Monday, August 12, 2013

We're All Subprime Now

One effect of the recent financial crisis is the deterioration in the treatment of debtors. I'm not talking about people who are seriously in arrears, in danger of foreclosure or the like, but ordinary people with ordinary agreements for service in exchange for payment of a fee.  It's as though we're all about to become scofflaws who won't pay our bills.  Not only are many people paying 18% on their credit cards, no matter what their credit rating, but we're reminded on our monthly bills (phone, cable, utilities) that if we don't pay on time, we'll owe some usurious fee for being late.  We got caught in this when one of our checks went missing--I paid the fee, as it wasn't worth it to me to fight it.  But it still irritated me.  (And worse than that, if the check does eventually turn up, they don't return it to me.  They process it and give me a credit on my next bill without, of course, paying an equivalent fee for the use of my money.)

But I'm lucky.  I don't buy a lot of services--we can't afford them.  And having been a tenant for all of my adult life, I know that I can't skip a rent payment, even over the holidays.  (I didn't know this, but homeowners frequently skip the December or January house payment, making it up later in the year.  It shows up in the mortgage delinquency statistics.)  But now homeowners, who used to be cut some slack, are being reminded that their mortgage payment is like any other service, and they're being treated accordingly. Just read, for instance, some of the stories here.  Bank of America, wanting to get rid of some of its more precarious mortgages, sold them to Green Tree.  This did two things.  It enabled the bank to raise some cash, so its quarterly report would look better, and it turned over mortgage collections to a servicer, an entity not bound by the restrictions on bad behavior that the government "imposed" on the major banks.  In many cases, BofA still owns the mortages, so they get all of the benefits and none of the oversight.

To sweeten the pot for Green Tree, they also sold some performing mortgages, and those people are absolutely furious.  Green Tree loses their mortgage payments, doesn't provide proper accounting, tries to increase their escrow payments for no apparent reason, fails to record their insurance policies and then charges them ridiculous sums to provide them insurance, and on and on.  Some people have taken up using certified mail to send in their mortgage payments, convinced that Green Tree is holding them until they are late.  (And this may be true.  Providian was the bad boy of credit cards, and was caught doing this repeatedly.  Providian was sold to WaMu, and then to JP Morgan Chase.)  People are having to file bankruptcy to get a court hearing, so that they can show that they shouldn't be in foreclosure.

It had never occurred to me that this would be an effect of the rise of the FIRE industries, but it makes sense.  When your income is dependent on servicing accounts, there may not be enough people who can't pay the bill, or who forget, or whose check gets lost in the mail.  It's not the decline of standards, or the absence of shame, or any of those other moral failings that right-wing pundits are always writing about.  It's simple economics. Providing services doesn't make enough money, so your phone company, utility company, credit card company and so on, have to make money from various fees and fines, and to doctor the books to be able to collect same.

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