29 August 2013

South Koreans: Who Needs Children Or Marriage?

In 2011, the average age of a first marriage for South Korean women hit 29.14, up from 24.8 in 1990; for men it jumped to 31.8 from 27.9 in 1990. The birthrate sunk to 1.15 children per woman, the lowest among the world’s most developed countries.
From here.

For what it's worth, developing and undeveloped (i.e. "Third World") countries generally have lower average ages of first marriage and higher birthrates than developed countries.  So, South Korea probably has the world's lowest birthrate.


I suspect that the reasons closely parallel those behind similar trends in Japan.

Japan and Korea are lands of great economic opportunity for women.  But, only if they remain unmarried.  Married women, and in particular, married women with children, are expected to make their marriages and raising children a priority.  Their economic opportunities are reduced far more, relative to unmarried childless women, relative to comparable women in the West.

In the West, large proportions of unmarried women of childbearing age have children out of wedlock, particularly in those countries with generous social welfare systems like Sweden.

But, both Japan and Korea are much more successful at discouraging women from having children out of wedlock (despite relying very heavily on condoms relative to oral contraceptives for birth control), in part, because their social welfare system is far more tied in the case of men to a connection to a private business (an almost neo-feudal approach sometimes characterized as "Prussian") with social welfare for women and children, in turn, much more closely tied to their fathers.

Another factor that reduces the  out of wedlock is that these societies are much more egalitarian.  While they have large "working class" populations, they have very small "underclass" populations - so, few women are in the hopeless situations faced by women in American ghetto environments.  The share of people who are "middle class" in values and in having a sense of having a viable future if they "play by the rules" is greater.

The bottom line is that in this context, far more women are deciding that they will choose a career over marriage and family, at least until a quite advanced age, than in other Western countries.  And, the later you marry, the less time you have to have children and the less inclined you are to do so.

Is this sustainable?

I suspect not.

The level of angst in these countries that many women feel about being in confining marriages, or about being denied family life by careers rivals that of the American Feminist movement in the 1960s.  Men and women alike are in boxes that they don't terribly like, but they aren't necessarily thrilled about the alternative model that the West offers them.  Sooner or later, the dam will break and a social revolution with an uncertain outcome will break out.  What alternatives end up arising out of that social revolution is hard to predict.

In the meantime, South Korea, like many developed countries, faces the risk of an inverted population pyramid that will make it harder and harder for the younger generation to support the older generation, and historical hostility to immigration in Korea and Japan make these barriers harder to overcome than they are in the United States and Europe which are relatively speaking, immigrant friendly.

28 August 2013

Simple Tests May Predict Suicide And Diagnose Depression

A Bio-marker For Suicide Risk

A study of nine men who committed suicide and forty-nine bipolar men hospitalized for being suicide risks has linked suicide risk with a chemical that can be measured with a simple blood test, called SAT1, which is involved in cell destruction.  Despite the small sample size, the study shows a relationship of great statistical power between the marker and suicide risk.

Reference: H. L.-Niculescu et al. Discovery and validation of blood biomarkers for suicidality. Molecular Psychiatry. Published online August 20, 2013. Doi: 10.1038/mp.2013.95

A Four Question Test For Depression

Another recent study found that a simple four question test could accurately diagnose depression in German women as well as much longer and more complex diagnostic instruments used previously.
[The] team drew on data from 1,382 German women who completed a 21-item screening questionnaire for depression on two occasions, separated by 18 months. Based on this measure, depression initially affected 3.6 percent of the sample, or 50 individuals, and later appeared in 1.9 percent of the sample, or 26 individuals. Women’s initial responses to a handful of items that best predicted whether they would rank as depressed 18 months later were used to create a four-question decision tree. 
The first question in the tree — “Have you cried more than usual in the last week?” — led the pack in identifying cases of depression. A “no” response to this or any of the other three questions — which inquired about feelings in the last week of disappointment or self-hate, discouragement about the future and personal failure — exempted women from being categorized as depressed. Those who responded “yes” to all four questions were classified as depressed.
The test may not work equally well for men.

 Reference: M. Jenny et al. Simple rules for detecting depression. Journal of Applied Research in Memory and Cognition. Published online June 24, 2013. doi:10.1016/j.jarmac.2013.06.001.

Secession v. Realignment in the American West

You know we've entered the silly season when Moffat County, Colorado wants to secede from Colorado to join the putative state of Northeast Colorado (seeing as how its boundaries define the Northwest corner of the state).

Proposals to allocate seats in the Colorado General Assembly on a county by county basis in at least one of its houses are outright unconstitutional under well settled, bipartisan precedents (with corrections here).

This said, there is another option which is neither unconstitutional, nor a simple power grab to put more conservatives in the U.S. Senate, and this one is actually a decent fit to the concept of federalism.  What is it?

Rural Northern Colorado counties could be transferred from the State of Colorado to the State of Wyoming.  Wyoming is more rural, more conservative, and more friendly to fossil fuel energy interests than Colorado and a closer fit politically to these counties than to Colorado as a whole.  This would leave these counties with a more hospitable state government, while allowing the rest of Colorado to fit its emerging more urban and resort oriented mold.

Moreover, as the state with the lowest population, a transfer of territory and people from Colorado to Wyoming would better balance the population to representation ratios in the U.S. Senate.

This realignment does something that politicians often like.  It permanently makes seats in the U.S. Senate safer for the respective parties without greatly altering the balance of power in the long run.  It leaves state elected officials in both resulting states more likely to deliver results that their constituents like in state legislation.  And, it leaves resulting states that are as viable, if not more so, than the original pair of states, something that would not be true in the case of an independent state of Northeast Colorado or something along those lines.  It also allows like minded counties on both sides of the continental divide with similar interests to be joined politically.

Wyoming voters might not like to see an addition to their state that would almost double its population.  But, the new territory would have a lot in common with the old one, so it just conceivably might work.

In a similar vein, it might make a lot of sense for the eastern portions of Washington State and Oregon (the natural boundary would be the Cascade Mountain range), to be removed from those states and added to Idaho, again achieving a better match of majority political attitudes with local political preferences, without altering the balance of power nationally.

Similarly, a large share of the State of Nevada that isn't Reno or the Las Vegas metropolitan area, would likely be more comfortable as part of Utah or Idaho.

(In the Northeast, a notable similar proposal would, rather than granting the District of Columbia except a small federal district, statehood, annex that part of the District of Columbia to the State of Maryland from which it was originally annexed, just as much of the original District of Columbia was returned to Virginia.  In the Midwest, transferring the Upper Peninsula of Michigan to Wisconsin might be attractive.)

Allowing people to have a state government that is more to their liking than the national government is the fundamental reason to have a federal system of government at all, so these ideas would be reasonable ones to promote.

Language Notes

Why do unfamiliar rap lyrics seem lifeless?
[S]ome important things about the "poetics" of rap are lost in a purely textual presentation of the lyrics. One student observed that in pieces he knows, the rhythm is there in the written form — but the lyrics for pieces that he doesn't know seem flat and lifeless in comparison.
There are good reasons that this is more true for the works of Melle Mel or Jay Z than for Elizabeth Barrett Browning or W.H. Auden[.]
From Language Log.

As the post explains with scientific precision and illustrations, one of the key points that is missing is that rap is presented against underlying beat and that placement of words at different points relative to the rhythmic background affects the feel and makes the combined rhythmic structure far more complex than it seems on a printed page.

For example, while the music alone might be in 4/4 time, the timing of the words in a rap may make 16th note length time periods fundamental with off beat and on beat words having a different impact.  The rhythmic structure often changes a great deal between stanzas and choruses as well, breaking up monotony.

Mark Lieberman's post suggests that older poetry doesn't do that.  In the case of Browning (flourished early to mid-19th century) or Auden (flourished early 20th century), he's probably right.  But, in the case of classical Greek lyric works right on the brink of the transition from oral tradition to written accounts, and even in Shakespeare, I'm more skeptical.  A great deal of nuance may have been lost in the transition to the written word in those cases.

"It's a thing."

I've heard the phrase "it's a thing" out of my daughter a lot in the last year or so, meaning that something either has a secondary meaning (in the trademark law sense) or that something is part of a (newly established) shared cultural practice.  The phrase even has its own twitter feed.  A blog at the Chronicle of Higher Education noticed the reinvigoration of the phrase eight months ago (the frequency with which it is used, rather than the usage itself is what is really mostly new, the idiom passes the mutual intelligibility test back to decades before I was born), but being around college students all the time keeps you at the cutting edge of trends like this if you pay attention, so I don't fault myself for being oblivious.

For example, "Why are you wearing no socks, but a long thin shawl to school?", I ask.  "It's a thing.", I'm told.  The phrase can apply to text messaging conventions, instagram, decisions to participate or not in certain activities, or pretty much anything else that an anthropologist would call a "folkway."

Google And Life Long Learning And A Small Blogger Rant

One of the great things about reading online is that when you hit a word you don't know (in my case, usually terms describing fashion or furniture or cars of some particular kind), you can Google it up instantly and learn.

For example, this week, I have needed to look up the words maté, a kind of South American caffeinated tea, kilim, a kind of woven oriental carpet, and a bespoke suit.  I also needed to figure out what a 1969 Chevy Chevelle looks like (I'd heard of them, but couldn't picture one in my head).

In principle, I could have done this pre-Google.  But, finding a source sufficient for these references probably would have taken a half an hour or an hour each at a library, rather than an instant, and in some cases would have resulted in dead ends, particularly where I had misspelled a search term like using "matt" instead of "mate" for the tea in question.  On Google, a wrong turn, like a search that delivers a "matt shot" (booze poured into a shot glass at night's end from the floor mat for a buck), is a minor inconvenience.  In a library search when you can only manage to get there once a day, it could cost you another week that wasn't worth the effort given the final result.

In contrast, on the dislike list, is the function in the blogger software that goes way overboard in copying type style information from a source when you cut and paste.  I'd like to retain scientific notation, accent marks, and emphasis (like italics and bolding), for example, but not fonts and backgrounds, when I cut and past into it in "compose mode".  This is fairly tolerable in Wash Park Prophet, where I can cut and paste in bare HTML and lose the fuss easily.  But, quite a problem at Dispatches from Turtle Island, where I often need substantial formatting of scientific journal article text, but don't want it to take the "cut and paste" paradigm too literally.

97% of men in college and 80% of women in college have played video games often at some point

A study drawn from University of Texas-Austin students is making headlines, some based on misreporting of the story, about how often people play video games at the campus.
Potential participants were screened with a web-based questionnaire regarding their current and past video gaming habits. The principle items of the questionnaire were, "In the last year, how many hours per week do you tend to play video games?"' and "Prior to the last year, think back to the period in which you most frequently played video games. How many hours per week did you tend to play during that period?" Participants who reported 2 hours or less of video game play per week qualified for inclusion in the study. A sample of 816 prospective participants (463 female) were screened for inclusion in the present study. Only nine male respondents qualified based on their self-reported gaming habits, whereas 90 females qualified.
That’s right — the researchers had a hard time finding male participants who played computer games less than two hours per week, during the period in which they most frequently played video games, and not necessarily now.[1] 
[1] I’m pretty sure that the two-hours-per-week threshold was applied to the second question and not the first because only 90 of the 463 female respondents qualified, and “[f]or all female respondents, the median hours of current weekly game play was 1 (SD = 7.08) and 7 (SD = 12.6) at their most frequent.” If the two-hours-per-week threshold were applied based on current play, then well over half the women respondents would have qualified. Moreover, the study seems to discuss the eligible participants as “novice players,” which would likewise suggest that they were selected based on their never having played much.
The median male prospective participant played video games 8 hours per week (S.D. 9.2) in the last year, and 20 hours per week (SD 18.8) at a past time of peak play.  Given the other data it is fair to estimate that something like 10% to 20% of men at the University of Texas-Austin who inquired about the study had played less than two hours a week of video games in the last year.

The 90 female participants who qualified were a bit less than 20% of the prospective female participants.  The 9 male participants who qualified were a bit less than 3% of the prospective male participants.  This fits with a discussion of the literature in the study that states that: "In 2008, 72% of the general population and 97% of teenagers aged 12–17 reported playing video games."

Of course, one suspect that people who play video games very rarely may be disproportionately represented among people who don't answer web-based surveys about video game use with any eye towards being recruited as a subject in a psychology study.

Thus, most women and many men in college, however, currently don't play video games very often.

A number of blog reports inaccurately claimed that the cutoff was not two hours per week during the period in which you most frequently played video games, but two hours per day in the last year.  This is a far more extreme claim, although the number of male college students at the University of Texas-Austin who answered the survey and don't frequently play video games currently is still pretty modest.

The study's bottom line conclusion was that video game playing built valuable mental skills in novice players.

27 August 2013

Keeping "the book" interesting

In addition to a busy work schedule and a tumultuous personal life, one of the factors that has been keeping blog posting levels low here at Wash Park Prophet, has been a side project, "the book" that is coming along.  I may have to think about ways to avoid a criticism of another recent non-fiction book, however, so as to secure a wider readership.

Apparently, the problem with some non-fiction books is that there are "not enough vampires and car chases."  I will clearly need to endeavor to avoid this problem in my own work.  Honestly, important subjects like those are hard to avoid in any decent piece of non-fiction anyway.  This blog has the vampire topic soundly addressed on multiple occasions and from multiple perspectives, but is a bit light on car chases, something that will have to be addressed sometime soon.

Co-author, take note!

21 August 2013

Environmental Copper Exposure Linked to Alzheimer's Disease

A new study suggests that copper exposure at normal dietary levels from a variety of sources is a major environmental cause of Alzheimer's Disease.
"It is clear that, over time, copper's cumulative effect is to impair the systems by which amyloid beta is removed from the brain," said Rashid Deane, Ph.D., a research professor in the University of Rochester Medical Center (URMC) Department of Neurosurgery, member of the Center for Translational Neuromedicine, and the lead author of the study. "This impairment is one of the key factors that cause the protein to accumulate in the brain and form the plaques that are the hallmark of Alzheimer's disease."
Copper's presence in the food supply is ubiquitous. It is found in drinking water carried by copper pipes, nutritional supplements, and in certain foods such as red meats, shellfish, nuts, and many fruits and vegetables. The mineral plays an important and beneficial role in nerve conduction, bone growth, the formation of connective tissue, and hormone secretion.
However, the new study shows that copper can also accumulate in the brain and cause the blood brain barrier -- the system that controls what enters and exits the brain -- to break down, resulting in the toxic accumulation of the protein amyloid beta, a by-product of cellular activity. Using both mice and human brain cells Deane and his colleagues conducted a series of experiments that have pinpointed the molecular mechanisms by which copper accelerates the pathology of Alzheimer's disease.
Reference: Itender Singh, Abhay P. Sagare, Mireia Coma, David Perlmutter, Robert Gelein, Robert D. Bell, Richard J. Deane, Elaine Zhong, Margaret Parisi, Joseph Ciszewski, R. Tristan Kasper, and Rashid Deane. Low levels of copper disrupt brain amyloid-β homeostasis by altering its production and clearancePNAS, August 19, 2013 DOI:10.1073/pnas.1302212110

19 August 2013

Peer Reviewed Journal Papers Are The New Bible Stories?

As I observed a few years ago, "scientific studies"  have taken over the place that bible stories used to occupy. It's only fundamentalists like me who worry about whether they're true. For most people, it's enough that they can be interpreted to be morally instructive.
- Mark Liberman.

16 August 2013

NSA Concealed Abuses From Justice Department and Director of National Intelligence

The National Security Agency not only violated the privacy rules we are supposed to trust it to obey thousands of times a year in a trend that has gotten worse and worse since 2008, it concealed the extent and nature of the abuses from oversight officials in the Justice Department, the Director of National Intelligence to whom it reports, and established unconstitutional programs without obtaining even FISA court approval. In a related Washington Post article, the chief FISC judge is quoted stating:
“The FISC is forced to rely upon the accuracy of the information that is provided to the Court,” its chief, U.S. District Judge Reggie B. Walton, said in a written statement to The Washington Post. “The FISC does not have the capacity to investigate issues of noncompliance, and in that respect the FISC is in the same position as any other court when it comes to enforcing [government] compliance with its orders.”
But, this isn't really true.  In genuine courts, which have an adversary system and transparency, the people who could be harmed by government non-compliance with its order are informed of the existence of the orders and people allegedly harmed by a violation of an order have standing to enter an appearance contesting the order.  In the FISC case, only the government has standing to appear before the Court, the Orders that might be violated are known only to the government, and noncompliance is punished only if the government asks the Court to punish it.  Needless to say, this (almost never) actually happens - probably just once in the fall of 2009.

Congressional oversight committee members never saw the audits that showed this was the case and NSA employees were instructed to be purposefully vague in even internal reporting about their own abuses.  In general, Congressional efforts to provide oversight are muzzled and often thwarted by the agencies.

Former NSA contractor Edward Snowden, increasingly looks like a Patriot and not a criminal, for revealing this massive web of NSA lies, deceit and abuse.

Every day that evidence mounts that a massive overhaul of how the federal government conducts intelligence activities needs to be undertaken to provide meaningful privacy protections to Americans (and to foreigners not involved in diplomatic or terrorist activities), and to provide meaningful oversight of an agency that even members of Congressional intelligence committees, supposedly overseeing courts and senior federal officials with jurisdiction over the NSA aren't told about, but private contractors can find out about.  The NSA is broken in a way not easily mended.

Simply put, the way the NSA is operating is un-American and Unpatriotic.  Its activities are doing as much to undermine the values of our country and our national security as they are to preserve it.  They have stopped working for "Team Good" and starting working for "Team Evil."  Our elected officials have the power to act, but they need to exercise it.

15 August 2013

More Than Four Cups Of Coffee A Day Unhealthy

A study of more than 40,000 individuals found a statistically significant 21% increased mortality in those drinking more than 28 cups of coffee a week and death from all causes, with a greater than 50% increased mortality risk in both men and women younger than 55 years of age. Investigators warn that younger people in particular may need to avoid heavy coffee consumption. No adverse effects were found in heavy coffee drinkers aged over 55. . . . Younger men had a trend towards higher mortality even at lower consumption, but this became significant at about 28 cups per week where there was a 56% increase in mortality from all causes. Younger women who consumed more than 28 cups of coffee per week also had a greater than 2-fold higher risk of all-cause mortality than those who did not drink coffee.
The more than 40,000 subjects were tracked by the study over sixteen years. According to a non-study source "more than 60% of American adults drink coffee every day, consuming on average just over three cups a day."

From here citing Junxiu Liu, Xuemei Sui, Carl J. Lavie, James R. Hebert, Conrad P. Earnest, Jiajia Zhang, Steven N. Blair. Association of Coffee Consumption With All-Cause and Cardiovascular Disease Mortality. Mayo Clinic Proceedings, 2013; DOI: 10.1016/j.mayocp.2013.06.020


Nothing in a woman in her early 20s screams self-confidence like walking out to lunch with your friend in a seven colored frilly dress and a tiara.

14 August 2013

Spatial Ability Predictive Independent Of SAT Scores

A study of the relationship between SAT scores, a test of spatial ability taken at age 13, and high level performance in related areas such as publishing peer reviewed STEM papers and obtaining patents, shows that IQ differences in excess of the 99.5th percentile and spatial ability independent of SAT scores significantly predict performance even among this elite group measured for very high level and complex professional performances (from here).

The study is drawn from a project called the "Study of Mathematically Precocious Youth", which studied people who are roughly my peers in mathematical ability (I taught myself geometry, pre-calculus, three semesters of college calculus, college linear algebra, and discrete mathematics from textbooks in high school rather than attending math classes and then majored in math in college because I didn't have to take many classes in the field to complete my major).  They are also only modestly older than I am.  
[Abstract:] In the late 1970s, 563 intellectually talented 13-year-olds (identified by the SAT as in the top 0.5% of ability) were assessed on spatial ability. More than 30 years later, the present study evaluated whether spatial ability provided incremental validity (beyond the SAT’s mathematical and verbal reasoning subtests) for differentially predicting which of these individuals had patents and three classes of refereed publications. . . .[T]he SAT subtests jointly accounted for 10.8% of the variance among these outcomes (p < .01); when spatial ability was added, an additional 7.6% was accounted for—a statistically significant increase (p < .01). . . .  
[Steve Hsu commentary:] SAT composite accounted for 10 percent of variance in research success even within this already gifted subpopulation. This non-zero result, despite the restriction of range, contradicts the Gladwellian claim that IQ above 120 does not provide additional returns. In fact, the higher the IQ score above the 99.5 percentile cutoff for this group, the greater the likelihood that an individual has been awarded a patent or has published a research paper.
Spatial ability was much less relevant to papers on biology and medicine (and outside STEM fields) than it was in the areas of patents and non-biology and medicine STEM papers (even though math SAT scores were about equally relevant to biology and medicine and to patents).

Verbal ability was actually more relevant to STEM publication rates than to non-STEM publications rates, but was largely irrelevant to getting patents, which may in part be an artifact of greater variability in verbal ability in the subpopulation.

Norfolk, Virginia had an official blame the victim policy until 2013

According to a report from the Virginia Pilot . . . prior to the changes, [made in 2013, the Norfolk, Virginia police department, classified all rape cases as “unfounded” as a default and had no written provision in place to ensure victims were taken to the hospital and examined following an assault.
From here.

It was also standard practice in Norfolk, Virginia to repeatedly impress upon everyone reporting that they had been raped that they faced felony charges if the department concluded that they were lying.

Telephone Etiquette For Businesses

It is never acceptable in a business call to someone for any purpose to begin the conversation by saying: "Please hold while we connect you . . . ".  I always immediately hang up if I receive such a call.  If you care enough to call me, you should care enough to have a real person on the line when I pick up the phone.

12 August 2013

A Turning Point In Federal Charging And Sentencing Policies

Attorney General Holder has announced the biggest changes in the way that the federal government handles criminal prosecutions and sentencing decisions since the 1980s when long sentences for drug possession were enacted as part of the "war on drugs" with consequences that have been subject to widespread criticism ever since that time.

* The Justice Department will deliberately bring charges that lack the mandatory minimum sentences authorized by law in cases of "low-level non-violent drug offenders with no ties to gangs or large-scale drug organizations." The New York Times reports that: "according to an administration official, prosecutors will be told that they may not write the specific quantity of drugs when drafting indictments for drug defendants who meet the following four criteria: their conduct did not involve violence, the use of a weapon or sales to minors; they are not leaders of a criminal organization; they have no significant ties to large-scale gangs or cartels; and they have no significant criminal history."

* Sentences will be reduced for elderly, nonviolent inmates.

* Alternatives to incarceration will be sought by the Justice Department for non-violent criminal.

The Justice Department's U.S. Attorney for each of the 94 federal judicial districts will adopt policies to implement the national about face in the war on drugs, in an effort to reduce unduly harsh (and long criticized) federal mandatory minimum sentences for drug offenses and to reduce record high incarceration rates spawned by "war on drugs" hysteria in drug sentencing.
"Too many Americans go to too many prisons for far too long and for no good law enforcement reason," Holder plans to say. "We cannot simply prosecute or incarcerate our way to becoming a safer nation.
In addition to changing how U.S. Attorneys exercise their discretion in prosecuting cases, legislative changes will give judges greater sentencing discretion that is now constrained by mandatory minimum sentences.

While no national policy was announced related to marijuana offense prosecutions for conduct that has been legalized under state law, U.S. Attorneys with jurisdiction over districts that have legalization of recreational or medical marijuana may consider adopting policies to scale back prosecutions as part of this initiative.

The Sentencing Law and Policy blog has more coverage here and here, which also surveys media reports on the announcement.


The importance of this initiative cannot be understated. The death penalty, for example, is really a sideshow compared to the routinely excessive federal incarceration sentences for relatively minor crimes.

On the other hand, the proposal may take years to have much impact, because it would do only a little to shorten the long terms being served by current inmates.

Overuse of mandatory minimum sentencing is a leading cause of racial discrimination in the criminal justice system, with blacks and Hispanics charged with mandatory minimum sentence bearing offenses in federal court and middle class whites charged with much lighter sentences in state court, when they are prosecuted at all.

U.S. incarceration rates are high, in part because federal prisons are full of non-violent offenders serving long prison terms.

The changes are anticipated to save billions of dollars in prison costs.
The cost of incarceration in the United States was $80 billion in 2010, according to the Justice Department. While the U.S. population has increased by about a third since 1980, the federal prison population has grown by about 800 percent. Justice Department officials said federal prisons are operating at nearly 40 percent over capacity.
The United States, by far, has a world's highest incarceration rate. As a quote from the New York Times story quoted above notes that although the United States "has only 5 percent of the world’s population, it has 25 percent of its prisoners."

A Snapshot of the Federal Prison System.

As of June 29, 2013, there were 219,087 people under federal correctional supervision.

Of those 47% were incarcerated for drug offenses (about 103,000), and 12% for immigration offenses, and about 10% for other non-violent offenses (this category is hard to determine from summary statistics because non-violent fraud ad violent extortion cases are lumped together).

About 31% of federal prisoners are there for violent crimes or for weapons, arson and explosives related offenses (and many of the weapons offenses not involving violent acts in the most recent offense, with the modal charge being possession of a firearm by a felon or career criminal which has a mandatory minimum sentence in federal court). A disproportionate share of violent federal offenses involve offenses on federally controlled property like national parks, or offenses on Indian reservations.

Inmates serving sentences of ten years or more make up 32.5% of inmates in federal custody.  The median sentences is more than five years in prison.   There are 57 prisoners on federal death row (just three federal inmates have been executed since 1999 despite an average of roughly 350 inmate deaths a year from illnesses, accidents, suicide and homicides).

About 35% of federal inmates are Hispanic and about 37% are Hispanic (categories that overlap slightly), while most of the remaining inmates are non-Hispanic white (about 1.8% are Native American and 1.6% are Asian). About 26% of federal prison inmates are not U.S. citizens, a category disproportionately made up of people convicted of immigration offenses.

State prisons compared

By comparison, there are currently roughly 1,350,000 inmates in state prisons, of whom about 225,000 are incarcerated for drug offenses and 53% of which are incarcerated for violent offenses.

Thus, while federal prisons house only about one in seven people in prison in the United States (some for offenses like immigration offenses for which parallel offenses don't exist under state law), federal prisons house 31% of all prisoners incarcerated for drug offenses. The proportion of long drug offense sentences in federal prisons is even greater, despite the fact that the individuals serving long federal drug sentences are often fairly low level drug offenders such as "drug mules."  The federal law provisions allowing for early release on parole or as "good time" are also more strict than in most state criminal justice systems.

Trends culminating in this announcement.

State governments that handle the bulk of criminal prosecutions and have to balance budgets and deal with more constrained resources have been trimming sentences for non-violent offenses for many years now, even in conservative Southern states.   But, the federal government, with its perennial log jam in Congress discouraging new legislation and its more ample ability to finance mass incarceration, has been slower to join the trend towards more lenient sentences for non-violent offenders.

Earlier reforms have partially mitigated the notorious 100-1 crack-powder cocaine distinction that imposed stiff mandatory minimum sentences on very minor crack offenders (a drug of choice in minority ghettos) while comparatively lenient sentences were applied to powder cocaine offenders, but didn't reject entirely the harsh regime of mandatory minimum drug sentencing despite clear injustices that resulted.

08 August 2013

Good stuff

* Yesterday a cashier dropped a five dollar bill that I gave her.  I quickly knelt down, picked it up and handed it back to her without any pain.  A year ago, before I had back surgery, I couldn't have done that.  Hurray for medical science!

* Sliced mangos.  Waffles with whipped cream.  Yum!  Having kids at home to help you in the kitchen makes a huge difference in the quality of my diet.

* I've had a couple of cases recently where I've been able to secure favorable settlements for clients very early in litigation.  It feels good.

06 August 2013

Texas Still A State With An Abusive Criminal Justice System Problem

In multiple unrelated incidents, dash cams on police cars have caught Texas police officers conducting unreasonable body cavity searches in an unreasonable manner, allegedly searching for contraband drugs.

The cases also seem to have a strong "driving while black" arbitrary stop character to them.  The similarity and brazenness of the conduct in incidents involving officers not related to each other closely in time and place suggests that this is a larger pattern of conduct statewide in Texas.

The clarity of the police video evidence has led to criminal charges and employee disciplinary action against some of the perpetrator female police officers, in addition to lawsuits.  To some extent this corresponds with a growing shift in public opinion that sees strip searches and cavity searches for people who have committed only minor offenses, or have not been incarcerated, as abusive punishments rather than merely justifiable procedural matters.  As an attorney for one of the Texas women searched sums up the view:

"They basically raped them on the side of the road."

I expect that judges and legislators, despite the fact that challenges to these procedures have been rebuffed already in many cases, are going to eventually decide that this kind of invasive searching is not acceptable on the routine basis that it is used today.

Exploding Targets Used By Gun Nuts Cause Many Fires

Seven recent wildfires in the Rocky Mountain West (including three in Colorado) have been caused by exploding targets favored by gun enthusiasts.  In the last eighteen months, sixteen fires causing $33 million in damages (a significant share of which was in Colorado burning thousands of acres) was caused by these targets.  Federal officials are banning their use without permits on large swaths of federal land.

While these targets aren't the only cause of a record breaking fire season, a drought is the overarching cause, the damage caused by these targets does account for a remarkable share of the total burn damage for a more or less entirely new cause of forest fires.

Given the risk that these targets pose to neighboring property owners, a state or national ban on using these devices anywhere without a permit to ensure proper fire prevention measures are taken seems very appropriate.  Even gun owners understand that the Second Amendment doesn't include the right to use fireworks enhanced targets for entertainment purposes that put whole counties at risk of going up in flames.

Also, liability rules are not effective to regulate this problem because one target will often do more damage than the person responsible and their insurance policy can afford.  Indeed, one wonders if a product liability action by some of the fire victims against the manufacturer isn't in order.

05 August 2013

Saudi Arabia Considering Firing Squads In Lieu of Beheadings

[Saudi Arabia] is considering ending execution by beheading in favor of firing squads, reports the Egyptian English-language news website Ahram OnlineA committee consisting of representatives from the Ministries of Interior, Justice and Health says there are shortages in government swordsmen and argue that a change to execution by firing squad would not violate Islamic law, the Saudi daily newspaper al-Youm writes. According to an official statement from the committee, “This solution seems practical, especially in light of shortages in official swordsmen or their belated arrival to execution yards in some incidents.”

Execution by beheading in Saudi Arabia has continually been condemned by human-rights groups. According to Human Rights Watch (HRW), at least 69 people were executed by beheading in 2012, while Amnesty International says 79 were killed under the death penalty in the same period.
From here.

The official Saudi Arabian justification, a shortage of swordsmen, doesn't pass the smell test. Even if you have only one swordsman in the entire country, cutting off the heads of sixty to eighty people a year is a part-time job for a single person, and the notion that a nation with a population somewhere between New York State and California, with millions of unemployed young Saudi Arabian men, many of whom pursue traditional areas of study like Islamic theology, and hundreds of thousands more of whom are in military, just isn't remotely plausible.  The royal family alone has enough idle young men available to learn this skill in a heartbeat.

Presumably, the claimed shortage of skilled swordsmen is, in fact, a fig leaf for those in the Saudi Arabian government who want to make Saudi Arabia seem less medieval.

01 August 2013

Rigid Adherence To Gross Injustice In Federal Sentence Calls For A Presidential Sentence Commutation

Seventh Circuit, spliting 5-4, refuses to reconsider guideline error remedy after Peugh  
A helpful reader alerted me to this Seventh Circuit order denying rehearing in US v. Hawkins and this set of opinions from judges on the panel explaining how the Supreme Court's recent ruling in Peugh enters the analysis. I fear that the legal issues being debated here are hard to unpack (though they are fascinating), and thus I will here just reprint the first paragraph from Judge Rovner's dissent from the denial of rehearing, which helps spotlight the issue being debated:
Since July 25, 2003, Bernard Hawkins has been sitting in a Federal Correctional Institution, where he is scheduled to remain for approximately twelve-and-a half years. It is uncontroverted that the district court erred when it calculated his sentence using the career offender enhancement, and had the court not erred, his calculated sentencing range would have been approximately ten times less — somewhere in the range of 15-21 months. Yet despite the known and conceded error, we are told that for the sake of principles of finality, Hawkins must remain in prison for the entire 151-month sentence. My dissent to the panel opinion elucidated the reasons why I believe this was the wrong result. In the interim, the Supreme Court issued a decision in Peugh v. United States, 133 S.Ct. 2072 (2013), addressing the question of how appellate courts should view the effect of errors that sentencing courts make when they select the incorrect United States Sentencing Guideline as a starting point. In light of that decision, and for the reasons articulated in the dissent to the panel opinion, I believe it is our duty to reconsider Mr. Hawkins’ case and therefore I respectfully dissent from the denial of rehearing.
From here.

These are the kinds of cases that scream for the President to cut through the red tape and commute this man's sentence. Serving 151 months in prison when you would have served 15-21 months if a mistake had not been made concerning his criminal record is intolerable. This man has already been in prison for ten years of what should have been a sentence of about one and a half years.

A review of the original appellate decision which this panel was reconsidering in light of a new U.S. Supreme Court decision but ultimately left undisturbed sheds a little more light on what happened in the underlying case.

When Hawkins was sentenced in 2003, walk away escape offense were considered violent felonies under 7th Circuit precedent, so the misclassification of these offenses was not raised on direct appeal.  In 2009, the U.S. Supreme Court held in the Chambers case that walk away offenses were not violent felonies, overturning the 7th Circuit precedent at the time, and this implied that Hawkins was not entitled to be sentenced as a career offender (the underlying crime for which he was sentenced was a brawl with some courtroom bailiffs).  He sought post-conviction review in light of the new decision. 

The case comes down to whether the Chambers decision can be applied retroactively in his case via a post-conviction review motion.  The 7th Circuit concluded it could be in another very similar case a year ago, but the majority felt that the Hawkins case was distinguishable, a conclusion reached in this case on a 5-4 basis in a en banc decision that will probably be appealed to the U.S. Supreme Court (despite the fact that the Defendant will have only a year or so of his sentence remaining by the time that the process runs its course in the absence of a Presidential commutation).

The majority and minority discussions of the importance of finality in criminal sentencing are good expositions of the arguments for and against it that bear reading.  I agree squarely with the dissent for the reasons eloquently set forth in that opinion.

Feds Lied About Benefits Of Domestic NSA Surveillance

At a Senate Judiciary Committee hearing, the chairman, Patrick J. Leahy, Democrat of Vermont, accused Obama administration officials of overstating the success of the domestic call log program. He said he had been shown a classified list of “terrorist events” detected through surveillance, and it did not show that “dozens or even several terrorist plots” had been thwarted by the domestic program. . . . The Obama administration has been trying to build public support for its surveillance programs, which trace back to the Bush administration, by arguing that they are subject to strict safeguards and court oversight and that they have helped thwart as many as 54 terrorist events. That figure, Mr. Leahy emphasized, relies upon conflating another program that allows surveillance targeted at noncitizens abroad, which has apparently been quite valuable, with the domestic one. . . . John C. Inglis, the deputy director of the N.S.A., said there had been 13 investigations in which the domestic call tracking program made a “contribution.” He cited two discoveries: that several men in San Diego were sending money to a terrorist group in Somalia, and that a suspect who was already under scrutiny in a subway bomb plot was using a different phone.
From The New York Times.
[U.S. Senator Leahy] noted that senior officials had testified that the phone logging effort was critical to thwarting 54 plots, but after reviewing NSA material, he said that assertion cannot be made — “not by any stretch.” Pressed by Leahy on the point, Inglis admitted that the program “made a contribution” in 12 plots with a domestic nexus, but only one case came close to a “but-for” or critical contribution.
From The Washington Post.

And thus, 54 terrorist events detected became one plot to which the program made a critical contribution, over many, many years of monitoring every single phone call of every single American in the United States. This tips the balance quite a bit. It is not at all clear that a House vote of 207-217 rejecting limitations on NSA domestic surveillance made last month would have survived if the administration's lies about the program's effectiveness in preventing terrorism had been available at the time. The fact that it took an illegal disclosure by an outside contractor to get the administration to tell Congress the truth or to release basic information about the program also casts doubt on the effectiveness of Congressional oversight of the program.

A key question in my mind is whether the "critical contribution" was one for which a request support by "probable cause", or even a "reasonable suspicion" related to a particular suspect or even a particular terrorist plot or group for which names are not known, could have achieved the result, or if this "critical contribution" would not have been possible but for a blind search.  If the critical contribution came from finding another phone of a subway bomb plotter, one might think that it could have been.  If the critical contribution was related to people sending money to a terrorist group in Somolia, I'm inclined to think that greater privacy protection might be worth missing one instance of terrorist group funding found with a blind search that couldn't have been found any other way.

On the whole the updated effectiveness data strongly suggests that probable cause based investigation is not just legally sound, but is also an extremely good discriminator between almost worthless blanket searching and highly fruitful targeted searching.

Bonus:  Absurd details about the FISA Court.

Colorado Foreclosure Lawyers Still Dirty

The Foreclosure Law Firm Industry and Its Business Model

In Colorado, and in most states, most mortgage foreclosures are handled by a small number of law firms between them have won most of the commercial banks and other mortgage lenders in the state as clients (a more numerous but still small set of core clients), in addition to lower volume mortgage lenders who use them because they specialize in the work.  Unlike most law firms, which operate on a craft work basis, handling cases on an individualized case by case basis, these firms engage in factory style mass produced legal work with a small number of partners supervising a significant number of associates supervising an army of paralegals to produce large numbers of judicial foreclosures and deficiency judgments which are overwhelmingly routine and not seriously contested.

These firms do almost nothing else but foreclose on defaulting mortgages.  Often, if lender liability issues or other serious complications arise, the cases are transferred to another large law firm or boutique law firm specializing in lender liability and commercial litigation with a more tradition craft work business model.  They work on a fee for service basis and handle dozens, hundreds or even thousands of cases per year for each client.

Most of a foreclosure law firm's work happens in the non-adversarial non-judicial public trustee's foreclosure system punctuated by a brief, narrow summary probable cause hearing to determine if there is a default on the loan (often uncontested) called a Rule 120 hearing.  The Rule 120 hearing does not examine issues like the reasonableness of collection costs or foreclosure bids.

Institutional mortgage lenders like these firms because they know how to interact with institutional clients with a large volume of routine work, they provide consistent quality work, and their paralegal and form driven practice with routine hiccups supervised by associate attorneys with less prestigious credentials and lower hourly rates than the large law firms they use for non-routine work makes these firms very competitive with other small and medium sized firms that would do the work on a traditional top heavy craft work basis.

These firm's poor cousins, collection law firms, have similar practices that collect unsecured debts like unpaid credit card bills, store accounts, judgments and bills for professional services, typically on a contingency basis of 33%-50% of the funds recovered.

Process Serving Charge Corruption

Almost all of the leading foreclosure law firms in Colorado are the subject of an investigation by the Colorado Attorney General's office (currently Republican Attorney General Suthers) involving inflated charges for posting foreclosure notices.  Foreclosure firms claimed the costs were on the order of $125 to $150 or more for the service, but actually had affiliated process serving firms owned by their lawyers do the work for $7 a posting plus mileage, pocketing the profit for themselves and not disclosing the relationship to the Public Trustee's offices or courts.  Bona fide third party process servers typically charge $25 or so for the same service.

What is the economic impact of this practice?

While the practice generates only $100-$200 of extra revenue per foreclosure, which typically involve debts of hundreds of thousands or millions of dollars each, and is also small relative to the largely unregulated fees charged by foreclosure lawyers, the undisclosed profit received by the foreclosure lawyers from this practice at one major foreclosure law firm was $5 million a year.  This is a classic case where the bite of the practice to its primary victims is a mosquito bite to them, but a huge boon to the people who engage in it.

Who Is The Victim?

This practice defrauds property owners (1) if they pay this price when curing their defaulted mortgages, (2) if deficiency judgments are entered against them that include that amount if the an appraisal supports a foreclosure sale bid less than the value of the outstanding debt because the price of the house fell after it was purchased, and (3) if they receive less of a surplus check when the foreclosure sale bid is more than the outstanding debt.

Property owners do not bear most of the cost of this practice, however.  In the overwhelming majority of cases the mortgage default is not cured and the only bidder at the foreclosure sale is the lender who bids the amount of the debt plus collection costs, in return for title to the property that was collateral for the loan, waiving a deficiency judgment.  In these cases, the defrauded party is usually a commercial bank, or a government agency that purchased or guaranteed the loan, such as Fannie Mae, Freddie Mac, the FHA, the Veteran's Administration and other government lenders or guarantors.

Of course, nothing prevents foreclosure law firms from discontinuing this dubious practice with hidden charges and replacing it, for example, with more honest increases in the hourly rates charged by their paralegals, associates and partners, or even an arbitrary "new case fee" in addition to their hourly rates, of a similar amount.

Why care?

The practice itself leads to only modest harm that disclosure alone can mostly remedy.

Standing alone, the practice of using captive process servers charging inflated prices to post notices on foreclosed properties is a petty and banal case of petty corruption which, in fairness, is sufficiently subtle that it is just barely fraud at all.  Most of the people who are hurt by it would have had the economic power to insist that the practice stop if they are going to continue to use the firm's services if they had known about it.

The more diffuse class of property owners who have no economic means to stop the practice (and surely it is lawyers who defend them, and not representatives of institutional investors who brought this practice to the attention of the Attorney General's office) is suffering a modest share of the total harm caused by the practice, that is also small relative to the total losses they suffer in foreclosure cases.

Also, once the information is shared widely (as it is in many kinds of specialty legal practices like foreclosure defense through practice newsletters, internet forums, and bar association networking and continuing education programs), property owner in cases where deficiency judgments are asserted do have an adversarial court forum in which they can get a fair hearing regarding these inflated charges (although the cost of doing so over a $100 to $200 charge may not be cost effective except as a good faith basis to fight summary judgment and delay collection).  Significant surplus payments in foreclosure cases due to third party foreclosure sale bid are rare, and cures are also, alas, quite rare.

The tip of the iceberg.

The improper conduct of these foreclosure firms in the case of process serving fees, however, is really just the tip of the iceberg of the overarching and more serious problem: low level corruption that pervades the entire industry and is exacerbated when foreclosure volume is up putting a strain on these firm's resources.

Another area that the Attorney General's office is investigation, albeit on a lower profile, because the issue is more subtle and more invasive of the attorney-client privilege to investigate, is attorneys' fee bill padding by these firms.  These dollar amounts are likely considerable greater than inflated process service charges and have the same incidence and sources.  Inflation of attorneys' fees and collection costs combined can create a significant barrier to the ability of a property owner in default on a mortgage to cure the default and retain the property.

Even more problematic than inflated collection costs is the practice of using false affidavits of foreclosure firm attorneys, their staff, their clients and their process servers concerning the right to foreclose.  For example:
Attorney Toni M.N. Dale of Medved Dale Decker & Deere in Lakewood was referred for discipline last month by a federal judge for wrongly certifying that copies of a bank's promissory note — required for any foreclosure in Colorado — were "true and correct" when, in fact, she had never seen the originals at all.
Additionally, U.S. Bankruptcy Court Judge A. Bruce Campbell said in a written order that not only was Dale's certification in 2011 to the El Paso County public trustee — the overseer of foreclosures in that county — untrue, but so was her verification to the bankruptcy court about the same records.
From the Denver Post.

In the Dale case, he was caught when two different purported note assignments from one bank to the other were submitted in different stages of three different court proceedings involving a loan.  Fraud regarding the existence of original notes and deeds of trust establishing the right of a foreclosing bank to enforce it by bringing a foreclosure action, something that is part of a larger national "robo-signing" scandal was common during the period of high volume foreclosures during the financial crisis.

In all of these cases, a key issue is that the sworn statement of a lender's foreclosure lawyer or the lender's foreclosure department employee is all that stands between a person losing their home and not losing it to a lender who doesn't actually have the legal right to enforce the promissory note.  The non-judicial foreclosure process is non-adversarial, recent amendments to Colorado law prevent property owners from contesting this issue in a Rule 120 proceeding, and contesting a foreclosure in an independent injunctive relief action is an expensive option that is unlikely to prevail in cases where the borrower knows that there is only a small chance that their particular case involve a lender who doesn't actually have a right to foreclose.

Dale's case is particularly notable because the kind of forgery and lying in affidavits that he engaged in, within a firm that operates on a mass production model rather than the individualized craft work business model of most law firms, is almost certainly not an isolated incident.  The other cases may never be caught, but there are almost surely many other cases in which Dale engaged this kind of fraud, in which other employees at the same law firm engaged in this kind of fraud, and in which other similarly situated law firms in the industry in Colorado engaged in this kind of fraud.

Why would someone like Dale lie?

Dale's fraud is somewhat understandable.

In the vast majority of cases, lenders do have their paperwork in order, so affidavit signing lawyers or bank employees tend not to be vigilant as they mass produce this routine and dull paperwork for hours on end for large packages of defaulted mortgage loans.

In the cases where the lenders don't have their paperwork in order, it is usually because some mid-level bureaucrats at a loan transferring institution in the byzantine secondary mortgage market process by which mortgage originators sell their loans to other lenders or mortgage loan investors in large packages of loans failed to dot their i's and cross their t's property in the course of implementing a deal already reached at the executive level, or because bureaucrats at this level simply made a clerical mistake.  The customer service level loan servicing process often works from the high level package of loan transfer process of engaged in by the executives rather than back room documentation of the mid-level bureaucrats involved in the transfer, so problems in transferring the physical loan documents can easily go unnoticed until the loan goes into default.  In the case of the vast majority of loans that never default and are released without physical copies of the notes as special rules applicable to release by institutional lenders permit them to do, the problems never have any impact at all.

But, the bottom line is that when the loan transfer paperwork isn't in order it is costly and time consuming to correct the problem and the vast majority of the time, there is no bona fide dispute between the parties to the transfer of the loan concerning who owns the loan.  Indeed, this appears to have been the situation in Dale's case where the loan transfer documentation irregularity was ultimately sorted out and the foreclosure was ultimately completed.

When it is factually true that a borrower is in default, and it is factually true that the foreclosing lender really is the owner of the loan entitled to foreclose, but the paperwork documenting the fact that the foreclosing lender has that right was screwed up by someone earlier in the mortgage transfer process, it is tempting for a foreclosure lawyer to see a lie, or even a forgery that covers up the bureaucratic screw up in connection with the loan transfer to be a mere "white lie" that cuts down on busywork paperwork and delay that would provide a windfall benefit to an undeserving defaulting mortgage borrower, rather than a material misstatement of fact that constitutes a morally blameworthy "black lie."

There are cases where lenders who have no right at all to foreclose on a loan, rather than merely a right to foreclose in which the paperwork needs to be cleaned up happen.  There was a famous case where that happened in Florida a few years ago at the height of the financial crisis.  But, these cases are vanishing rare, because in those cases there is hell to pay in an easily proven case from a property owner who can easily prove that the loan was paid off with bank records, or from another lender whose right to collect on the loan was converted from them by the wrongdoer.

The trouble is that if "white lies" by people like Dale are not punished severely, an entire system that depending on banks and their lawyers being honest about the amounts owed on loans, the existence of a default, the amount of collection costs incurred, the accuracy of the notices that they give, and the lender's ownership of a loan, none of which are subject to a meaningful adversarial challenge, could go of the rails and become seriously abusive as a matter of routine.

Petty corruption by foreclosure lawyers about process service fees, the number of hours of legal work involved in a foreclosure, the accuracy of mailing lists, the accuracy of a bank's loan payment history, the existence of documentation establishing that the foreclosing party owns the loan, and the sincerity of the appraisals backing up deficiency claims all undermine what if utilized in good faith with extremely high standards of care and honesty can be a very low cost and efficient way for banks to collect their unpaid debts which lowers the cost of mortgage lending and benefits borrower's who fulfill their obligations while proportionately and accurately punishing borrowers who default on their loans.

An Aside On The Economically Most Significant Issue In The Foreclosure Process: Overstated Deficiency Claims And Thin Foreclosure Sale Markets

Outside of the cure situation, when deficiency judgments are sought by banks foreclosing on properties that are upside down (i.e. worth less than the outstanding debt), however, even inflated collection costs and carrying costs for the property are relative minor issues.  The two main sources of economic harm to property owners and people who guaranty their loans are overstated deficiency claims and thin foreclosure sale markets.

Low Ball Foreclosure Appraisals

In cases where a lender believes that foreclosed property is worth less than the debt owed, the lender can obtain an appraisal, bid the appraised value of the foreclosed property rather than the full amount of the debt owed, and sue for the deficiency.

The dominant economic concern of borrowers in this situation is that these deficiency bids are routinely based on artificially understated appraisal of the foreclosed property that for one reason or another third party foreclosure sale bidders did not exploit.  Appraisers who are hired by banks in these situations know the score and produce low valuations within the range of possible appraised values (something that is more art than science) so that they get repeat institutional lender customers.

This is a core litigated issue in deficiency judgment cases brought against borrowers and their guarantors, but the presumptive validity of a deficiency bid which a contesting borrower has the burden of showing was unreasonable, is challenging for someone who has just lost a valuable property to overcoming in sometimes expensive litigation.  As often as not, borrowers fight these claims be reaching a settlement based upon inability to pay, or by going bankrupt, rather than by resolving the question on the merits in a deficiency judgment lawsuit that they lack the resources to fight once deprived of their valuable property in foreclosure.

This is also a situation where an asymmetric playing field is unfair to borrowers.  The deficiency bids of lenders supported by appraisals are presumptively valid and can be used to get more than the property from the lender on a basis that is not market tested.  In bankruptcy under Chapters 11 and 13, second home borrowers and commercial real estate borrowers can do essentially the same thing, using an appraisal to "cram down" the amount of a mortgage lender's loan that survives bankruptcy to the value of the property that is collateral for the loan without any market test of that appraised value.  But, residential mortgage borrowers aren't entitled to cram down in bankruptcy and must either surrender a personal residence (in which they have a non-economic stake that can't be share with the bank) that is worth less than the loan, or turn over the personal residence to the bank and move out.

Lenders and their attorneys often pursue deficiency cases aggressively even when in a large share of cases this leads to nothing but a pennies on the dollar settlement in or out of bankruptcy, or to no meaningful recovery at all, often after forcing a borrower or guarantor to go bankrupt.  There are some substantial recoveries in these cases, but they aren't particularly common even in big dollar commercial cases.

The Thin Foreclosure Sale Market

The other hugely problematic feature of the foreclosure system is that foreclosure sale bids rarely command anything close to the full fair market value that could be secured in an ordinary arms length, undistressed realtor negotiated sale of the collateral.

The moment that a property enters the foreclosure process, buyers collectively lower their offering prices because they know that the seller is distressed.

Foreclosing lenders are never required to bid more than the amount of their debt to obtain the collateral even if their loan is worth far less than the property foreclosed upon.

Third parties are allowed to bid at foreclosure sales, and sometimes they do, but a variety of factors conspire to prevent third parties from making anything other than low ball bids except in the case of properties which obviously have lots of equity.

Foreclosure bidders have far less information about the property being purchased than an ordinary commercial real estate purchaser and have to suspect the worst because the current owner didn't find a third party buyer for the property prior to the foreclosure sale.  So, they discount their offering price accordingly, factoring in a higher expected profit margin in each transaction to compensate for unexpected surprises in a few deals. Sometimes the owner doesn't come to terms with reality because the property has little equity, but equally often, the owner fails to act because the owner does not personally have the capacity (often at a time of general personal and financial distress) to be together enough to take the steps necessary to conduct a pre-foreclosure sale, especially if the complications involved in trying to negotiate a short sale are involved.  Also, the lender can always refuse to cooperate with a short sale, leaving the borrower's only recourse to solicit people to make cash bids at a foreclosure sale without knowing what appraised price the lender will be offering.

The fact that a foreclosure bidder has to promptly pay cash in a time frame to short between the purchase and the time that full payment is due to arrange commercial financing for the property prevents the vast majority of people ultimately interested in purchasing a foreclosed property from bidding.

The lender has no interest in soliciting people to bid at the foreclosure sale, because once they regain possession they can arrange at their leisure for a more lucrative commercial sale of the real estate in the ordinary course and secure a full market price rather than a distressed seller, cash only sale price.  Any potential buyer the lender is aware of at the time of the foreclosure sale can be contacted after the lender secured title to it.

Artificially low foreclosure sale auction prices inflate the deficiency judgments owed by borrowers when properties are upside down, and cause them to arbitrarily lose equity in their foreclosed property in cases where the lender's debt is fully satisfied out of the collateral.

Further, to the extent that the foreclosure sale auction process is not providing a meaningful check on abuses on inaccurate bidding and lenders windfalls from over secured loans in the foreclosure process, the foreclosure process imposes strong moral hazards on lenders to routinely unreasonably bend the rules in their favor that are hard to test in an adversary process.

How Badly Broken Is The Foreclosure Sale Process?

In short, the concern is that foreclosure sale prices are too low.  Nobody is seriously claiming that foreclosure sale prices are too high and are cheating the lenders and foreclosure bidders at those sales.

The indirect measure of the extent to which the foreclosure sale process is flawed by underpricing foreclosed real estate is the extent to which lenders and third party foreclosure sale purchasers are making profits from property purchased at foreclosure sales.  The bigger the profits lenders are making from the REO sales and the bigger the profits third party foreclosure sale purchasers are making from their purchases, the more badly the foreclosure system is broken.

The fact that surplus payments to borrowers are rare, even in cases that don't involve recently closed, low down payment loans also supports an inference that the foreclosure sale process is flawed, although less decisively, because market wide declines in real estate prices, which have been recently experienced in many markets, can also have that effect.  A poorly cited study by Whitney from 2003 cited in Wikipedia states that bulk REO sales are typically for 40% to 60% of the actual fair market value of the properties.

A 2008 study in the Cleveland market found that lenders take losses on a large share of their lowest price REO sales, although subsequent buyers from commercial banks make significant profits of these very low priced REO sales.  The lenders apparently see foreclosure as a way to cut their losses a little, while placing a premium of getting out of the business of owning real estate quickly even if that comes at significant opportunity costs to the lender.  Part of this may be motivated by tax disincentives for lenders associated with REO profits.  Rather than chase borrowers for deficiency judgments, these lenders bid the amount of their debts in the case of low value real estate, quickly dispose of the property in a fire sale, and let someone else secure incremental profits involving activities like fixing up foreclosed properties and marketing them that are outside their core business competencies.

Another metastudy from 2012 that was jointly sponsored by several federal reserve banks looking at several studies conducted since 1985 found that in U.S. markets discounts in foreclosure sales varied by market and property type from just 1-2% to 47%, with a foreclosure discount in the vicinity of 22% being typical nationally.  Recently, studies have also focused on the concerns of local governments about neighborhood level distress caused by a wave of foreclosures in the same neighborhood.

The foreclosure sale auction market is also not monolithic.  Most foreclosure bidders are geared towards purchasing very low priced properties either for personal use or to fix and flip (or just to flip).  Empirical studies have shown few big players with foreclosure bidders who purchase large numbers of properties making up only about a fifth of REO purchasers in the Cleveland market, for example.  The pool of potential foreclosure bidders for high end residential real estate and commercial properties, where the risks associated with imperfect information are greatest and the number of sales each year is smallest, is particularly thin.

In short, the empirical evidence supports the claim that foreclosure sale prices are artificially low, but there are few strong indications that REO sales are a big profit center for lenders who tend to leave money on the table in these transactions, or that the market is lucrative enough to attract large numbers of repeat players who consistently make big profits over time on these transactions.  So, while this system is broken, something, probably the ability of borrowers to make distressed sales or secure hard money loans while foreclosure proceedings are pending, mitigates the extent to which this process is abused when property owners risk losing large dollar amounts of equity in a foreclosure sale itself.