Debunking Banks’ “Procedural Problems” Defense on the Foreclosure Crisis - Roubini.com

[WillyT]

Debunking Banks’ “Procedural Problems” Defense on the Foreclosure Crisis
Yves Smith
Oct 10, 2010 4:24PM

<snip>

As more and more problems with foreclosures and borrower horror stories are coming to light, it isn’t hard to notice that banks are still gamely sticking with the pitch that the failings are technical and procedural even as the breadth of their response and the official reaction says otherwise. Suspending all foreclosures in the US, as Bank of America did today, is a very significant move. And the pressure appears to be escalating, as a multi-state effort is close to going live.

...

Although we have chronicled the affidavit improprieties, we’ve kept our focus on the fact that these abuses are symptoms of much bigger, and we believe pervasive, problems with the securitizations. But in trying to give the big picture, we may have played into the bank narrative of minimizing the importance of the affidavit issue. Reader ella in comments provided a reminder:

An affidavit is a legal document which can substitute for live witness testimony in court. All testimony in court is governed by the rules of evidence or by statute. All testimony requires that the witness swears to tell the truth, is competent and has personal knowledge of the facts they are testifying about. An affidavit is no different, in most if not all jurisdictions; the affiant swears to tell the truth by being placed under oath by the notary, the affiant states in the affidavit that they were sworn, are competent and that they have personal knowledge of the facts in the affidavit. The notary attests to the oath of the affiant and that the affiant is who he claims to be.

If a witness lies in court or in an affidavit then they could be charged with perjury. Perjury is lying to the court.

The affidavit issue is being portrayed in the MSM at a paperwork problem. Lying to the court is not a paperwork problem. Attorneys are prohibited from making a material misrepresentation to the court of fact or law. Further, attorneys in most jurisdictions have an affirmative duty to report known perjury by their clients to the court.

The problem with the affidavits is perjury on behalf of the affiants and possibly the notaries depending on the notaries’ knowledge that the affiants had not reviewed the files, the promissory notes, the mortgages, or the records of default.

Further, you can reasonably argue that the entities pursuing foreclosure (banks or servicers) have perpetrated a fraud on the court by submitting perjured affidavits. If the attorneys representing the entities have knowledge of the fraud or are preparing questionable documents then they may also be involved and subject to penalties.

At the heart of any trial or hearing is the determination of the truth of the matter. It is the very purpose of the rules of evidence and what law and fact is presented to the court. If the affiants lied, as it appears, then the truth of whether they owned the note and held the mortgage and the borrower was in default is at issue. Courts, Attorneys General, and bar associations need to serious consider actions that will assure compliance with the rule of law.

This country cannot stand as a democracy if there is one set of law for the banks, corps, elites and another set of law for the rest of us. Perjury and fraud on the court is very serious matter. It is not a mere paperwork problem.

Link: http://www.roubini.com/us-monitor/259774/debunking_banks_______procedural_problems____defense_on_the_foreclosure_crisis

:kick:

[Stargazer99]

1. If it wasn't for government this mess would be worse

How can anyone except those who profit by not being monitored want less government? Imagine what would happen under complete Republican conservative control....

[customerserviceguy]

2. The procedural problems don't make the mortgage go away

All they do is delay the day that the mortgage in default actually gets foreclosed on. While it's clear that the lenders are foreclosing no more carefully than they decided who to make the loans to, the end result will be the same.

The homes in question will be foreclosed on, and it's just a matter of time as to how long it will take until the real estate market hits rock bottom. We don't start a true recovery until the housing market stops falling, and that doesn't happen as long as there are still foreclosure properties in the pipeline.

[WillyT]

4. Actually... They Just Might

So there’s a war going on right now between risky and safe investors, many of which have different risk positions in different securities.

But servicers don’t have the necessary documents, and they can’t get them. The Florida bank lobby says that destroying mortgage documents was standard operating procedure during the bubble years. If you can’t provide the documents, then in many cases, you simply do not have the right to foreclose at all. That means catastrophic losses for both safe investors and servicers, since they never get to recoup any losses.

So no matter what happens, the most obvious, immediate losses and the most serious long-term legal liability are at the big mortgage servicers. These are all megabanks. And investors of all stripes are going to do everything in their power to stick the investment banks who created these securities with the bill. These are also megabanks.

As Mike emphasizes, there are $2.6 trillion worth of mortgage-backed securities out there. That’s more than enough in potential losses to sink every major bank and hedge fund in the United States.

Link: http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=389x9290435

:shrug:

[customerserviceguy]

7. Ok, let me supply you with some reality

Mortgage documents are recorded with whatever entity keeps track of deeds, etc. A certified copy of the mortgage is just as valid in court as the original, for all practical purposes.

They're not going away, despite all of the wishful thinking. It's just a matter of establishing the chain of title on the lien that is the one being foreclosed. Yes, robo-signers have thrown a monkey wrench into the process, but it will eventually have the very same outcome.

I spent twenty-five years in the title insurance business, and I speak from experience, not by quoting some half-baked 'story' from some media freak who has no understanding of the process. All of the lenders in this situation got a title insurance policy, paid for by the borrower, which insures their ability to foreclose as a first lienholder.

Have you ever read a news story about something that you were an expert in, and found numerous inaccuracies? If I can't believe any stories where I know the facts, how can I trust news articles where I don't know the industry or situation?

[localroger]

9. How about some more reality?

What title insurance does is reimburse you if you can't in fact get clear title. It does not in any way get you clear title. It gives you cash because you don't have clear title. That cash goes, presumably, to the lender who is the beneficiary of the policy, assuming the insurance company hasn't gone WAFORK and declared bankruptcy. Of course if it gets pervasive enough that happens a lot but whatever.

Meanwhile the "homeowner" who has been living in the house, taking the mail, paying the services, and paying the property taxes after a certain amount of time in most states can file a claim for what are generally called "squatter's rights," since nobody at all appears to have title to the land and there are no legitimate claimants the simple fact that you've been living there for X years without concealing it and simply acting as the owner gives you a claim.

Considering that I paid my home off within 8 years long ago it does chap my butt a bit that people who got in over their heads might get to keep the McMansions they never should have been able to afford, but then again they went through a lot of stress and took a huge risk I didn't and it could have all worked out very different for the "lucky" ones (as it did for lots of other unlucky ones in exactly the same situation for whom the timing was different). The thing is, rules are rules and if consumers don't play by the rules we get shafted hard. And maybe that's necessary. But when megacorps don't play by the rules they need to get shafted too, for exactly the same reason, and if that means my neighbor a mile away gets a house three times the size of mine for free well that's how it works. If the banks had done the paperwork right it would have been the other way around, and you know what happens if I don't do the paperwork right on something like my property taxes, right?

[flvegan]

13. I don't know who deserves the bigger (facepalm), you or the poster you're responding to.

[customerserviceguy]

18. Stack my two and a half decades

of title insurance experience against his unstated qualifications that are purely based on 'coulda, shoulda, woulda', no doubt.

The whole foreclosure moratorium wouldn't have happened if the title insurance companies (starting with Old Republic Title) hadn't said, "Hey, we're not going to issue owner's title policies to people you sell to, based on these faulty foreclosures."

Those are the same title companies that issued mortgagees's policies to the lenders when the mortgages were taken out in the first place. Title companies are smart, they don't want to be left holding the bag for other peoples' mistakes, and they made damned good and sure that a valid lien was created on the day the mortgage was originally recorded.

[flvegan]

19. I am a title underwriter

and IMO, Old Republic made that call because they have money problems and (in Florida) their title plant(s) lack the ability to properly process an REO/post REO closing. In Florida (at least) foreclosing lenders have little to worry about. For example, Florida Default Law Group's title company, New House Title, has three underwriters, First American, Fidelity and Westcor. None of them have issued (that I know of) any sort of decision as to not insuring foreclosed titles.

And yes, title underwriters are smart. Any post foreclosure policy has a "new" sort of risk assessment value, but part of that assessment is "can the company fix the foreclosure if a claim were to arise because of X" on an individual basis.

[customerserviceguy]

20. I know, I've seen that in posts you've made on this subject

Will you agree with me that mortgages will simply not go away, because of some problems with either an assignment or a foreclosure proceeding that has some technical faults? Some folks here have played "Monopoly" way too many times, and think that it represents the reality of how real estate titles and mortgages work.

So, why the facepalm?

[flvegan]

23. I absolutely do agree with you.

The mortgages will not go away, at least not how the media and many hopefuls think they will.

The facepalm in regards to you was a slight one, in regards to the certified mortgage standing in court. In reality, with a foreclosure (again, in Florida) is that the court could care less about a lost original mortgage. It's the Note and the Note alone that matters, and how that Note (and in the records, the mortgage) are chained to the Plaintiff on the Lis Pendens.

Unless I read your post wrong, which I have certainly done with others in the past (either in context or intent).

[customerserviceguy]

24. We are indeed in agreement

I know that some states do things differently than Washington, where I spent my years in title insurance, but the fundamentals remain the same. Lenders are absolutely paranoid at the time of making a loan that the documents that evidence both the loan and the security on the property are 100% correct.

No subsequent mistakes made in the assignment or foreclosure process make the mortgage or the note just disappear.

[flvegan]

25. You're right, and in re the "just disappear"

what folks need to keep in mind is that once the mortgage is in foreclosure, an awful lot of control is given to the foreclosing law firm and their client. The mills here in Florida have entire departments that do nothing but track requests for Assignments as deemed necessary by the title examination done before the LP is filed. And if they need to? A last minute Assignment of Bid is always a possibility.

And even under the worst case scenario of a missing Assignment in the mortgage chain if raised as an issue with the lawsuit? No problemo. Hey, Lender X (who has no interest in the loan, and hasn't in 2 years), we'll give you $100 for a Nunc Pro Tunc Assignment. Just sign here and we'll get the Note stamped. Thanks.

[customerserviceguy]

26. Well stated

The folks who are in the foreclosure business don't always do things perfectly, but they're not total fools.

[customerserviceguy]

15. Title insurance is of two forms

One is the owner's policy that you're familiar with, the other is the mortgagee's policy that you paid for, for the benefit of the lender, that other than buying it, you probably have no association with. That mortgagee's policy guarantees that the mortgage being insured is a valid first lien on the property being secured.

While it doesn't make any representations about the process under which mortgages are assigned and foreclosed under, it does signify a financial willingness and ability to pay, if the original mortgage is flawed in some way. Once each lender goes through the foreclosure process in a deliberate way, those foreclosures will stand. The only issue is putting the assignment and foreclosure processes on some sort of assembly line. It slows down the eventual outcome, but does not fundamentally change it.

Unlike consumers, megacorps have attorneys and other experts that make sure that the bank will always win, even if they screw up something along the way, and have to go back for a do-over.

[WillyT]

10. Well I Bow To Your Wonderfulness, Yet...

it seems these days that the deeds/titles to many houses have been misplaced due to bundling of mortgages and their risks.

From what I understand... if you cannot prove ownership of the mortgage (cannot produce the deed) you cannot foreclose on the house.

What happens then?

:shrug:

[customerserviceguy]

16. Clearly, you don't know about recording of mortgages

I'll admit, I didn't either, before I worked in the title insurance industry. at the age of twenty.

They're all photographed at the time of filing with the recorder of deeds in each jurisdiction that keeps the pertinent records of such things. It's how the whole system has worked for centuries.

As far as a missing "title" goes, well, you've just played Monopoly too many times, and think that it's reality. What's been screwed up is the process by which mortgages are assigned when they're sold. It just means that the party who did the improper assignment still needs to file something that simply does it right.

Mortgages don't just disappear through clerical errors, as desirable as that might be for some folks who don't understand the process.

[WillyT]

12. More:

“If Wall Street cannot produce the deed nor the mortgage audit trail… you should stay in your home.”
Posted on July 25, 2010
By Christopher Hansen

Link: http://www.independentamerican.org/2010/07/25/if-wall-street-cannot-produce-the-deed-nor-the-mortgage-audit-trail-you-should-stay-in-your-home/

:shrug:

[customerserviceguy]

17. Yes, there have been errors

But ultimately, they will be corrected, and the foreclosure process with go on.

Just hope that they can get their shit together in the next year or so, we need to get the foreclosure pipeline cleared, or we'll see the inauguration of President Palin. The economy cannot make a true recovery until the real estate market has hit rock bottom, and that cannot happen until the foreclosure market is over with.

[Po_d Mainiac]

8. You're leaving too much out of the equation

The original paperwork may well prove that the securities were in fact defective from the onset. That means that those actually holding the investments (in secularized form), and getting screwed (Think CALPERS, etc) may be able to force the shit back onto the originators. We may even see a bunch of prosecutions and perp walks

In other words, the fuckers that are getting the bonuses will hopefully get their just rewards as they get to have first hand knowledge of being unemployed and homeless.

There would also be a great deal more willingness on the part of the banksters to actually resolve a lot of the problems when there interest jumps from just 'servicing' a particular mortgage, to owning it.

All of a sudden it would be in the best interest of those trying to keep the last iota of light gas in the housing market, into allowing the bottom to be found.

[customerserviceguy]

11. The original mortgages would be fine

Although it's possible that the assignment process left something to be desired. Mortgages are standard documents that are taken off the shelf, with the particulars filled in.

They're not going away because of a few clerical errors, they're still liens on the titles of the homes being foreclosed on. It's just a matter of being deliberate and careful, and while proceedings that have been halted might not have had a proper standard of handling, they eventually will.

Yes, the assclowns who got the bonuses were screwups, but they took the proper precautions when setting up the original mortgages, and the same title companies that are refusing to insure new deeds from the lenders based on foreclosure irregularities are the ones who guaranteed that the mortgages were validly executed in the first place.

A quarter century of experience in the title insurance industry (ending in 2005, when the last bubble popped) have told me what I state to you.

[Po_d Mainiac]

21. We're talking Apples and oranges

I'm not disagreeing with you BTW....

I'm pointing out that many of the loans that were secularized were not done so in a manner that met the perimeters of the MBS client's order. I don't believe there is a problem with the doc trails. (cept the stuff that was shredded, dog ate the homework) The problem for the originators is if they produce the docs for the courts, the fund managers and others that are getting hosed would also have a chance to get a look-see.

I seriously doubt that fund managers just told the banks to toss a bunch of mortgages together into a security. We ain't fussy. Here's the cash.

Mortgages and mortgagees were supposed to meet certain minimums and ratings before that particular note could be a component of an MBS. When/if the current owners of those securities start pawing through the paperwork, they may well have every right to be made whole again. There are also triggers worded into contracts that allow for non complying securities to be kicked back upon the originators.

If you look at the current paper problem from that respect:
A)Things start to make a whole lot more sense
B)The so-called clerical errors and lack of due diligence becomes a massive cover-up to conceal fraud.
C)The are a few trillion ($) reasons this is a big frigging deal

I believe the assclowns that got the bonuses were not screw-ups. They knew exactly what they were doing. In the real world it's called fraud and or racketeering.

As you have pointed out, and I have experienced first hand as the owner of at least 14 pieces of real-estate over the years. The forms are standard. Each folder has a master sheet that gets checked off as each doc is added. The folder ain't complete until the master is filed. The process is in place so everyone's ass is covered and documents are always available.

[customerserviceguy]

22. What fraud are you talking about?

Are we talking about the original mortgagor defrauding the assignee? If so, then I see that it might take some time to resolve.

In any case, someone has the right to foreclose. I guess if it takes years of litigation to figure out who that is, it takes years before the mortgages being assigned can also be foreclosed. But, that's not in the interests of either the original lenders or the assignees. I expect them to arrive at out of court settlements rather quickly, to preserve capital secured by assets of rapidly diminishing worth.

And that diminishment continues for as long as there are foreclosure properties to be sold on the market by lenders who just want a portion of their original capital back.

[Po_d Mainiac]

28. Fraud like that linked below ....just to get warmed up

http://blogs.wsj.com/economics/2009/06/04/mozilo-on-8020-loans-pay-option-arms/
http://www.washingtonpost.com/wp-dyn/content/article/2010/10/09/AR2010100903468.html

First off..Thanks for keeping this going....Second....no doubt you have the expertise you claim...

Third...You are making assumptions based on an honest common sense approach to how a rational person would expect lenders to conduct business. IMHO there are fatal flaws to that approach.

Unlike the old days, the vast majority of current RE loans are not the property of the original underwriter nor do they exist as a singular financial instrument. They are/were often securitized and held as investments by everyone from State retirement funds to private individuals (and everything in between) Groups of loans would be bundled to form mortgage backed securities (MBS) It's also common for parts of a mortgage to split amongst different MBS.

(I assume this is old news to you, but it may assist others that may be following...OK?)

The original underwriter (Usually an Investment Bank, but not always) is often just the servicer of the loan. It's the responsibility of the servicer to keep the money flowing from a loan to the holder/s of the MBS/s in which the loan or part was bundled and sold off in. An investor or fund manager would place an order for an MBS that had a coupon of X (paid interest to that amount) and would be comprised of loans in which the mortgagors met certain requirements, the properties met certain requirements (SF or MF, commercial, primary owner occupied, etc), and the loans themselves fell within certain parameters. In most cases the MBS was also paid for up-front In other words, not unusual for the issuer of a loan to never have had any skin in the game. The contracts were/are pretty detailed with no room for mis-interpretation.

basically the agreement is: here's X amount of money. In return I want RE loans that meet these specifications and will pay me this amount of interest

The buyer of an MBS would insert verbiage in the contract to enable the return of and receive full compensation any portion of an MBS that did not meet the conditions of the original purchase contract. If the number of non-conforming loans exceeds a certain percentage of the total MBS, the investor usually had language in the contract that allowed for the whole instrument to be returned as defective, and receive a total refund of the initial investment

Basically: if you screw up I'll demand my money back for part or all of the security

If the bank that bundled the MBS had prior knowledge that there were non-conforming loans in an MBS and passed if off anyway that is fraud. (It's just a matter of whether the fraud is civil or criminal in nature)

Now we're back to the document thing.

How can the investors prove that the were screwed? The original documents would clear the issue up in a heartbeat. The original documents would also prove in a heartbeat if there was fraud. There are a lot of people/States/funds that have lost serious amounts of money on MBS that by all rights should have been safe investments

Your experience with banks would indicate they tend to be very particular about taking care of documentation.

If all of a sudden the courts and investors have the blue ink papers setting out in the open, and everything is as it should be. Then it can be written off as just some clerical missteps. But if our country was raped by banksters whom knowingly committed widespread fraud, they deserve to rot in a cell.

If the doc problem is an attempt to deceive the courts then the matter is both civil and criminal.

The break-in at the Watergate was just a simple burglary. The attempt to cover up what was a fairly minor crime took down the President.

ps....there are also several other logical reasons that banks would look at clearing their books, in a timely fashion, as not in their best interests...

[Junkdrawer]

3. And Bush/Cheney didn't lie us into war...it was just incompetence....

or, less judgmentally, an honest mistake.

[Better Believe It]

5. K & R

[democracy1st]

6. K & R WillyT

[HughMoran]

14. lol

quite predictable I must say :rofl:

[Catherina]

27. Recommended n/t