Wow... Must Read... This Thing (Foreclosure Crisis) Is Really Snowballing...

[WillyT]

Expecting Bailout II? Why It Might Not Happen This Time
By: David Dayen - FDL
Saturday October 16, 2010 11:58 am

<snip>

...

The servicers are basically making changes to loans without recording them properly for the remittance reports. Neither the investors, nor the servicers, know how much money is tied up in these securities. Between this inability to judge the value of the securities (the core job of any banker – they can’t even count money anymore), and the clear instances of fraud in selling the securities, the entire market in these products could verge on collapse.

Then you have the existing-home purchasers. My mouth gaped open when I saw this headline in the New York Times today: “Avoid Foreclosure Market Until the Dust Settles.” Its first sentence: “Are you out of your mind to even consider buying a foreclosed property right now?” Incidentally it’s the most popular emailed story on the site currently.

The writer, Ron Lieber, chronicles yet another foreclosure fraud nightmare story – in this case, a couple who bought what they thought was a home at a foreclosure auction, which turned out to be a second mortgage on a home with a first mortgage. So they paid $137,000 cash for a house that still had a massive mortgage on it – and the second mortgage and the first mortgage came from the same bank.

Finally, we’re seeing a shift in how the media is covering the story, as you can see above. Yves Smith picks up on a Wall Street Journal story that actually cogently explains the nub of the crisis: how the incompetent servicing industry didn’t follow any legal standards, which calls the entire housing market into some question:

But the banks’ “reassurance is not reassuring,” says Susan Wachter, a professor of real estate at the University of Pennsylvania’s Wharton School, because it doesn’t deal with how easily they can prove ownership of the underlying mortgages…

Real-estate law requires the physical transfer of paperwork whenever mortgages trade hands, and analysts are raising questions about how often that happened during the housing boom. One concern is that banks may have lost, or didn’t ever have, mortgage certificates. If that happened, banks will have to pause foreclosures for months as they track down certificates and refile paperwork…

Under a far gloomier scenario, the problems created by using robo-signers may be irrelevant if, instead of being lost, mortgage documents weren’t ever properly transferred during each step of the securitization process, says Adam Levitin, a professor of law at Georgetown University. If that happens, “the whole system comes to a halt,” he says. Investors could argue in court that they never owned the mortgages backing their money-losing securities.

...

<snip>

More: http://news.firedoglake.com/2010/10/16/expecting-bailout-ii-why-it-might-not-happen-this-time/

:wow:

[dkf]

1. When a banking industry can't do the basics you gotta wonder about competency

How do we trust these jokers with anything?

I'm seriously wondering about the American worker. Maybe we do suck.

[WillyT]

2. Oh I'm Sure The Workers Were Just "Following Orders"

That's why it is time for the Big Boys to pay the piper.

:shrug:

[dkf]

6. No one can make you do things that are illegal.

A person takes on that risk themselves.

[WillyT]

11. Yeah... The Germans Learned That The Hard Way

And according to the Milgram Experiment... we're just as "vulnerable".

Milgram Experiment: http://en.wikipedia.org/wiki/Milgram_experiment

:shrug:

[Donnachaidh]

41. you're assuming they KNEW what they were doing was illegal

Big frigging assumption.

[Donnachaidh]

40. blame the workers for following instructions handed down?

:wow:

[liberation]

47. And if that does not work... then blame the victims.

That's the American way.

In many ways, the US never truly evolved past the plantation mentality... and some of the slaves living in the mansion still are under the delusion that they are members of the massah's family.

[WillyT]

49. + 1,000,000,000... What You Said...

Yep...

:kick:

:hi:

[Ikonoklast]

50. That one always apologizes for the Monied Elite.

It's always the little people at fault...very strange world view for a 'Democrat', to say the least.

[LiberalArkie]

3. The best part was about Wells Fargo

Wells Fargo wanted to foreclose on a condo unit which had multiple mortgages attached to it.
Wells Fargo also owned one of those second mortgages.
So Wells Fargo spent money to hire a law firm and file suit against the irresponsible lenders at Wells Fargo.
Then, Wells Fargo spent money to hire a different law firm in an understandable effort to defend Wells Fargo from the vicious legal attack coming from Wells Fargo.
The second law firm even prepared a legal statement for Wells Fargo which called into question the dubious claims being made by Wells Fargo.
Sadly, Wells Fargo won the case, crushing the hopes of Wells Fargo.

As business reporter Al Lewis wrote at the time, “You can’t expect a bank that is dumb enough to sue itself to know why it is suing itself.”


That pretty well sums it up I guess..

[WillyT]

4. ROFLMAO !!!

:rofl:

:hi:

[EFerrari]

7. LOL

[leftstreet]

10. LOL

:rofl:

[dixiegrrrrl]

19. A true "if I didn't laugh I would cry" moment, reading that.

[Warpy]

28. The more I read about this mess, the more

I don't know whether to laugh, cry or panic.

Jesus wept, was anybody doing his job over the past decade?

[aquart]

30. Well, the executives were very well paid for doing...something.

[formercia]

42. I think you hit the nail on the head.

This whole mess was about maximizing commissions and bonus money. The Banksters have their Nut and will walk away from the economic wreckage.
It didn't matter if someone could afford the loan, give them the loan, collect your commission and party.

[malaise]

35. Do all three

:D

[XemaSab]

31. That is a laugh riot

As my mom said tonight, "I sure hope Bank of America doesn't foreclose on us... Especially since the mortgage is with Well Fargo." :P

[WillyT]

32. LOL !!!

Props to your mom!

:rofl:

:hi:

[subterranean]

48. Don't think that will stop them...

Did you read about the couple in Florida who had their house foreclosed on by BoA, despite the fact that they didn't even have a mortgage because they had PAID CASH for the house!?

Here's the article in case you missed it:
http://www.tampabay.com/news/business/realestate/bank-of-america-forecloses-on-house-that-couple-had-paid-cash-for/1072632

[kentuck]

5. Well, that is really encouraging !

Not!

They could put any price they want on the properties. They could double the price if they were so inclined.

Is Fannie and Freddie (us taxpayers) buying those mortgages from the banks? Does anyone know?

Was that a deal that was made with the first TARP bailout?

A lot of questions...

[dixiegrrrrl]

20. To answer your questions

Yes and yes,

[TheMadMonk]

23. How, if they can't prove ownership? A lot of the physical paperwork...

...has been destroyed.

A number of people already have had clear title assigned to them, because the lender hasn't been able to produce the necessary paperwork.

But if you walk away without a fight you're fucked. Even if you do manage to sucessufully sue the lender for breach of contract later, the best you're likely to get out of them is your money back.

One nasty thing about real estate is that a dodgy title becomes good at the next legally registered change of ownership. It is virtually impossible to unwind a real estate transaction once it's been finalised, even by court order.

The moment you relinquish interest in a disputed title it's over for you.


One thing I think that needs to come out of this is a clear separation between loans to owner occupiers and those to investors.

[Bigmack]

38. You sound as if you know....

what you are talking about.

I thought the "title search" was supposed to make sure that the title was clear on homes I've purchased. Wouldn't the dodgy title come up in that search? What lender would want to lend if there was any questions about who owned the house?

[TheMadMonk]

52. Where I come from a title search is the responsibility of the buyer.

Lenders should require a clear title search before a loan is approved, but I can see that requirement being overlooked/ignored in the frenzy to churn out as many sub-prime loans as possible.

That said, no it might not necessarily come up in the search. If the possessor of the disputed title successfully sells, legally or not, and the buyer (presumed to be acting in good faith) successfully registers the change of ownership the buyer's title is as a rule good.

Now however, with the whole mess exploding so spectacularly, first of all no buyer can be considerd to be acting in good faith and because more and more of the mess is dropping into the laps of superior courts, any future decisions by the lesser courts could very much be in question.

Unfortunately, what has been done can not now be undone.

[DirkGently]

43. Do you have examples of people getting "clear title because the lender couldn't produce

the paperwork?" Bad paperwork is one thing. Making a purchase money mortgage go away forever is another. If you borrow money, buy a house with it, and sign a mortgage in the process, it is extremely unlikely that no one anywhere can ever enforce that mortgage. A lost note can be re-established, for example. In lieu of that, in many cases a lender can establish an equitable lien in its place.

Not siding with the cheating lenders. They screwed up the market, then they and their lawyers lied and cheated in many cases with the paperwork. But there's no indication so far that there is a basis to permanently eliminate the mortgages in question.

[TheMadMonk]

53. Bad paperwork that puts them in outright breach of mortgage law...

...and of the contract as written, can void the contract, while leaving the mortgagee clear title.

But in the cases I saw scattered here and there on DU, I believe it was down to the banks' shift to electronic storage of paper records. Paper records which they then destroyed. Paper records that included in some cases at least, even those pieces of paper that make it possible to recreate other destroyed peices of paper. The law demands hardcopy originals, the banks have only electronic copies and no means to resecure notarised duplicate originals.


Right now as the law stands it would be very possible for the courts to void a majority of property loans simply on the basis that the lenders deliberately destroyed the physical paper trail the law demanded they keep.

That I think is why you are seeing all these voluntary freezes and "suggestions" to freeze from govt. If this gets too much momentum in the courts it will hurt or utterly destroy the banks. Best keep it out of the courts till a resolution is reached. Probably a retroactive recognition of the electronic document store.

And this is why, in all probability some are ignoring the freeze. They are those who hung onto the physical paper trail. They're going to make out like bandits.

[brewens]

8. Regardless of which administration these disasters happen

under, you have to know that most of the people making the moves are Republicans. If they can blame Obama for some of this, it is still Republicans and conservative Democrats blocking real reforms and mostly republican making the crooked deals.

[Junkdrawer]

9. Check this out: There may be a systemic reason the notes were "lost"....

...

"But the REMICs didn't own the notes either, because of a fluke of the ratings agencies: the REMICs had to be "bankruptcy remote," in order to get the precious ratings needed to peddle mortgage-backed Securities to institutional investors.

"So somewhere between the REMICs and MERS, the chain of title was broken.

....

http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=389x9333435

[WillyT]

12. Saw That... Gave It A Rec Earlier !!!

:hi:

[Junkdrawer]

13. This whole thing smacks of desperation. There must be a real corker of a problem...

at the center of it that we're only beginning to get wind of.

[WillyT]

17. Oh Yeah... Remember That They Tried To Sneak That Robo-Signer Bill Through...

Thank goodness Obama let it die in his pocket.

:shrug:

[EFerrari]

14. These people are so crazy. When I think of the hundreds of hours

we spent in the office dealing with the smallest details of an escrow to make sure everything was right before anyone was allowed to sign off, it seems INSANE to me that anyone could possibly believe this would work at any level for very long. Even I know that, and I was just an administrator. :wow:

[lunatica]

15. The next wave of newly unemployed will be the robosigners

[Junkdrawer]

16. Perhaps they will also get to be the Lynndie Englands of the crisis....

With this much fraud, somebody will do time.

[WillyT]

18. Yeah, But It Won't Be The People That Derserve It...

:shrug:

[Junkdrawer]

21. Of course. Lynndie England didn't invent Abu Ghraib either....

But that's how these things are handled. Too Big to Fail. Too Powerful to Go to Jail.

[WillyT]

27. So True...

:shrug:

[Blue_In_AK]

22. I admit to not understanding any of this.

I've been in my home (a HUD duplex foreclosure) since 1990 and refinanced once in 2002 to pay off my ex-husband. I got a good deal on the house when I bought it and my renter pays most of my monthly mortgage payment. I'm hoping that everything is okay, but with Citibank now holding the mortgage, I guess I can't be too sure.

I HATE financial stuff.

[gratuitous]

24. Either the law gets followed or they have to change the law

It's still black letter law that you can't foreclose on a property you don't own. And if you don't have clear title to a property, you don't own it. The real estate market was so overheated during the Bush years, the big money boyz couldn't process the paperwork fast enough. Real estate was too valuable and the money to be made from commissions and fees and on and on was just too good to let it go. Packaging and repackaging bundles of mortgages was the hot commodity, and they paperwork couldn't move quickly enough. Some day, when the heat finally got turned down a little, they'd go back and catch it all up.

Now we see the problems as the music has stopped and everyone's scrambling for a chair. Some of the shadier operators aren't around anymore. And surprise! They weren't all that meticulous about keeping track of all the little pieces of paper. Lost, stolen, shredded, never existed, stored away someplace and nobody knows where, but for mortgages that went through several exchanges, the odds of a snafu increase with each new transaction.

That leaves changing the law as the only way out for these lenders to recover properties they can't prove they own. At least they can't prove it in the traditional sense with all those "deeds" and "signed documents" heretofore favored by courts of law. You think the Chamber of Commerce is pouring billions into this election because they really hate Obamacare? Fuhgeddaboudit! They need a malleable new Congress that will re-write the property laws in this country so that they can foreclose on properties on little more than their own say-so. They came within an ace of it a short time ago with that self-writing bit of legislative legerdemain that the president vetoed.

What do you suppose their tack is going to be? "How come you can tell the truth in one state, but you have to prove it all over again in another state? Call Congress and tell them to change the law and quit being so nit-picky about notarized documents! Americans need stability and security!" And what isn't said: So that lying, thieving financial institutions can take possession of "foreclosed" property without all the hassle of proving they own it.

[Junkdrawer]

25. Putting pennies in the fusebox of mortgage law.....

When they're done, no homeowner will be safe.

But, hey, now we'll all need to buy "Accidental Foreclosure Insurance". An industry is born.

[dkf]

26. The notary bs was just a fig leaf anyway.

We've learned the true value of a notary.

[JVS]

29. Oh boy. The real estate market is going to be fucked up as hell

[Panaconda]

33. K&R for that n/t

[Better Believe It]

34. K & R

[Name removed]

36. Deleted message

Message removed by moderator. Click here to review the message board rules.

[WillyT]

37. Welcome To DU, Linda fabrizzia !!!

:toast::bounce::toast:

Glad ta have ya aboard!!!

:hi:

[MadHound]

39. Don't worry, we'll do another trillion dollar bail out for the banks

While the rest of the country continues to suffer.

[indimuse]

44. KNR! n/t

[KoKo]

45. K&R! The finacial "Bloggers for Truth" have been all over this...but

lots of times DU'ers aren't reading them.

IT'S BIG! Thanks for posting this.

[geckosfeet]

46. At the risk of appearing self serving - Kruggie nailed it in Saturdays colum.

http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=114x83016

[lib2DaBone]

51. If Mr Obama wanted to make a populist move.. or lean left even a little teeny bit...

.. He would issue an Executive order to Fannie and Freddie and FHA.. freezing ALL foreclosures until the Justice Department can look at the fraud by the Banksters.

David Axelrod said the other day that, "He was worried about the real estate markets and the negative effect it would have on banks if they stopped forclosures."

Obviously, no one is worried about the American Families thrown out on the street.. they can go to hell as long as the BANKSTERS make their Billions. Sad commentary.