Doug Cornelius .com

The Attorney General is proposing new regulations under the Consumer Protection Act (M.G.L. 93A). The new regulations add new prohibited activities as provisions (15), (16), (17) and (18) under 940 C.M.R 8.06.

The new prohibited activity under item (17) makes it a “deceptive act or practice for a mortgage broker to process, make or arrange a loan that is not in the borrower’s interest.” It goes on to require the broker to disclose when the financial interest of the broker conflicts with the financial interest of the borrower. If the broker is going to get paid more if the borrower gets a loan with a higher interest rate, the broker needs to disclose the conflict and not help with the loan. The regulation further provides that the broker cannot disclaim a fiduciary duty to the borrower.

I surprised that the regulation requires the mortgage broker to have a fiduciary for the borrower. I think the mortgage broker is acting as an agent for their lenders, not as an agent of the borrower.

I think this regulation, if enacted, will leave mortgage brokers scratching their head as to how to operate. How can they determine if a loan is in a borrower’s interest?

I was surprised at the lack of “live bloggers” at ILTA. It is a technology conference so I expected to see some interesting ways people were keeping notes and tracking information. Lisa Kellar Gianakos was toting around a tablet PC. But otherwise, I saw very few people using computers. Mostly, I saw people scratching some simple notes in the back of the conference book.

I first started live blogging at the Enterprise 2.0 Conference in June. I was (still am) new to blogging. But I thought a blog would be an excellent way to keep notes from the conference. Just before going to that conference I came across some notes I had taken from another conference I attended. There was some good stuff in those notes, but they were just sitting in a pile. I could not retrieve the notes, leverage the notes for other use or leverage my attendance at the conference.

With my notes in a blog, I can use the blog search to quickly retrieve them, use labels to add some organization and incorporate them into the stream of thoughts embodied in this blog.

In addition to my use of the notes, the blog makes them readily available to my colleagues in the knowledge management group at the firm (and shows my director that I was not just off having a good time).

I think it is important to stop the blogging shortly after each session. I do not want blogging to take the place of person-to-person interaction at a conference. As the session ends, I will generally do a quick spellcheck and a quick skim for obvious errors. If it is decent enough, I just hit publish and let it go with whatever typos, grammatical errors or formatting problems I missed. If it is in really bad shape, I will wait to edit the post during a later, quiet time. For me the key is to capture the information, more than polishing them for prime-time.

During a session, I will look surgically attached to my computer. But the end result is much more useful. Isn’t that what technology is all about?

The Attorney General is proposing new regulations under the Consumer Protection Act (M.G.L. 93A). The new regulations add new prohibited activities as provisions (15), (16), (17) and (18) under 940 C.M.R 8.06.

The proposed prohibited activity in (16) limits the mortgage lender’s ability to make no-documentation or limited documentation loans. These types of loans were targeted at borrowers who had trouble documenting all of their income. Typically this type of borrower would be an independent contractor or small business owner. [CNN.Money background article]

On the dark side, I believe these borrowers were typically a contractor or business owner who did not do a good job tracking all of the cash they received and was hiding income from the taxman. I also think these loans were used for a borrower trying to get more of a mortgage than they would ordinarily be able to get using typical underwriting standards. The borrower would state that they had more income than they actually did. I never saw a good reason for this type of loan to exist other than to cheat the lender or the taxman.

The Washington Post does not paint a pretty picture on the use of these loans: The Lowdown on Low-Doc Loans.

Although the new regulation does not prohibit this type of loan, the regulation makes them very unappealing to lenders. The lender must deliver a statement with the borrower’s income and a disclosure that the loan will be at a higher interest rate because of the “no-doc” option. Also, the lender needs to verify the employment and income when the stated income is “not reasonable for the occupation or experience of the borrower.. . .”

I do not know how a lender is supposed to determine what a reasonable income is for a person in a particular occupation with a particular level of experience. Effectively, a lender is leaving itself wide open for a claim under 93A if makes no-doc or limited doc loans in Massachusetts.

The Attorney General is proposing new regulations under the Consumer Protection Act (M.G.L. 93A). The new regulations add new prohibited activities as provisions (15), (16), (17) and (18) under 940 C.M.R 8.06.

The new (15) provides in part: “It is an unfair or deceptive act or practice for a . . . lender to . . . make a mortgage loan unless the . . . lender . . . reasonably believes at the time the loan is expected to be made that the borrower will be able to repay the loan based upon a consideration of the borrower’s income, assets, obligations, employment status, credit history, and financial resources, not limited to the borrower’s equity in the dwelling which secures repayment of the loan. . . .”

The problem with this new prohibited activity is the lack of a benchmark for a lender to rely on. The challenge from the borrower under (15) will almost always come after the person has gone into default and is scrambling to prevent foreclosure. How can the lender prove that they reasonably believed the borrower could repay the loan when it turns out that the borrower could not.

How much of their income should a borrower reasonably be expected to expend on their mortgage and still be expected to be able to repay the loan? Certainly a loan with monthly payments in excess of 100% of a borrowers net monthly income would be a violation of this new provision. But I am not sure where the percentage hits the tipping point to become reasonably expected to be able to repay. 90%? 75%? 50%? 25%?

I think the borrower should be the party that determines if they will be able to repay the loan.

Chris Taylor wrote a piece on Business 2.0 on Why commercial outfits can’t get Wikis to work. Among other things it points out the failure of Penguin Books to use a wiki to write a novel. IT failed, even with the assistance from instructors at a creative writing program.

Mr. Taylor concludes that “People need a common focus, a shared obsession, to be productive as a crowd.” Wikis need direction. Wikipedia succeeded as first entrant into the market and continues to dominate as the online wiki encyclopedia. Any other wiki needs to be focused on a particular topic of interest. One of my favorites is the Wookiepedia on all things Star Wars.

I think the same concept needs to be carried over to wikis inside the enterprise. The first step for success is for the enterprise to have communities of practice or practice area to organize the “crowd.” Each community of practice should have its own wiki. I also think all the changes in the wiki should be distributed to the practice area instead of having to subscribe to changes on a particular wiki page.

A community of practice is more likely to contribute to wiki that is its own rather than firm-wide wiki. I see much more a of sense ownership. The down-side is the possible duplication in wikis for different communities of practice. I think it should be the role of the knowledge management team to monitor the wikis and identify when they are hitting on the same topic. You can then broker who should be the primary repository and link the wikis together using an external URL link rather than an internal wiki link. If the topic is big enough and the groups can’t agree, create another wiki for the groups to share and link the community of practice wikis to the new one.

With Wikipedia and its hundreds of thousands of pages and millions of users, a user would be overwhelmed by the changes if they were on the RSS feed for the whole wiki. This scale is unlikely to be true inside an enterprise, with many fewer users and many fewer changes. Also, the flame wars seen in Wikipedia would be unlikely inside the enterprise. Inside the community of practice, mashing all of the changes to the wiki into a single feed makes sure that everyone in the community is aware of everything happening in the wiki.

I have seen some firms set up a single wiki for the whole firm. They generally get poor results.

Of course having multiple wikis means that you need a search tool that indexes all of them and returns the results in a unified manner.

For those of you who have may not have heard, Nixon Peabody created a song to celebrate being named one of Fortune Magazine’s best companies to work for. No surprise that the song is horrible and no surprise that it leaked out to the media.

Above the Law publicized the song and got threatened with legal action by Nixon Peabody. The Wall Street Journal then dog-piled on the story.

Now the story has gone mainstream and has been picked up by VH-1: Ladies and Gentlemen, It’s Never Too Late for a Hot Summer Jam, Courtesy of Blood-Sucking Law Firm. You need to listen to the song to appreciate how horrible it is.

It takes a lot of public relations mis-management for an AmLaw 100 law firm to be mocked by a music video network.

The Attorney General is proposing new regulations under the Consumer Protection Act (M.G.L. 93A).

The Attorney General summarized wants to enact the new regulations to:

· Prohibit mortgage brokers or lenders from making a loan if they do not have a
reasonable belief that the borrower is able to repay the loan.
· Restrict the abuse of no-documentation or “stated income” loans by requiring that the mortgage broker or lender disclose how the interest rates or other charges will increase under a “no-doc” loan, and obtain the borrower’s signed statement of income in order to process those types of loans.
· Prohibit mortgage brokers from arranging or processing loans that are not in the borrower’s interest, and prohibit brokers from brokering loans if their financial interests conflict with the borrower’s.
· Prohibit mortgage lenders from steering borrowers to loan products that are more costly than those that the borrower qualifies for, and prohibits lenders from discriminating between similarly qualified borrowers.

These new regulations are an update of regulations from 1992 when the last big mortgage crisis affected the Commonwealth. The regulations apply to all residential mortgages, except open end home equity lines of credit.

The update adds new prohibited activities as provisions (15), (16), (17) and (18) under 940 C.M.R 8.06.

I have a lot of concern about knee-jerk reactions to mortgage crisis. One person’s predatory lending is another person’s provider of an opportunity to invest in real estate.

The Massachusetts Attorney General is reacting to the current sub-prime mortgage lending situation by proposing several new regulations under M.G.L. 93A

A copy of the proposed regulations can be found here.

The hearing schedule for the proposed regulations is as follows:

Monday, September, 17, 2007, 11:00 a.m.
Worcester Regional Chamber of Commerce
339 Main Street
Worcester, MA 01608

Tuesday, September 18, 2007, 11:00 a.m.
Brockton District Court, Rotunda Hearing Room
215 Main Street
Brockton, MA 02301

Wednesday, September 19, 2007, 10:00 a.m.
Office of the Attorney General
1350 Main Street, 3rd Floor Conference Room
Springfield, MA 01103

Thursday, September 20, 2007, 10:00 a.m.
The State House – Gardner Auditorium
Boston, MA 02108

With all the live blogging I did last week at ILTA, I found this story on NYTimes.com interesting: Minding the Meeting, or Your Computer?

I rarely use my laptop at work to take meeting notes. Since my laptop does not dock and undock smoothly from the network, it is a nuisance to lug from meeting to meeting.

At a conference, like ILTA, I find this blog to be a great way to take notes. The NYTimes story made me wonder if the laptop note-taking has a negative impact on the presenters. They do see the big gray back of the laptop instead of a notepad, but I am not any less engaged using a laptop instead of a pad of paper. If a presenter is engaging me as an audience member, I am just as inclined to ask a question or disagree with a presenter regardless of my note-taking method.

Of course if I am bored by the presenter, I am inclined to check email, ESPN or my RSS feeds for something more engaging. The alternative would be checking my blackberry, which is the universal sign for “I am not paying attention to you!” With the laptop, the presenter can assume I am still taking notes instead of checking the latest Red Sox score.

• Beth Chiase, National Director of Loss Prevention of Foley & Lardner LLP
• John J. Kruse, Director of Records & Conflicts Administration of Calwalder, Wickersham & Taft LLP
• Ann M. Ostrander, Senior Loss Prevention Manager of Kirkland & Ellis
• Keith Lipman, Senior Manager, Legal Solutions & Product Manager of Interwoven, Inc.

At Kirkland, the DMS is the repository for records. The DMS for electronic records and the RM system for physical records are the only place that client records should reside. They have developed a taxonomy, practice of law, for both physical records and electronic records. They have instituted a proactive security policy in the DMS. On a confidential matter, document access is restricted to a limited group. This is an issue with overnight word processing. They do not have permission.

Why have document types?

The longer the list, the more likely people will pick miscellaneous. It is very beneficial to drive document retention against different document types. As you are developing your list, a primary driver is how long you are going to keep the document in the system. (Maybe you should delete fax cover sheets quickly.) It may make more sense to drive the retention by practice area.

How have they approached document types and folder in Matter Centricity of Interwoven?

Cadwalader has 12 different types of folder lists, depending on the practice group. They have had to go back and revise half of those lists. They tried to maintain the one-to-one of folder name to document type. As the lists were revised they broke away from that on-to-one structure. They now have 18 different types of folder lists.

At Kirkland, they have twenty different document types. Different practice areas, have different lists of folders. Different areas of laws have different folder types. They have an “other” folder that allows the user to pick a different document type.

Foley did not create different folders lists for practice areas. They thought there was too much cross practice area work on most matters. Foley has five folders for each matter: email, work in progress, executed documents, temporary, and correspondence. The user needs to add a document type. That is all they have input. The client and matter information are added by saving the document into the folder. The folder structure is based on status of the document. In retrospect, John would have gone with a similar strategy as Foley.

Cadwalader found that emails and documents were getting mixed in folders. John found that emails were being added to document folders because of the attachment.

Cadwalader and Foley want to get as much email out of Outlook and into Interwoven.

John raised the issue of emails that cover multiple matters. Where do you put it? They decided to have a personal workspace for partners to store emails like this. Associates do not get a personal email folder.

To get buy-in, they pitch the cost savings and compliance requirements. They can easily address litigation holds.

All three panelists chose LegalKey, mostly because of the conflicts checking capabilities of the software. They seem underwhelmed by the records management functionality of LegalKey. If they were looking now, they would have separate systems. When they purchase LegalKey, records was a hanger-on.

The panel agreed that document types did not translate to the knowledge management system. They found that attorneys were not searching on document types and the document types were not impacting search results.

An audience member suggested that document retention should be based on matter, not documents. They determine retention based on the matter. She thought it was unduly complicated to introduce the document level retention.