What Gretchen has failed to learn (despite Monty Python, Douglas Adams, Scott Adams & Terry Pratchett) is that bureaucracy, sans evil intent, still trumps Snidely:
Dilbert: So rerunning the EscrowEqualiza program will "reprint" the shortage letters?
Wally: Yes.
Dilbert: How can you "reprint" a letter that was never printed in the first place?
Wally: I've learned not to hear such questions.
Does this example really demonstrate a pattern of abuse or the limitations of a highly automated system? Centralization has left us with something like the top 10 servicers servicing 80% of the countries mortgages. The upside to all of the centralization is that it's made mortgages cheaper. The downside is the kafkaesque intransigency in dealing with anything outside of the box.
One of the hot topics in operational systems is how can the service economy achieve productivity improvements and yet still provide 'service'?
The whole thing stems from mfg automation systems think - you know Henry Ford & the assembly line mentality. You can have any mortgage you want just as long as it is black.
Mfg systems have evolved to the point were there is a lot more operational flexibility (see discussions on 'Lean')... but services are harder to do in many ways. Services are generally 'messier' because of all the interaction with 'people'.
Maybe it will improve once the Matrix takes over.
Great topic Tanta...
dryfly, part of the trouble with mortgage servicing software--banking software generally, and I'm sure it's true elsewhere--is the failure to program in a working override system.
I was, actually, in a system review session just a few years ago wherein I asked where the "override" capability was and was told there wasn't any.
The trouble was that (this was a front-end system) a lot of things were defaults or auto-populated or calculated fields, and to keep the damned loan officers from "fixing" the borrower's interest rate or screwing up the APR calc, the things couldn't be changed by the user. But they also couldn't be changed by a back-room user with appropriate authority who realized that it was all caused by a loan officer hitting "enter" at the same second that a new rate sheet was published, or something like that.
I said, "You have to have override capability. Nothing this complex works without it."
They didn't trust their own people, and they didn't want "audit problems." Lurking behind this refusal to build good overrides is not wanting to hand the regulators something to examine carefully. It's like wanting to do "stated income" loans instead of processing an exception loan for a high DTI. These people are so afraid of handing a regulator a stick to beat them with that they're willing to design a system that will inevitably fail because no series of user inputs or system processing is ever perfect.
It is also part and parcel of firing the veterans with a clue and hiring untrained "technicians" whom you do not trust to make overrides, because they do not have the breadth of experience and judgment to waive fees.
They're so afraid that some soft-hearted employee will waive a fee for some borrower with a sad story that they'll go out of their way to make sure that employees can't waive fees at all. Then they pay a hundred times that fee in fines. Old story.
But the story is no longer a suspense novel! And you have turned the Evil Banksters into fairly normal, self-involved humans. Now what can we get worked up over?
"I do wonder about the underlying motivation, however. The obvious "savings" for the move to automated systems are from reduced payroll--instead of paying highly skilled college graduates, they can slide by with just a few community college graduates running the machines, with obvious (short term) cost savings."
Well if you want the systems to run right you need a few highly paid highly skilled college graduates actually. Also if the system is built right it can lead to a more evenhanded and "fair" execution of rules. It also rules out a certain type of human error.
Making the system work that smoothly take a lot of design work and support, with a decently staffed QC dept to deal with the "the system did WHAT????" situations. Most companies that spring for an automated system don't want to pay for all this so the execution comes off half assed. But anyways the machines aren't inherently worse or evil, it's just intent and effort that went into their design and upkeep that determines the outcome.
But yeah usually it gets fucked up.
Frank: It's the same old story. Boy finds girl, boy loses girl, girl finds boy, boy forgets girl, boy remembers girl, girls dies in a tragic blimp accident over the Orange Bowl on New Year's Day.
Jane: Goodyear?
Frank: No, the worst.
CFC services around 9mill loans (something like 1 out of every 6 mortgages in the country).
And that's why BoA placed a bet that puts it at the front of the vulture line, if CFC goes belly up.
=========
Expensive bet.
I said, "You have to have override capability. Nothing this complex works without it."
Exactly - which is why they don't work.
Seriously... I've talked with hardcore ERP programmers in my MS program... took a class on ERP implementation where providers came in and discussed their products & limitation (this is in the Twin Cities - not bumfuck - so it was the folks who do 3M & BBY and the like).
In it I wrote a paper on ERP & lean shop floor operations and why the two don't make good partners.
It is incredibly hard to design a system to catch override UNTIL after the system has made a 'mistake' and kicked out the form letter or work order. The only real 'test' is will the dog eat the dog food or not (will the a real person complain about the output - that is the only acid test that works).
It really is a hot topic among ops geeks. One that is not going away soon.
BTW - my wife works in customer service and her company is implementing ERP right now... she tells me she anticipates all the same problems.
In general - these ERP systems are so constraining they make the company operations conform to the program rather than adjust the program to conform to best practices & desired business processes. It is very difficult & expensive to make the program fit most operations unless they are very generic.
Just saying...
When my nephew was but a wee thing still trying to work out the basic rules of "Peekaboo," he would cover his own eyes with his hands and shout, "Can't see me!"
I used to do that in these meetings. But my style of consultancy isn't for everyone.
systems people because they couldn't quit saying "Everybody always blames the computer! It's not the computer's fault!"
( see later )
but it really wasn't the computer's fault !
The big guys are responsible for corporate culture. Period. That's what we're paid the big bucks for.
Agreed.
I'm trying to say that there's an elemental blindness in corporate culture that leads to someone not realizing that documents should have "not a copy" stamps put on them
I call it a business process issue so I suppose I'm blaming the committee or whatever design validation mechanism that didn't have this step in place - but its common sense anyway. I recall when we shipped a software product that was soo buggy.. so it was all hands to the support center and as Engineering Manager with little to do as the next version was still in late Market definition - I did a 2 month stint at the Support centre taking front line calls ( nice time in ATL at that ) - anyway one particular problem was pretty obstruse but seeing as I was the Engineering guy I could work out a work around but it required me to write it down to communicate it - but obviously it wasn't an official supported solution. So I asked the Customer Support Supervisor for advice and he said: "no problem" and produced a "INFORMATION ONLY - NOT OFFICIAL" or some such worded stamp ! I was impressed ! so we stamped each page of this 5 page piece of code and sent it off. Not ideal but better than - "Sorry, wait till the next version"
Anyway the point is to illustrate that even that looong ago business processes to handle situations like this existed.
So I'm blaming the managment of all the various functions at CFC involved here. Totally.
BTW, seen CFC's stock price right now - 6.55 ! Whoah ! (Disclaimer: I'm short CFC ).
-K
In general - these ERP systems are so constraining they make the company operations conform to the program rather than adjust the program to conform to best practices & desired business processes.
That is going to be the epitaph of a lot of these big "efficient" servicers.
That is going to be the epitaph of a lot of these big "efficient" servicers.
Tanta | Homepage | 01.08.08 - 11:34 am | #
Manufacturers too.
Neal | 01.08.08 - 9:46 am | #
Retouching photographs is horribly widespread.
Remember the innocent Brazilian shot dead by the London police? In court they showed photographs of the dead man that had been doctored to make him look like the Arab suspect.
You have to check EVERYBODY these days.
PS Tanta: it's on-topic because the first of those letters had the wrong address. That IS fraud.
SK- I think that the likely (although unknown) theory of events is something like the following:
1.)FB goes into chapter 13
2.)A perfectly routine escrow analysis shows that the amount being held, while sufficient to pay the bills doesn't have the extra float that the company wants.
3.)Since the account havs been given a "bankrupcy" flag, nobody sends the letters automaticly generated by 2.)
4.)bankrupcy is resolved, and bankrupcy flag is removed from the account.
5.)system shows that the escrow account has been "insufficient" for an extended period of time, so a foreclosure action is generated.
6.)Part of the standard foreclosure proceeding is to append copies of the letters sent to the FB.
7.)It appears that no copies of the actual paper letters are kept, and no reccord of actual correspondence sent (or not sent) is kept. The SOP is to simply assume that letters generated are letters sent.
8.) The FBs lawyers notice that these letters couldn't be actual letters sent because they use current, not contemporary addresses.
9.) Some lawyer comes up with an ex-post facto excuse that these were never meant to represent actual correspondence.
The root problem here is the usually correct but unwarranted in this case assumption that "notices generated" is equivalent to "letters sent"
I'm not being clear - I'm saying its incompetence, at the very least, at pretty high levels - Heads must roll; fur must fly and all that good stuff.
-K
But sk, you're veering into Major Problem Number Two I have with this whole thing.
I worked with a lot of legacy systems that had been so patched up and over-elaborated--whether they were computer systems or business processes--that they were hopeless to manage.
A common problem: you worry too much about the last thing that burned you. Instead of putting time and energy into overall improvements of the escrow systems/business process/people to make the whole thing work better, some committee is going to generate some "high priority" work request to program the system so that the next time a BK is discharged in a month ending with "y" and there was an intervening escrow analysis and an override code =/= 7 appears in field 456678, "EXAMPLE ONLY, NOT A COPY" will print on all generated documents with that loan number in all departments for all purposes because goddam we never want THIS to happen again.
Then your employees spend the next several months developing "work arounds" that will give you a heart attack when you find out about them later, but they couldn't bring the problem to you for a better solution because they had just been branded not only bad people and fuck-ups, but "unable to accept technological workplace changes."
Meanwhile, this new total over-reaction to a problem that won't happen again for at least ten years is out there in the production system eating memory and slowing down transactions and conflicting with process 55648799 that we also put into place to "prevent" something that never ever happened again since that one weird day in 1984.
Been there.
Been there.
Tanta
Been there.
-K
"or whether the tran code was truncated during a CICS cycle"
... and hereby Pat learns Tanta's a green screen mainframer...
As an aside, I'm not so sure about the idea that people answer the question asked. Ask someone "do you know what time it is", and she'll likely tell you the time, not "yes" or "no".
Anyway... I think this story is fundamentally about a company that used tactics which were clearly unreasonable. Whether or not they attached the "letter" to a court filing or simply sent it to an unsuspecting customer is of no matter. This is a large, professional corporation which should not be allowed wiggle room when they make a clearly self-serving mistake like this. I'm sorry, and not too sound too anti-corporate here, but these companies shouldn't be allowed these types of mistakes. They're led by very highly paid people who claim expertise, and justify that pay by claiming they know what they're doing. As such, they should be held strictly liable in these situations where they (purposefully or not) incorrectly screw a customer.
One other thing to note is there is a big difference procedurally between subprime and prime. If you built a process that's meant to handle prime business (payments made on time, DQ% of about .5%, etc...) but the business is acting more like subprime, you've got a big problem.
The one thing that causes ERP systems to be of any use is the little button that reads "Export to Excel".
Tanta, I think the assertion that individual Countrywide employees and agents didn't "mean" to commit fraud may not necessarily help them. Countrywide is a legal person in its own right, and acts of its authorized agents within the scope of their authority bind the entire corporation. The decision not to bother with legal niceties in what, as you say, is a fairly common situation, may have originated with Tangelo, or the VP of customer service, or the IT department, but it was a decision, and I think the corporation needs to pay for it.
It didn't occur to this person that producing these "letters" would be construed by any normal person as an implied claim that they had in fact been sent years ago. If you find that hard to believe, then I suggest you've never been in a certain kind of corporate environment before, where internal processes become so "intuitive" to the people who work in them that those people lose all sense how the "external" world sees things.
I strongly disagree. I've been in the corporate world and the sole point of saving a letter for 4 years is to demonstrate it was actually sent. Generating a new letter is fine. Saying "our records show" is fine. Backdating a letter 4 years and using it to claim a letter was sent is simply fraud. Everybody I've every worked with is aware that backdating is dishonest and I never knew anybody in the corporate world who would even consider backdating a letter by more than a few days.
This kind of lucid, common-sense, analysis/thinking-out-loud is why I read this blog. Thanks, Tanta.
There's a simple way to get better attention to bankruptcy rules: large fines for violating them. Congress ought to amend the statue to make the fine at least $50,000 for this kind of violation. Unfortunately, it will never happen.
And I think $50,000 is low since Congress see fit to fine $100,000 to $250,000 for one copyright violation which is far easier to make a mistake on than a court filing.
Tanta,
Back in the late 80s and early 90s, the top ranked business schools had a reputation for churning out pretty mercenary managerial types. Ethical questions were answered along the lines of: "use negative stereotypes of brown people to feed our bigoted clientele?", no problem, good marketing strategy. The consensus opinion was that any obligation to one's larger community needed to be sacrificed to the gods of profit. For many years now, the hard work and sacrifice for low pay that exists in the public sector (read teachers, etc) has been met with not-so-secret contempt. I've read comments here recently about a niece who had chosen the terrible career choice of teaching.
As a culture we have chosen to isolate ourselves from our neighbors and our larger communities. Within a bizarre corporate culture where there is no loyalty, no ethical framework and where managers have been trained in the art of dehumanization, we have your observation and the observations of people who are critical of the insurance industries (read the lying cover ups after Katrina).
I agree with your observation and think it is a widespread cultural phenomenon.
However, I think that the specific Countrywide example that you use is more a problem with the industrial metaphor than with technology. Programmers who are isolated from the design and implementation of their programs are far more myopic than those who sit in with experts, users, and designers during the design process and then live through the stress of a live implementation. I've had a few too many beers with hospital software systems folks. The programmers who participate in implementation have a level of fear and respect for what they create that counterbalances some of the geek arrogance. Users who are actively engaged in design and testing tend to feel a greater level of responsibility for what they produce. Technology has been implemented badly and much of it has been poorly designed, but I think that isolating people along chains of responsibility and training them to be task oriented instead of problem solvers is systems thinking left over from industrialization. Cross training, educating people to have critical thinking skills, encouraging goal orientation instead of task focus, destroying the myth of 'magical' technology, etc would be . . .
Time for another cup of coffee.
Markel, I'm not saying that they didn't cross a line here. They have to be held accountable for what is fraud in effect if not in intent. That's the only way to protect the integrity of the system.
That is exactly why you don't let your processes get this dysfunctional. Because you can, in fact and in law, be held to have committed fraud.
Fair Economist, you are assuming that "backdating" was for the purpose of making these look like old letters. I'm still not convinced that it wasm't just the only way the employee could get the system to re-run the numbers on an old escrow situation.
If you went into Ms. Hill's loan today and did the equivalent of "request escrow analysis," you'd get numbers based on last 12 months and projection for next 12.
If you wanted the system to go back and tell you what numbers it would have come up with in 2003, you have to do something else. I still think you might have poor system design where the date someone entered in order to get archival calculations ended up being the date printed on the resulting document.
I can still remember many years ago when I worked for a thrift that closed its own loans, and someone would print out a set of closing checks, and the damned check paper would get jammed in the printer or something. Someone noticed that one check wasn't printed right, so being energetic employees who don't always think things through, they'd reprint the whole set. Well, the system doesn't let you reprint duplicate checks. So they figured out that if they changed the date, it would print them again. Then they'd void all of them except the one they needed.
It never struck these people that they were doing anything wrong. Of course we were a thrift and would have honored any check we issued. But I tell you, the first time they got in trouble for disbursing funds during the recission period on a loan (because it looked like they did because the date on the checks was one day too early), they quit that shit.
Actually, the computer system probably did exactly what it was designed to do. When a business case came up (bk), it probably quit processing the loan as a regular loan and sent it to a special queue to be processed. Unfortunately, it probably fell through the crack via employment turn over, business growth, etc. Because the system assumed that human processing would handle the issue, it languished until someone ran a special report and found additional unrecognized revenue that could be recognized. At this point, the correct business processes should have been to research the loan's history. Unfortunately, it sounds like CFC just tried to do it fast to generate revenue without researching their facts and tried to regenerate existing data that should have been captured by their system. Since the hard and soft copies were not available, they decide to regenerate the letters and hope eveything would be okay and that no one would notice. However, they lost as it was easily provented that the submitted documentation was newly generated. I points to a brekdown in system management, bueinss process, and documentation retnetion. Makes you wonder how many other individuals have been sent similar letters seeking additional revenue? By the way, have you seen the drop of CFC to $6 range? Absolutely amazing the capital loss to CFC and BoA.
Tanta, have you ever seen the documentary, The Corporation? An expose of sociopathic corporate behavior as implemented by normal, rational, and often nice employees. I think you'd enjoy it.
Thanks Tanta, certainly would be easy enough for CFC to misrepresent these docs to attorneys. The pendulum does swing a bit more toward corporate stupidity than corporate complicity...
Either way, that said CFC attorney that might be tearing said client a new one is probably mentioning the fact that, in light of the judge's findings, lots and lots of homeowners (or lawyers mulling class actions perhaps?) might be wondering how much CFC computer f-uppery is in their files...
Actually, I know a little something about ERP systems as I spent four years implementing ERP system. Had a good run with each system up and running on time and on budget. In each case, the client would complain that we were spending too much time on the business process and that the vendor said that we could just implement the system. In every case, the client was wrong as we had to create custom business process (manual and coding) to handle their custom processes. In addition, each implementation allowed overriding (ie: correction mode) where the user made a mistake or where an overall business processes changed before a subprocess was completed. However, the correct mode was only graded to a select few people who had to justify their actions and all data entry was retained in the database. I would say that CFC's system failed for business processing, manual processing, technical architecture, and data retention. ERP implemtations are not fun and I always swore that I would quit after my last implementation. However, the challenges always dragged me back in. Sorry about the long post. Cheers.
I am awed by this detailed and devastating analysis of the internal workings of the mortgage business.
My simple-minded summary of it all would be as follows:
Many companies (lenders and other kinds) are all about taking the customer's money. After that process is complete, the customer becomes a problem if that customer wants or needs some kind of followup service that doesn't generate any new revenue for the company.
In the mortgage business, I'm familiar with at least one company that seemed to put all of its efforts into loan origination. Record-keeping, answering borrowers' questions down the road--their execution on that kind of stuff was pretty bad.
sociopathic corporate behavior as implemented by normal, rational, and often nice employees
I have had to deal with abnormal, irrational, and not at all nice employees. Not often, thank heavens, but they occur in nature. You get rid of them and clean up the mess and then get on with your life.
Horrors raining down on you because of the actions of normal, rational, nice people who were unconsciously following the only logic the whole system--computers, practices, SOP--created for them, and who know no more than you do how to get themselves out of it? Lord god.
I am endlessly concerned about the inability a lot of people have to display any empathy for the elves. It's not a matter of letting them continue to do things that land you in a federal court being accused by a judge of fraud. I don't mean that. I mean this instant assumption that people are bad and need punishment.
I see it all the time in any discussion of troubled borrowers. We're going to continue to see it in any discussion of servicer dysfunctions.
Besides the fact that a world without empathy is not a world I want to live in, the solutions that are proposed by assuming that everything bad grew out of bad faith will simply never work. Until you can wrap your mind around that, you're POTP. After all, there wouldn't, quite often, be so much "ass covering" by employees if there weren't this immediate need to assume evil intent.
and now that the story has hit CNBC - the stock dipped a further 35 cents ( which is a LOT when your stock is at 6.50 ) - and now it looks clear that the NY Times story on its own cost the stock $1 down. So much for trying to "inadvertently" screw Ms. Hill for $1500 or $4500 or whatever.
I'm sorry for the employees at CFC - but as far as the VPs etc at CFC are concerned:
HAHAHAHAHAHAHAHAHAHAHHAHHHHAA!
As a proud member of the 'hang 'em and flog 'em" brigade - for unscrupulous businessmen who give profit chasing a bad name AND make it harder for honest chasers ( remember ATT and the difficulties they had because of MCI/WCOM) - yeah, beat the price down - its the only language they understand.
-K
Great topic Tanta!
but just so I understand:
When you talk about a "crazy monkey" you're not referring exclusively to the ORANG-O-TAN man, right?
Isn't there a law against fraud? Don't people go to jail for that?
By the way, there's a great word in the English language for the phrase "That said..." It's "However", which works particularly well for the written medium, since what you write isn't "said".
which works particularly well for the written medium, since what you write isn't "said".
You're absolutely correct. Metaphorical usages of "say" in writing are egregious barbarisms. Why, next thing you know I'll be "going" when I mean "saying." At the bottom of that slippery slope of idiomatic inconsistency we find text messages, nature's way of proving that the written word is never context-dependent.
I feel so bad about it that I think I'll make myself go eat a slab of the chocolate chip pound cake I baked yesterday.
Anyone that has ever dealt with CFC in any capacity whatsoever knows that this is neither isolated nor discouraged. Quite the opposite.
I feel so bad about it that I think I'll make myself go eat a slab of the chocolate chip pound cake I baked yesterday.
Did you bring enough for the class? Maybe if you slice it real thin and let is bid on the best pieces?
I'm guessing that several years ago, some salesman or systems programmer said something like: "And you won't hae to keep hard copies of correspondence anymore. Anytime that you want a copies of the correspondence you can just click on the 'correspondence' button and see everything that you've sent the borrower."
Later, somebody in management said "Why do we have all these lawyers anyway? Do we really lawyers to send NODs? We really only need them to sign them, not read them.
Best way to tell you really need a lawyer: Somebody tells you "you won't need a lawyer."
I feel so bad about it that I think I'll make myself go eat a slab of the chocolate chip pound cake I baked yesterday.
well well well. sitting at home in your pajamas, eating cake in the middle of a Tuesday. wanna trade lives?
Fair Economist, you are assuming that "backdating" was for the purpose of making these look like old letters. I'm still not convinced that it wasm't just the only way the employee could get the system to re-run the numbers on an old escrow situation.
CFC's accounting system can't cough up an old statement? It has no reports for internal review? Are you serious?
Even if one of the largest mortgage servicers on the planet can't do basic stuff like that, then the person documenting this would have to do a "our system says" letter/memo. Like I said, this is immediately obvious. If CFC has hopelessly incompetent employees working on a crippled system I wouldn't have dared write for a small roofing firm, then it's conspiracy for fraud at high level in IT. The people setting up the system knew what would happen.
Tanta- you owe me a slice of that pound cake. In a letter dated April 1, 2000 which my lowly PC will recreate for you, it clearly states that any mention of food to be eaten must be shared by the whole class. It's done by the computer and the word processing software and I'm only suppling minimal inputs(the text). Just be thankful that the commenters are not acting as a class to force disgorgement. Ewww, forget that part.
And you won't hae to keep... Guy must have been Scottish.
let's stop calling lying, f...ing fraud and forgery by the euphemism "regenerated." The issue isn't the money or whether the claimed charges were fair or justified or legal. The issue here is filing falsified documents in court. The post-hoc insertion of addresses from a later date into letters that were never sent is evidence enough.
This is about the rule of law. CFC might believe their own story, just as GWB might believe his own story. I'm sorry, but in a civilized society that operates by the rule of law, self-belief doesn't matter one whit. Self-delusion is not a legitimate defense. Torture is torture, a lie is a lie.
Sh.t, Hitler and Eichmann thought they were doing the right thing. No, I'm not equating Angelo with anyone but Angelo. I'm just making the point that we have totally abandoned the rule of law and don't even understand it. Screaming that we believe is beside the point.
Joe Shmoe
Besides the fact that a world without empathy is not a world I want to live in, the solutions that are proposed by assuming that everything bad grew out of bad faith will simply never work. Until you can wrap your mind around that, you're POTP. After all, there wouldn't, quite often, be so much "ass covering" by employees if there weren't this immediate need to assume evil intent.
I think you would love The Corporation.
In interview after interview, it shows mostly pleasant and sympathetic corporate denizens dutifully and conscientiously wreaking bloody hell on society and the world.
The documentary does not lay blame at their feet. Instead, it points to the absurdity of our current corporate system. Here we have organizations deemed legal persons, which by law can have only one objective: maximizing profit. In today's climate, it is also considered a grievous offense to restrain them from achieving this objective in any way by nasty and inefficient regulation.
As it turns out, we already have a word for "persons" with absolutely no regard for any but their own interests. We call them psychopaths.
In general - these ERP systems are so constraining they make the company operations conform to the program rather than adjust the program to conform to best practices & desired business processes. It is very difficult & expensive to make the program fit most operations unless they are very generic.
I got a few laughs reading a whitepaper a few years ago proposing an ERP system for the U.S. Army business processes. If you carefully read the parts of it that weren't regurgitations of Gartner Group papers, they said that any Army processes that wouldn't fit with the ERP solution would be changed to fit. I have no idea whether this went forward or not: I give it even odds.
well well well. sitting at home in your pajamas, eating cake in the middle of a Tuesday. wanna trade lives?
Well, OK, but that means you'd get my salary. Sitting-around-jammie-wearing-cake-eating doesn't pay nearly as much as you'd think.
i can deal with that as long as you send me Excel Art from my former desk while i'm eating cake and ordering books on the internet.
PS, you will find a stuffed football within easy reach of your right hand. throw it at randy's head every opportunity you get.
CFC's accounting system can't cough up an old statement? It has no reports for internal review? Are you serious?
Of course it is most likely to have a way to do what this employee needed to do. But this situation doesn't come up very often, you know. After all, usually, when you generate an escrow analysis, you do send it to the borrower and a copy is archived somehow. It's only in situations like BK or forbearance or something that you don't, actually, send the letter; you "defer" this increase.
I am suggesting it's quite possible that the employee found a "quick and dirty" (or, um, "Fast and Easy"?) way to get the machine to produce the thing. That was the point of my check-printing example. Of course we had a way to clear the "checks printed? Y/N" flag with a management override and reprint them after a paper jam. We just had employees who figured out that you could do it "the easier way."
And the fact that the new address appeared is hardly conclusive to me. All that shows is that CFC kept its database up to date with the current mailing address of that attorney. I'd bet that the letter uses a word-processing "mail merge" function to pull those addresses without human intervention, once the addressee is chosen.
Have you really never worked in a huge company where turnover guarantees that there are few old-timers who know how to do the rare tasks, badly-written documentation, and a whole lot of "self-training" goes on? I guess you're lucky.
let's stop calling lying, f...ing fraud and forgery by the euphemism "regenerated." ...
...
This is about the rule of law. CFC might believe their own story, just as GWB might believe his own story. I'm sorry, but in a civilized society that operates by the rule of law, self-belief doesn't matter one whit. Self-delusion is not a legitimate defense. Torture is torture, a lie is a lie.
...
Joe Shmoe
Yeah, what the man said !
I think that word "regeneration" is going to the join the lexicon already populated by such esteemed entries as "economical with the truth", "that statement is no longer operative", "cannot recall", "definition of the word 'is' is".
Sick, innit ?
-K
Tanta,
You explain how an interactive procedure would work - how the backdating was required to produce the analysis as a ONE-OFF - and a printed report too, as a ONE-OFF - and even that this may autogenerate a letter as a ONE-OFF - but that SAME oneoff 'thang' means that somebody knows its not a "real" letter sent out many moons ago.
Yet,remember its a letter on letterhead paper ( you aren't going to tell me the individual ran out of plain paper at their departmental printer or the group printer or the individual printer and only had letter head paper handy are you ?) it should have been binned, trashed - to send it out as evidence of.. what ? its as plain as can be ! on letterheaded paper and not plain paper at that - CFC fingerprints all over it !
If its argued that this was part of a batch process ( say that have 1000s of such actions going on ) then its even worse !
-K
All this talk about psychopaths got me curious about the diference between them and sociopaths.
"Of the more distinguishing traits, some argue the sociopath to be less organized in his or her demeanor, nervous and easily agitated someone likely living on the fringes of society, without solid or consistent economic support. A sociopath is more likely to spontaneously act out in inappropriate ways without thinking through the consequences.
Conversely, the psychopath tends to be extremely organized, secretive and manipulative."
What is the Difference Between a Psychopath and a Sociopath?
Casey = sociopath.
Angelo = psychopath.
Any questions?
Actually I've only worked in small companies, and I'm used to situations where nobody in the company has ever dealt with the situation, ever. Backdating a legally significant document is the kind of thing that makes even a 19 yo secretary with a high school education and no experience get a quizzical look and say "wait, that's not right, is it?" Never mind backdating by four years.
Also, while this particular situation is rare, dealing with old correspondence is not and there's no excuse for not having standard policies to deal with missing documentation. "I didn't get the letter" is a VERY common occurrence for a mortgage servicer. If CFC's general action with old correspondence is to regenerate that is HUGE. And criminal.
BTW, is anybody proposing legal action against the elves? I blame CFC by default, and they are at the very least responsible for not controlling this. If this was rogue malicious behavior (which I very much doubt) IMO it's CFC's business to deal with the employees after they're properly fined.
CFC will have a hard time trying to enter those recreated letters into evidence in a court simply because recreations are not evidence under the rules of evidence.
So Miss High and Mighty Tanta's solution to Countrywide's malfeasance? Let me eat cake!
Yet,remember its a letter on letterhead paper ( you aren't going to tell me the individual ran out of plain paper at their departmental printer or the group printer or the individual printer and only had letter head paper handy are you ?)
I'd bet that this system prints to a dedicated printer and that its print routine always chooses the "letterhead bin." It would take user intervention to get it to print to the plain paper bin. Or a user intentionally switching bins for one print run.
Then again, you're talking to someone who once printed the draft of a 37-page board policy statement on pages of peel-off labels, because she forgot to unload and reload the printer. SHIT HAPPENS.
It's the cover-up that is the problem, not the "crime." A lot of what we're doing on this thread, it seems to me, is acting out the dynamic I'm trying to step outside of (to see from a different perspective): the confident assurance that "there must be a procedure to prevent that from happening and it must be foolproof, therefore if this happened it must have been of malicious intent." CFC is just relying on the flip-side of that mindset: "we have a procedure to prevent that from happening and it is foolproof, therefore it didn't happen."
Backdating a legally significant document is the kind of thing that makes even a 19 yo secretary with a high school education and no experience get a quizzical look and say "wait, that's not right, is it?" Never mind backdating by four years.
I have never yet gone one whole January in this business without getting a goddam closed loan with a first payment date 12 months in the past. There's always one person who cannot remember that it isn't 2007 any longer.
Yes, it's illegal to close a loan in January 2008 and make the first payment due February 2007. That could certainly be construed as predatory, as it means the borrower is past-due the day the loan was made! Why, don't these people know that's illegal???
Everybody knows that the annual dating problems we have in January are not malicious. That tells me that people are, in some circumstances, capable of making non-malicious errors that do cause terrible consequences down the road. I do not know any more than anyone else what exactly happened here. All I know is that if you work for a company that still has "secretaries" you probably have no idea how a giant servicer like CFC operates on 25-50 bps servicing fees.
I'd bet that this system prints to a dedicated printer and that its print routine always chooses the "letterhead bin." It would take user intervention to get it to print to the plain paper bin. Or a user intentionally switching bins for one print run.
I do kinda look forward to the arcana of office printing described in court - as a proud member of that long subsumed community that evangelized the "paperless" office, office automation, having the sordid underside details displayed for all to see will be worthwhile - it will beat those slashing strokes so elegantly described by a lawyer in the OJ trial.
But to the point - The key issue is that this is a ONE-OFF. Isn't it ? the sequence is that they demand money of the lady with menaces, she says hang on a sec I got you off my back and you signed on to it and they say no we didn't so she say show and they say SEE !
The generation of the demanding with menaces documents and the "SEE" document is at issue. They were either BOTH automated or BOTH were one-offs. If automated then this backdating behavior is systemic, endemic and signed off on by the implementation committee. If ONE-OFF then a manager is involved. Either way - OFF WITH THEIR HEADS.
Seriously, I look forward to a trial or some such - I'm now very very curious.
-K
Besides the fact that a world without empathy is not a world I want to live in, the solutions that are proposed by assuming that everything bad grew out of bad faith will simply never work.
Tanta, if you ever want to read interesting stuff about the legal aspects of Free Open Source Software, (among other interesting topics), head on over to Groklaw. The woman who writes that blog sounds so much like you, it is spooky.
for unscrupulous businessmen who give profit chasing a bad name AND make it harder for honest chasers
Laissez Faire capitalism sort of sounds OK - until you watch some capitalists in action.
I have heard the word "regeneration" of system-produced documents for years, sk. I guess I had no idea how bizarre it sounds to the rest of you.
"System-generated documents" is what we call those documents that are produced by a system process. Like "escrow analysis," which is a long series of steps involving downloading tax and insurance data, running trial balances, recalculating the new payment, etc. The final step is for the system is to generate a document that is part form-letter, part report. It isn't like printing some Word document: you cannot "view" it in "soft copy" because it does not exist until you hit the "print" button. It's more like a PostScript document in that regard: the print process actually creates the document. But many systems do not save the result as a .prn file; there's no reason to. If you want another copy you either photocopy the one you just generated or generate another one. Most of these systems print two copies anyway, one to mail to the borrower and one to put in the file.
Therefore "regenerating" the document literally means just launching the program again so that it will produce the document again.
Moral of the story: how badly we miscommunicate when we use these "internal" jargon words with abandon.
"
I feel so bad about it that I think I'll make myself go eat a slab of the chocolate chip pound cake I baked yesterday.
Did you bring enough for the class? Maybe if you slice it real thin and let is bid on the best pieces?
"
I only want the slices that Fitch rates AAA!!!!
...Have you really never worked in a huge company where turnover guarantees that there are few old-timers who know how to do the rare tasks, badly-written documentation, and a whole lot of "self-training" goes on?
Oh sure, but not one that's being actively shorted as muck.
Oh sure, but not one that's being actively shorted as muck.
Which just has to motivate all those little elves to follow procedures to the letter . . .
"System-generated documents" is what we call those documents that are produced by a system process.
Truly fascinating. Pre-1992 when I exited this office systems biz ( the "users" got too good, same as when I exited process control in 1985 - the engineers got too good and when I exited computing mathematics in 79 - the chemists and atmospheric scientists got too good : in all they could do their own shit ) -pre 1992 one of the arguments against "office systems" was that the documents that were produced weren't "permanent". Final format, .ps document were some of the mechanisms suggested for casually ensuring the integrity of the final form document.
The generation process at that time was so long winded, time and CPU and human-intervention consuming with so many audit trails and sign-offs that I would never have contemplated this "hole" in the argument - i.e. regeneration. Who'd have thunk that the entire process wouldn't require high priests and priestesses, the hand maidens, the torch bearers in just a few years - wait.. I did and acted accordingly.
-K
What's the difference between a slab, slice and a tranche?
lama,
first they slice you up in autopsy,
on a slab,
then they put you in a tranche and throw dirt on you;-}
As for this type of fubar, I have in the past worked for one big bank, and hr block, both suffering under legacy systems, the bank in particular had three separate systems going.
The really funny part is that executives never value people who know how to get things done, and when they blow up they can't find anyone to fix their messes...
Countryfried is definitely going to file, the only question is when, not if.
Someday this war's gonna end...
What's the difference between a slab, slice and a tranche?
If those soft dark brown things suspended in it are chocolate chips, then it's a slab or a slice of my poundcake.
If they're not, it's a tranche.
Seems like you need manual review to help ensure that (imperfect) automated/IT controls (like workflow systems) are working properly, while you should use management review to keep track of the number of times and reasons for working around the system.
Seems like this is exactly the kind of testing you're supposed to do during Sarbanes Oxley 404 test of design, test of effectiveness for IT controls.
"instead of paying highly skilled college graduates, they can slide by with just a few community college graduates running the machines, with obvious (short term) cost savings."
Running the machines, how about filling the professional ranks with community college (if that) wonks.
One of the unintended consequences of trying to create a path out of the female ghetto where I work is that college educated professionals are now a minority. Replacing them are a group of HS graduates who have been promoted into management/skilled professional positions simply by having a desk review that states their skills are "substantially similar" to those of someone with a college degree.
These people may be intelligent, but their problem solving and perspective taking abilities are severely limited. They've been given the title and the $$$, but they still make decisions as though they are getting paid to move widgets from Box A to Box B. Arguing with them, as Tanta as pointed out, is worthless because they don't know what they don't know.
DRYFLY, if I may get a copy of that paper (presuming you still have it)? My email would be my name at yahoo dot you know what.
Thanks.
CFC lost over $2 a share today over this monkey business.
So $2 times a 560 million share float, means CFC lost over $1 billion in market cap today over this.
Makes squeezing a recently discharged bankrupt customer for $4000 a pretty expensive business.
Many companies (lenders and other kinds) are all about taking the customer's money. After that process is complete, the customer becomes a problem if that customer wants or needs some kind of followup service that doesn't generate any new revenue for the company.
In the mortgage business, I'm familiar with at least one company that seemed to put all of its efforts into loan origination. Record-keeping, answering borrowers' questions down the road--their execution on that kind of stuff was pretty bad.
This is a lot like consumer level tech support. They want you to spend the money, but the second you have they don't want to talk to you.
DRYFLY, if I may get a copy of that paper (presuming you still have it)? My email would be my name at yahoo dot you know what.
Thanks.
Tangurena | Homepage | 01.08.08 - 7:41 pm | #
Sorry I do not - I had a HD crash after that and lost it.
But from what I remember of the paper I pointed out how most ERP Mfg Execution System modules are based on MRP-like 'Push' algorithms (they evolved from MRP & MRPII after all)... but Lean is based on JIT-like 'Pull' systems and many of the best aren't even automated (use visual pull signals like kanbans). ERP & Lean don't always get along well & play nice.
I did make the case for a 'layered' architecture - with ERP the 'global' accounting & demand management system on top but not letting it screw with the actual shop floor execution & costing... but then is it really an 'enterprise system'?
Those kinds of questions made me a bit of a pariah among the geeks in the class - but then I was the only one who had actually run shifts as a front line supervisor in an actual factory. There is a reason I like simple, robust, and visually intuitive manufacturing systems - they work.
You do know that the letters from 2003 and 2004 and 2007 were CC to the FB's lawyer's new address-that's how they got busted.
If they don't object to the discharge, then don't be adding charges after. Judges don't like it when you don't think the law applies to you. Just ask Conrad Black (Connie to his new closest friends)
"CFC lost over $2 a share today over this monkey business.
So $2 times a 560 million share float, means CFC lost over $1 billion in market cap today over this.
Makes squeezing a recently discharged bankrupt customer for $4000 a pretty expensive business.
Spiv | Homepage | 01.08.08 - 8:35 pm | #"
Markets have a maddening way of doing the right thing for the wrong reason. Except that if it is right, then it is the right reason.
Lets just assume that this was a totally innocent systems goof and everybody had the best intentions, etc. And that they will be able to explain that it was just a mistake.
Nevertheless, agreeing that knowing that the company is just incompetent and not evil really is worse for the shareholders.
Specifically, this points out that CW's systems can't handle servicing problem loans efficiently. The "why" doesn't matter.
It means that there will be lots of other problems out there. And the value of the MSR's on CW's balance sheet probably has the wrong sign -- it's going to cost them money if FC's hit a certain level.
Yes, Z. You are correct... If foreclosures continue to climb, CW "aka..crazy monkey" is in a lot of trouble. More borrowers will start looking at past escrow shortages and overages and how it came to pass that they owed CW more money. It's going to be an interesting year for CW. They need to rethink the 10,000 plus employees in India who don't really understand servicing and servicing systems.
I don't get this. How can it be claimed that there was a "legitimate" escrow increase, and the borrower was "in default," when it is clear that the borrower was never given notice of any increase? I might be sympathetic to the loan servicer if it paid out costs (taxes, etc.) for which it was reimbursed, but if that was the problem, why didn't it just say so and give a current, not a backdated (which in the criminal law I practice means "forged") claim.
The sin here was the claim that the borrower was already "in default" when the borrower was under no obligation to pay at any earlier date, and the evidence of that "default" was intentionally fabricated.
I say the lawyer and the company should both face sanctions.
Am I missing something? Christ on a cracker, think about what happened here. Somebody says, "Oops!, we should have raised the escrow amount, but didn't." What then was the proper step? To "override" systems and pretend that the amount had actually been raised and the borrower notified of this? If you say yes, I say back to ethics class (or maybe jail) for you.
Fair Economist, you are assuming that "backdating" was for the purpose of making these look like old letters. I'm still not convinced that it wasm't just the only way the employee could get the system to re-run the numbers on an old escrow situation.
I'm perfectly convinced. Because as you note, these letters weren't merely found lying around somewhere: they were attached to a legal filing. Normally, that means that somebody has to authenticate those letters. You can't just attach any old document to a court filing. There has to be something to show why it is relevant and admissible for the Court to consider.
So that means they didn't just stick these letters on a filing plain; chances are quite good that they were accompanied by something along the lines of a declaration stating "attached hereto as Exhibit J233 is a true and correct copy of a letter sent by Countrywide to the debtor on [date]."
Non-fraud would mean that whoever presented that letter would have been abundantly clear that the letter was a 're-creation'. It wasn't done; most likely, whoever at Countrywide handed over these documents to their lawyer flat-out lied.