Housing prices dropped 8.9 percent in the fourth quarter of 2007. There is a very simple reason for the subprime scandal that is found in a local story of judicial incompetence, financial malfeasance and decay. Then it went to the Oregon Supreme Court who displayed a notable lack of integrity. This is a sorry tale, but is a precursor to what is wrong with our financial institutions and our legal system, both of which let our citizens down.
Mr. and Mrs. Mum (their names have been changed to protect the innocent) were approached by Mr. Beginning Loan Broker to finance their retirement home. He had been a loan broker for exactly one week. He did not have his paperwork requirements ready, so did not complete any of the required paperwork to comply with The Federal Truth In Lending Act (TILA).
A short tutorial on TILA is in order. It is the law that requires the four little boxes that tells you the interest rate, the annual percentage rate, the amount you will ultimately pay and the extras that the broker crowds into your loan which innocent purchasers would otherwise not know about -- Mr. Broker's origination (commission) fee, for example. The purpose of these four boxes is to provide a single piece of paper to Mr. and Mrs. Innocent Citizen so they can shop their loan around and compare prices, through the figures in these four little boxes, with other loan offers that are also supposed to have the four little boxes completed and available to document the cost of their loan. No one does this. Financial institutions seldom strictly comply with TILA. Mr. Broker in Mr. and Mrs. Mum's case did not, nor did the private financiers who backed the loan. In the meantime, the subprime market took unconscionable advantage of the fact that our courts do not enforce TILA because of judicial incompetence.
When compliance with TILA found it's way before Judge Nellie Johnson, she was perplexed. She needed a tutorial, but her education was hampered by a common problem confronted by local judges. First, they usually do not have energetic, smart law clerks to research complex issues now being argued by the respective attorneys. Second, the downtown law firm had sent their junior league to argue for the broker and financier and he was an obtuse newbie who did not know what he was filing papers about. But, he was from a prestigious downtown law firm (where he did not last long), so the judge had to rely on his advocacy. She did not presume that the suburban (country) lawyer representing Mr. and Mrs. Mum knew anything about TILA. So, she did the best she could without actually studying the complex legal issue herself. She held five (5), (count them), hearings trying to understand TILA, but was never successful. Her further education could not wait according to the Presiding Judge, so the case went to trial. Well, certainly the (former) trial judge, Douglas Beckman, could not be expected to understand in one morning what Judge Johnson could not understand over several months, so he did the expedient thing. He didn't read anything in those trial court files. Indeed, because of the heavy file activity in a busy courthouse, he didn't even have the complete trial court file. Of six volumes, two were misfiled and one was missing. It didn't matter, he wasn't going to read them anyway. There is no law that requires a judge to read anything. Indeed, often they don't and a lawyer gets a stern look when a lawyer asks, "Your honor, I don't know if you have had time to read my motion.........., but.........."!! The Oregon Supreme Court has the constitutional right to censure judges who don't do their job, but they never do so.
So, Mr. Broker got his fee, the financiers got their excessive interest rate; two and a half interest points over the market place rate, and Mr. and Mrs. Mum got taken to the cleaners. TILA is a remedial statute meaning that the financiers must strictly comply with the requirement of the four little boxes. Mr. and Mrs. Mum never got their four little boxes, but they did get the honor of paying way too much for a loan and the indignity of seeking legal redress in a system that wouldn't take the time to understand their grievance.
This happened ten years ago, so our financial and legal systems have had years to fix it, but nobody cares about the regular citizens that get taken to the laundry by our financial systems who load people up with loans they can't afford and with interest rates they cannot understand. Our legal system does not care about our judges who do not do their job. The Oregon Supreme Court? Just like Judge Beckman, they didn't read anything either. I wish they cared, but they don't. Our legal system and our financial systems are taking advantage of innocent ordinary citizens and no one cares.