$25 Billion Mortgage Settlement: Is it Enough?
The largest federal-state civil settlement in ten years was passed today, packaged with one seemingly swift aim, “[To] provide substantial financial relief to homeowners and establish significant new homeowner protections for the future.” The federal government and 49 states signed the agreement with Bank of America, Morgan Chase & Co., Wells Fargo & Company, Citigroup Inc. and Ally Financial Inc. (formerly GMAC) which provided over $25 Billion dollars to homeowners and new protections to “stop abuses.”
What are the abuses so vehemently opposed by the majority of fed and state heads? Well, fraudulent foreclosure practices were the buzzwords of the day, most stemming from the use of “robo-signing”—the widely used banking practice, where a bank employee signs sometimes thousands of official documents without verifying the accuracy of the information. The ethically blind practice, forced many homeowners into default and foreclosure, without ever personally negotiating with them.
Ultimately, the automatic processes blind-sided many mortgage payers, sending them into insurmountable financial turmoil. That seems unethical enough, and coupled with the fine-print rolling interest rates so frequently used preceding the economic meltdown, it seems like the banks have been hit with a major case of cosmic karma.
However, what about the people being helped by this mega-bounty of booty? Is the victim the average homeowner who has found themselves upsidedown or underwater in their mortgage, suddenly owing more on their house than it is worth?
STATES, BANKS REACH FORCLOSURE ABUSE SETTLEMENT
Donald Rushworth, a San Diego mortgage broker in the real estate industry for over 30 years seems to think those homeowners crying financial despair need to take a bit more responsibility for the effects of their actions, “There is a complete breakdown of personal responsibility here with the borrower. In their most important asset they have--their home, they failed to read the fine print” he said, “Most underwater homes were not investment homes within the purchaser’s means, they were residences--homes they couldn’t afford, that they did not have the cash to purchase, and so they committed to borrowing from a regulated lender to secure financing.”
Well put like that, the mortgage meltdown seems like a typical case of materialistic-loving Americans, irresponsibly living beyond their means. So the banks were purposefully deceptive, and the luxury happy masses turned a blind eye to it. Perhaps the blame should be shared, but hopefully not by those who did not sign onto oppressive mortgages. Shortly put: who is funding this buku bucks bail-out?
See Related Stories from Business Review USA:
Refreshingly so-- not the tax-payers, who funded the last big bank bail-out. No this round’s loot is coming from the banks themselves, “[The agreement] holds mortgage servicers accountable for abusive practices and requires them to commit more than $20 billion towards financial relief for consumers.”
So maybe this is a PR push between the banks and the government to appear to have a morally-sound ethical conscience when it comes to the average person’s economic future. Or maybe it is a genuine extension of legislative empathy, to make up for the current larger-than-life economic crisis. However, $25 Billion—while it seems like Mecca Money—when broken up amongst the millions of defaulted mortgages, and coupled with the burdensome weight of leeching administrative costs… is simply not enough money to change much of anything. When everything washes out, troubled homeowners can expect to see a couple thousand dollars trickling into their pipeline.
Ultimately the settlement is great for headlines, but it may do little for a homeowner’s bottom line.
Six issues at the top of tax and finance leaders’ agenda
New Deloitte research reveals that tax leaders are under increasing pressure to add strategic value as companies accelerate business model transformation, from undergoing digital transformations to rethinking their supply chains or investing in green initiatives.
According to Phil Mills, Deloitte Global Tax & Legal Leader, to “truly deliver value to the business, the tax function needs to rethink its resourcing model and transform its technology infrastructure to create capacity and control costs”.
And the good news, according to Mills, is that tax and business leaders have more options at their disposal to achieve this.
Reflecting the insights of global tax and finance executives at global companies, Deloitte’s Tax Operations in Focus study reveals the six issues at the top of tax and finance leaders’ agenda.
Trend 1: Businesses seek more strategic counsel from tax
Companies are being pushed to develop new digital products and distribution channels and accelerate sustainable transformation and this is taking them into uncharted tax territory. Tax leaders say their teams must have the resources and skills to give deeper advisory support on digital business models (65%), supply chain restructuring (49%) and sustainability (48%) over the next two years. This means redrawing the boundaries of what tax professionals focus on, and accelerating adoption of advanced technologies and lower-cost resourcing models to meet compliance requirements and free up time.
According to Joanne Walker, Group Tax Director, BT Group PLC, "There’s still a heavy compliance load today, but the vision for the future would be that much of that falls away, and tax people become subject matter experts who help program the machine, ensure quality control, and redirect their time to advisory activity.”
Trend 2: Tipping point for resourcing models
Business partnering demands in the tax department are on the rise, but 93% of tax leaders say their department’s budget is remaining flat or falling. To ensure that the tax function can redefine itself as a strategic function at the pace that is required, leaders are choosing to move increasing amounts of compliance and reporting to a combination of shared service centers, finance departments, and outsourcing providers that have invested in best-in-class technology.
Trend 3: Digital tax administration is moving faster than expected
in addition to the rising focus of the corporate tax department partnering with their business counterparts, transformative changes to the way companies share tax information with revenue authorities is also creating an imperative to modernize operations at a faster pace. Nine in 10 (92%) respondents say that shifting revenue authority demands on digital tax administration will have a moderate or high impact on tax operations and resources over the next five years—and several heads of tax said the trend is moving faster than expected.
"It’s really stepped up in the last couple of years," says Anna Elphick, VP Tax, Unilever. "Tax authorities don't just want a faster turnaround for compliance but access into a company’s systems. It's not unreasonable to think that in a much shorter time than we expect, compliance will be about companies reviewing a return that's been drafted by the tax authorities."
Trend 4: Data simplification and lower-cost resourcing are top priorities
Tax leaders said that simplifying data management (53%) and moving to lower-cost resourcing models (51%) must be prioritized if tax is to become more proactive at delivering strategic insights to the business. Many tax teams are ensuring that they have a seat at the table as ERP systems are overhauled, which is paying dividends: 56% of those that have introduced NextGen ERP systems are now highly effective at supporting the business with scenario-modeling insights. Only 35% of those with moderate to low use of NextGen ERP systems said the same.
At Stryker, “we automated the source P&L process for transfer pricing which took a huge burden off of the divisions," says David Furgason, Vice President Tax. "Then we created a transfer price database to deposit and retrieve data so we have limited impact on the divisions. We are moving to a single ERP platform which will help us make take the next step with robotics.”
Trend 5: Skillsets are shifting
Embedding a new data infrastructure and redesigning processes are critical for the future tax vision. Tax leaders are aligned — data skills (45%) and technology process experience (43%) are ‘must have’ skills in a tax department of the future, but more traditional tax specialist knowledge also remains key (40%). The trick to success will be in tax leaders facilitating the way these professionals, with their different backgrounds, can work together collectively to unlock lasting value.
Take Infineon Technologies, which formed a VAT technology and governance group "that has the right knowledge about how to change the system to ensure it generates the right reports", according to Matthias Schubert, Global Head of Tax. "Involving them early was key as we took a greenfield approach, so we could think about what the optimal processes would look like and how more intelligent systems could make an impact
Trend 6: 2020 brought productivity improvements
Improved productivity (50%) and accelerating shifts to remote working (48%) were cited as the biggest operational benefits to emerge from COVID-19-driven disruption. But, as 78% of leaders now plan to embed either hybrid or fully remote models in the tax function long term, 34% say maintaining productivity benefits is a top concern. And, as leaders think about building their talent pipeline and strengthening advisory skill sets, 47% say they must prioritize new approaches to talent recognition and career development over the next two years, while 36% say new processes for involving tax in business strategy decisions must be established.