Consumer Law In the News

From SmartMoney: Why There’s No “Trust” in Securities-Backed Mortgage Biz

Igor Greenwald, writing for Smart Money magazine, lays bare some cold, hard truths about the “collateralized” home mortgage industry in this article entitled “Banking Runs on Margins and Interest, Not Trust.“  While that might seem like a “duh” moment to some, I’d be willing to bet that to many homeowners, the notion of their mortgages being bought and sold like stocks in a pool of other such mortgages is a new concept. It certainly was to me a year ago when I started my transition from public servant to bankruptcy/consumer lawyer.

But Mr. Greenwald is writing about one particular aspect of this new age of banking - the complete eradication of the personal relationship between borrower and lender. And he writes about this almost as if it surprises him:

The more superficially the financial industry knows its customers and the more it views them as near-term profit catalysts, the more it spends to advertise the very opposite. I see these not-quite-white lies all the time in between snippets of business news: The investment advisor who’s like a member of the family, the kindly loan officer next door.

If only someone were still willing to pay these people to care. In reality, many of them have been replaced with software models. It’s called progress. On ABN Amro’s personal banking page, the bank presents itself as “the partner that can help clients take charge of their financial future by planning in the present.” And then there’s Preferred Banking, “a relationship-banking approach for mass-affluent customers” who desire “individual recognition.” That luxury costs extra.

That’s a “progress” I can do without, and it’s one that many financially-stressed homeowners could have informed Greenwald and the financial media about a long, long time ago.

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