More than 14 percent of borrowers were in trouble on their mortgage during the third quarter, a new record, according to an industry survey released Thursday, which also suggests that the foreclosure rate is likely not to peak until next year as unemployment rates continue to rise. * * *

About 9.6 percent of borrowers were delinquent on their mortgage during the third quarter, according to the survey, and another 4.5 percent more were somewhere in the foreclosure process. Overall, about 14 percent of mortgage loans or 7.4 million households were delinquent or in the foreclosure process during the quarter, according to the group.

Ugh.

Tort reformers would have us believe that our judicial system is broken, clogged down with frivolous tort suits. In fact, a recent study shows that the number of state court tort suits that make it to trial declined steadily over a 10-year period ending in 2005, dropping to about 4 percent. The figures, collected from the 2005 Civil Justice Survey of State Courts and released this month, found that the number of state court tort trials declined by about a third between 1996 and 2005 in the country’s most populous counties.

Of the cases that went to trial in 2005 - the year for which the latest state-level data is available - 60 percent were automobile accident cases. About 15 percent involved medical malpractice claims. Plaintiffs were victorious about half the time. Of those wining plaintiffs, about half were awarded $24,000 or less in damages. Punitive damages were sought in about 9 percent of cases won by plaintiffs, and awarded in less than 3 percent of winning cases, the data shows. The highest percentage of punitive damages awards came in cases involving libel and slander. The medium punitive damage award was $55,000.

As discussed in previous posts (here and here), Jenzabar is a higher education software company that is trying to bankrupt a documentary film company for the crime of having reported some controversial words stated by Jenzabar founder, Ling Chai, who was a student leader at Tiananmen Square (that she was allegedly hoping for bloodshed so that the Chinese people would open their eyes).  Rather than suing over the film itself, Jenzabar seized on a handful of pages on the Long Bow web site about the film that discussed Chai’s subsequent career as founder of Jenzabar and claimed that the use of the term “Jenzabar” in the keyword meta tags for some of those pages infringed Jenzabar’s trademark.

Rob Pegararo has published an excellent piece in the Washington Post about the dangers posted by the largely secret negotiations for a so-called anti-countefeiting treaty that is actually being used to try to curb important consumer rights that are protected under US copyright law.  Early this month, Public Citizen joined a letter complaining about excessive secrecy in the negotiations.

Following up on Jeff Sovern's post yesterday on the Federal Reserve's new rule that will bar banks from imposing certain overdraft fees unless the consumer opts in, check out this article in today's Washington Post. As Jeff's post indicated, the new Fed rule, to go into effect next July, will require consumer opt-in for overdrafts on one-time debit-card overcharges and ATM withdrawals. The Post article explains that these two types of transactions account for about 49% of all overdrafts. (Check writing accounts for another 30%.) The Post article goes on to discuss relevant pending legislation, some of which goes further than the Fed rule and would impose limits on the the number and size of overdraft fees even for customers who opt in. A bill sponsored by Rep. Carolyn Maloney (D-NY) would include check writing overdrafts in the opt-in regime, in addition to the ATM and debit-card overdrafts included in the Fed rule.

Before opting in, the consumer must be provided a notice that explains the financial institution's overdraft services, including the fees associated with the service, and the consumer's choices. The final rules, along with a model opt-in notice, are issued under Regulation E, which implements the Electronic Fund Transfer Act.

* * *

The Board's consumer testing shows that most consumers prefer not to be enrolled in overdraft services for ATM and one-time debit card transactions unless they affirmatively consent, or opt in. At the same time, testing shows that most consumers want overdraft services to cover important bills, such as checks they use to pay rent, utilities, and telephone bills.

To ensure that consumers have a meaningful choice, the final rules prohibit financial institutions from discriminating against consumers who do not opt in. The final rules require institutions to provide consumers who do not opt in with the same account terms, conditions, and features (including pricing) that they provide to consumers who do opt in. For consumers who do not opt in, the institution would be prohibited from charging overdraft fees for any overdrafts it pays on ATM and one-time debit card transactions.

The rules take effect July 1, 2010.

HOPE NOW's September foreclosure report gives the grim news – there were roughly 90,000 more completed foreclosure sales for the month, i.e. running at 1 million per year, and rapidly approaching 2 million completed foreclosure sales since July 2007 (about half of them subprime).  At the current pace subprime foreclosure sales alone will reach 2 million by the end of 2011.  New foreclosure filings eased off a bit, but are still near their crisis peak levels of about 250,000 monthly or 3 million per year.  The number of foreclosure filings far exceeds the completed sales, partly because of successful modifications and refinancings, and partly because there is a huge inventory of homes in the foreclosure process.

It is also clear that the subprime crisis, while still ongoing, has spread to prime mortgages.  Subprime loans account for 11% of all mortgages, 39% of completed foreclosure sales, but only 29% of new foreclosure filings.  Subprime loans accounted for more than half of foreclosure filings and sales in the first half of 2008.

Interestingly there were 75,000 permanent modifications reported, for a period in which the Federal government’s Home Affordable mortgage program (HAMP) achieved fewer than 2,000 permanent modifications.  It seems odd that servicers choose to implement significant numbers of modifications outside the HAMP program, foregoing substantial payments from Treasury for successful mods.  It may be that the September non-HAMP modifications represent mortgage servicers concluding deals that were initiated before last April.  We’ll know more next week, when Treasury has promised to report the total number of permanent HAMP modifications achieved so far. 

As you honor veterans today, consider this: Over 1,461,000 working-age veterans lack any health insurance and, last year, over 2,266 died as a direct result. That is more than 14 times the number of deaths (155) suffered by U.S. troops in Afghanistan in 2008 and more than twice as many as have died (911, as of Oct. 31, 2009) since the war began in 2001. These statistics come from a new analysis by a team of Harvard Medical School researchers based on data from their upcoming article in the American Journal of Public Health.

This paper discusses consumer protections available to gift-card users. Specifically, it examines the ways in which value loaded at the time of purchase is protected for future card use or returned to consumers when the card is not used or has expired. The consumer protection information included in this paper is derived from a number of sources, including several types of state statutes, Federal Trade Commission decisions, financial industry regulatory agency guidelines, and previous interviews with payments industry experts regarding practices concerning network-branded gift cards. This paper expands research begun by the Payment Cards Center in 2004 into prepaid cards generally and the protections available to consumers who use gift cards specifically.

Today Treasury released the October monthly report on the Home Affordable modification program.  Once again Treasury gives us only the good news - 650,000 temporary 3-month payment plans with homeowners since the program started in April.  By now, we should be seeing significant numbers of permanent modifications, but Treasury again refuses to divulge this key data.  I am hearing that the conversion of temporary modifications to permanent ones is still appallingly low.  We the taxpayers have contracted to pay the servicers billions of dollars to prevent foreclosures and modify loans, and so far they are not doing the job.  It will not do at this point to keep pointing the finger at homeowners, hundreds of thousands of whom are entering payment plans and making payments.

There are also early indications that two-thirds to three-quarters of homeowners on temporary modifications have made all their payments, but fewer than one in a hundred has a permanent modification after three months.   In some cases, legal aid lawyers are going to court to stop foreclosure sales for homeowners who are making payments on a temporary modification plan.  Treasury needs to demand performance from BankofAmerica, Chase, Citi, Wells Fargo, and the other mortgage servicers who are slated to receive billions in HAMP subsidies (not to mention all the other TARP subsidies).  Treasury also needs to start reporting the temporary-to-permanent conversion rate, and the homeowner default rate on temporary modifications.  If this emperor has no clothes, then let's get the tailor working on a new outfit.

Earlier this week, as the Times reported, the House passed a bill to move up the effective date of some of the Credit CARD Act provisions to December 1.  Here's an excerpt from the Times article:

Industry executives, however, said the move could backfire by prompting companies to restrict the availability of credit at a time when the economy is in a recession.

“This will create significant confusion for consumers and will further restrict access to credit for both consumers and small businesses, all to the detriment of the broader economy,” said Kenneth J. Clayton, a senior vice president at the American Bankers Association.

It's a relief to see that banks are concerned about consumer confusion.  I wish that concern extended to their consumer contracts.

Jenzabar has sued the Long Bow Group for placing Jenzabar’s name in the keyword meta tags for a web page about Jenzabar, which, Jenzabar claims, has unfairly placed this web page among the top search results when Internet users do a search for “Jenzabar.”  This placement, Jenzabar protests, allows university IT personnel who are trying to decide whether to buy Jenzabar’s software and services to learn adverse facts about Jenzabar which might, in turn, lead them to decide not to do business with Jenzabar.

Jenzabar is particularly exercised that my blog post cited a statement by Google back in September announcing that its search rankings have not employed keyword meta tags for many years.  This information, Jenzabar insists, is not admissible in court because Matt Cutts’ statements on the subject on the Google’s blog for webmasters, which Google calls “Official News,” is not an “official statement by Google.”  It appears to be Jenzabar's position that blog posts about a lawsuit must comply with the rules of evidence.

Interestingly, earlier this year, Long Bow published on its own web site, at the request of Jenzabar's counsel, a lengthy statement about the litigation.  During her deposition, Jenzabar founder and former Tiananmen student leader Chai Ling testified it was Jenzabar’s own lawyers who wrote that “extrajudicial statement.”  It seems that what is sauce for the goose is not sauce for the gander in Jenzabar’s book.

Jenzabar’s persistent efforts to suppress criticism continue to raise questions of hypocrisy in light of the company's use of its founder's life story, as a symbol of the resistance to tyranny in China, to promote its business.

[Under the Credit CARD Act,] card issuers such as Citibank and Chase will have to quit a set of practices that regulators and lawmakers have finally outlawed as unfair or deceptive.

But not right away. In a concession to the arguments of the card industry that it needed lots of time to adjust, most of the new rules were delayed until February. Some won't take effect until August.

The result? According to a new study by the Pew Charitable Trusts, the nation's dozen largest card issuers - led by banks that taxpayers have spent billions to bail out - have doubled down on the practices that got them in trouble in the first place.

* * *

Last week, researchers from Pew's Safe Credit Cards Project said every bank credit card they had looked at, nearly 400, bore at least one of the terms that will soon be outlawed as unfair or deceptive.

I wonder what this will do to the credibility of financial companies the next time they claim they need time to implement changes. The House Financial Services Committee is trying to move the effective date forward.