Consider the following numbered sequence of events:
1. A family wants to buy a home and the head of the family ‘James’ signs a property loan agreeing to pay every month. Call the person arranging the property loan Billy. James and his family move into their home, establish themselves in the community and watch their children grow.
2. Billy almost immediately sells a separate investment note based on James’ property note (that is kept hidden) to someone named Wong and agrees to pass through investment return payments while holding back a processing fee. But Wong knows nothing about James. Wong’s risk is totally with Billy as an unsecured loan. James knows nothing about the investment note that Billy has with Wong. Billy is happy because he has all his loan capital back via Wong’s investment and residual revenue from processing fees; money for nothing.
3. Billy dies and the property note he has with James goes missing.
4. James’ payments to Billy continue but are bounced back to James with no instructions where to forward payments. James becomes very concerned.
5. Wong makes inquires as to what has happened to Billy and what has happened to his investment return payments. No one knows.
6. Wong files a claim with Billy’s insurance agent Stanley who is listed on Wong’s investment contract note with Billy. Stanley is overwhelmed with the number of claims from all of Billy’s clients and has a massive heart attack.
7. Government representatives hear from Wong about Billy’s death and Stanley’s heart attack. They agree to arrange that the taxpayers fund the payoff of Wong (bail out) and fund the cost of resuscitating Stanley.
8 Everyone is taken care of except for James. James does not know what to do. He tries to chase down anyone that knows Billy and what should happen to his property note payments with Billy. No one knows anything. But one crooked person hears of James’ angst.
9. This crook is a sinister greedy person named Fast Eddie. Fast Eddie gets a criminal inspiration. Fast Eddie decides to represent himself as the beneficiary from the death of Billy. Fast Eddy creates a fictitious investment note from dead Billy to himself that is based on Jame’s property note. He has a forgery expert forge dead Billy’s signature to this false note.
10. But one problem remains for Fast Eddie. How will he tie his false investment note to Jame’s property? Fast Eddie decides to create another false document that sells the property note held by Billy to himself and he has it backdated.
11. Fast Eddie presents the notes to James and demands immediate past balances with penalties and fees that exceed the past due amounts.
12. James is blown away by Fast Eddie’s demands. James suspects criminal motive and intent behind Fast Eddie. James discovers that Fast Eddie never recorded Billy’s property assignment to Fast Eddie.
13. Fast Eddie claims that Billy died before recording the assignment of the property note to Fast Eddie. Fast Eddie forges yet another false document of assignment from Billy to himself and sends it to the property recorder’s office for recording.
14. The property recorder informs Fast Eddie that the deadline has passed for filing a record of property assignment of Jame’s property.
15. Fast Eddie meets with the State Governor’s Office and cuts a deal that he will pay the State money if the State will tell the property recorders to look the other way.
16. Fast Eddie arranges for a law firm to foreclose on Jame’s home. Jame’s family is traumatized.
17. ......To Be Continued ........
My questions to you:
Where is the Moral Hazard in letting James and his Family keep their home without Fast Eddie’s involvement?
Where is the Moral Hazard in letting Fast Eddie get away scot free with taking James’ home or his money, or with attempting to defraud the entire process?
Uh...over my head that.