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Obama Administration: “Nothing to See Here” on Foreclosure Crisis

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The Obama Administration is entirely predictable. It ever and always sides with large corporate interests, while trying to create the impression that it is actually concerned for the welfare of the average citizen. Admittedly, the occasionally tough talk with little follow through feeds a perverse spectacle of plutocrats sulking, pouting, and claiming that they are really, really badly treated.

Yesterday, the Financial Times reported “Foreclosure crisis tops Obama agenda” and described a closed door meeting scheduled with top officials. This mountain of effort so far seems to be producing a molehill, apparently by design. Team Obama is resorting to another of its well ingrained bad habits, of using PR as the preferred solution for all policy problems.

The only question here is whether the powers that be are so out of touch that they regard the foreclosure crisis version of extend and pretend as a viable strategy, or whether they are simply using it to buy time. And if the latter, is the object to get more breathing room while they do a proper diagnosis or simply to keep things on an even keel through the elections? Presumably, any bank-favoring measures would be radioactive right now, while voters will lack immediate recourse after November 2. Indeed, in a DC version of Br’er Rabbit’s pleas not to be thrown in the briar patch, expected Republican gains could serve as a very useful excuse for the Administration to rescue the banks once again: “Congress made us do it”.

A very good account by Shahien Nasiripour and Arthur Delaney at the Huffington Post lays bare the Administration’s dubious logic. The message starts with the usual suspect promises about doing the right thing for individuals, but then repeats a pet mantra of the Administration, “look ahead, not back”:

U.S. Housing and Urban Development Secretary Shaun Donovan said Wednesday that the Obama administration will attempt to protect homeowners and police the kind of paperwork fraud that led the nation’s largest banks to temporarily halt foreclosures this month, but added that the administration had yet to find anything fundamentally flawed in how large banks securitized home loans or how they foreclosed on them.

“Where any homeowner has been defrauded or denied the basic protections or rights they have under law, we will take actions to make sure the banks make them whole, and their rights will be protected and defended,” Donovan said at a Washington press briefing. “First and foremost, we are committed to accountability, so that everyone in the mortgage process — banks, mortgage servicers and other institutions — is following the law. If they have not followed the law, it’s our responsibility to make sure they’re held accountable.”

He added, however, that the administration is focused on ensuring future compliance, rather than on looking back to make sure homeowners and investors weren’t harmed during the reckless boom years. The administration is “committed to forcing institutions to change the way that they conduct business,” Obama’s top housing official said, “to make sure these problems don’t happen again.”

Yves here. The “we haven’t found anything yet” posture is awfully convenient. I wish I had time to do a Freedom of Information Act request on the calendars of Geithner, Donovan, and their deputies tasked to the foreclosure mess over the last two weeks. I guarantee that their calls and meeting with outsiders on this matter are skewed 4:1, if not heavier in favor of banks or their supporters (industry incumbents, lobbyists, bank lawyers) versus anyone who might have a different point of view.

And another aspect of the DC insider versus outsider dynamic is the blatant bias in favor of people with the right credentials, meaning top schools, past roles at well respected firms or top policy positions. That bias means anyone representing the borrower point of view is going to be discounted because they are not members of the club. The people on the front lines of the foreclosure crisis are consumer lawyers, and a handful of academics, largely from second tier institutions (real estate law has been a backwater until the crisis made it sexy). One of the things that has given the critics’ case real cred is that Adam Levitin, a Georgetown law professor (meaning someone deemed to pass the class test) has supported many of their contentions.

So it isn’t surprising, as the Huffiington Post story intimates, that the preliminary clean bill of health is based on framing the inquiry awfully narrowly:

When it came to the larger issue of what some legal experts describe as a fundamentally-flawed and fraud-ridden mortgage market — fraudulently-underwritten loans that passed through a maze of institutions that failed to properly maintain basic paperwork or follow legal procedures in bundling, securitizing and ultimately selling those mortgages to investors — Donovan said that, thus far, all is well.

“The primary issue that’s been the focus of the moratoria is, is the foreclosure process being followed correctly? Are affidavits being filed correctly, and are notarizations and other things being done correctly? That is one set of issues,” he said. “A second set of issues — and we think this is very important — that we look more broadly at, ‘Are servicers taking steps to help keep people in their homes?’”

The lesser, third issue that has been raised, Donovan said, is whether the process underlying the securitization of mortgages is “in question.”

“So that’s the point that I’m trying to make, is that the issues that we are finding … that we’re focused on are, ‘Are there particular servicers that are not following these processes?’”

Donovan added that “we have not found any evidence at this point of systemic issues in the underlying legal or other documents that have been reviewed.”

That review, however, is fairly new. Experts in mortgage processes, housing law and bankruptcy say the practices employed by the big mortgage originators, securitizers and servicers is largely flawed, and that in some cases the basic process of how a loan came to be securitized and sold can be legitimately questioned. It’s unclear how hard the administration looked into the matter prior to Donovan’s diagnosis.

Even though Donovan steered clear of specifically endorsing bank assertions that the fuss over affidavits was unwarranted and the underlying information is fine, the “we see nothing wrong so far” amounts to the same thing. Others in positions of authority are less credulous. Per Bloomberg:

Ohio Attorney General Richard Cordray on Oct. 19 expressed deep skepticism that Bank of America had managed to complete its internal review in just 2 1/2 weeks, saying, “I would caution that they still have significant financial exposure in many, many cases.”

The officialdom’s attempts to diminish the severity of the mortgage securitization mess isn’t that hard to discern if you are paying attention. But it isn’t the only version of three card Monte at work. EmptyWheel points to a more complicated, less obvious version. Fidelity, the biggest title insurer in the US, is demanding that lenders warrant all foreclosure sales. That has the effect of moving liability for defective title off the title insurers and back onto the sellers, who just happen to be TBTF banks, meaning the taxpayer is now in the title insurance business. As bad as that is, EmptyWheel points out another advantage if you believe in protection a bad system at all costs, that it sweeps a lot of the concerns about title under the rug:
Note, too, that Fidelity National instituted this policy (as distinct from the agreement it signed with Bank of

America on the day BoA halted foreclosures) in consultation with Fannie and Freddie. That is, in consultation with government owned entities holding a majority of the mortgages out there.

So the government and Fidelity National have gotten together and said, “rather than actually check for fraud we’ve got abundant evidence exists not just in foreclosures being processed now, but in foreclosures already sold and–significantly–in performing loans that were securitized at the height of the boom, let’s just have the banks sign off on any foreclosures going forward.” As a particularly nice touch, they’re describing this fraud not as fraud, but “incompetent or erroneous affidavit testimony or documentation.”

From the standpoint of an industry and a government hoping to prevent people from learning about the extent to which our property system has been tainted by the banksters, that might be shrewd. After all, the most common time for real people to challenge bank conduct here is when they are foreclosed on or when they buy a house–when they are involved in a legal transaction. We only came to understand the true extent of foreclosure fraud after foreclosure and bankruptcy lawyers had dealt with such volume of cases that they came to learn the tricks of the servicers and even reviewed enough documents to have solid evidence of notary and robosigner fraud. By getting indemnity from the banks, Fidelity National (and our government acting through Fannie and Freddie) will ensure that one entity at least will continue to offer lenders title insurance, helping them unload those properties that may or may not have fraudulent title, but will never look closely at the documentation to see if there has been fraud. (boldface original)

So the effect of the official “don’t rattle the markets” posture is a refusal to dig too deeply, and the end result is to sanction fraud. Rewarding criminal behavior has never been the foundation of a well functioning capitalist society; indeed, Singapore was able to become an economic success against considerable odds by having a clean government and tough enforcement. But the powers that be seem determined to try this experiment, since they’d rather not rattle the power structure, no matter how rotten it might turn out to be.

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91 comments

  1. jake chase

    One issue on which nobody has touched: most title insurance companies are hopelessly undercapitalized. Thus, only the Go’mint can possibly insure titles going forward, which means another nice racket (and accompanying price gouging) by those licensed to sell title insurance.

    Of course, the ultimate solution will involve denial of rights to any borrower who cannot prove he did not ‘fail to pay’, since what is at stake here is the ‘credit system’. Those who can prove they were not in default (but were foreclosed anyhow) will be reduced to damage claims against servicers, most of which are bank subsidiaries and will find their own solutions in bankruptcy. Look for a Republican controlled Congress to engineer all this and a Presidential dufus and somnolent Supreme Court to rubber stamp it.

    Power and propaganda not only trump economics, they trump law too. At least we still have bread and circuses (well, most of us have what they call bread)

  2. Roger Bigod

    Why should I waste my beautiful mind on something like this? It will all be taken care of after the election in the Homeland Property Title Rectification and Forward-Looking Rule of Law Act of 2010.

  3. attempter

    Naked Capitalism has previously discussed whether or not government officials were in fact technically guilty of legalistic crimes even according to the bank-rigged laws. That was usually in the context of the AIG money-laundering scheme.

    But isn’t this criminally culpable abetting of fraud, and an entire administration complicit in it? Lots of people have gone to prison for actions exactly like this. This is really the event RICO was made for.

    The only help is going to come from ourselves. Bottom-up jubilation.

    http://attempter.wordpress.com/2010/10/22/jubilate-mortgages-and-property/

    1. ZADOOFKA FLORIDA

      Attempter, as I say almost every day on Yve’s site: Rewards are for the rich. Consequences are for the poor. And history is written by the rich conquerors.

  4. frances snoot

    “Singapore was able to become an economic success against considerable odds by having a clean government and tough enforcement.”

    Really?

    1. Yves Smith Post author

      Yes, the history here is clear and well known, this is regularly mentioned in histories and academic studies. When Singapore exited the British Empire, it was poor, with 3 million people, no obvious basis for economic advantage. Lee Kwan Yew determined that having an educated population and not being corrupt like the typical third world country were key to success.

      Among other things: top government officials are paid at the same level as top private level professionals (think law firm partner) so they don’t have an economic incentive to be corrupt. And government internal audit is very tough.

        1. frances snoot

          “Then out spake brave Horatius,
          The Captain of the Gate:
          “To every man upon this earth
          Death cometh soon or late.
          And how can man die better
          Than facing fearful odds,
          For the ashes of his fathers,
          And the temples of his gods?”
          –Thomas Babington Macaulay

          1. craazyman

            in drunken and dream-filled debauchery?

            when Singapore flogged that American kid a decade ago for some petty street crime, I kind of wanted to send in the Marines and level the place. It made me boil. That justice of peasants and tiny little shits with authoritarian dreams.

            But it was just a mind circus on my part. I hate that stuff. Violence begets violence and hate begets hate. A kid trashes a car. OK, so make him clean it up. And show him a way to live.

            Imitation begets imitation. Hate hate and misery misery. Everything imitates down down, into the cycle of death, where imaginato dies and everything dies. The big black hole of nothing, where the plutocrats and their slaves live in their palaces, decorated with moey and with each others nightmares.

            But you know, they may have a point, as long as they whip the right people. I guess it just comes down to that. But that’s always the hard part. And it usually never happens.

    2. Paul Tioxon

      Singapore is the perfect example of a 3rd world country, one that tried to make its way without becoming a client state of America or the Soviets. They escaped invasion by the US, like Viet Nam or domination by China, like N Korea. They were not as favored as the spoon fed miracle of Japan or used as a door mat like the Philippines, until they had enough and kicked us out. Countries that were smart and steered as clear away from either path, such as Singapore, did well. But don’t think nice middle class values and bourgeosie court justice was the backbone of their success. Their leader was without a doubt a strongman, but more of a Pericles than a sociopath like Sadam or the Iranian Shah. They have the world wide notoriety of executing more people per capita than any other country. The MANDATORY DEATH PENALTY FOR DRUG DEALING is used regularly to those convicted of drug trafficking, against their citizens as well as foreign nationals. You don’t need to Pablo Escobar to cross the threshold.

      You can read more about the very strict laws and enforcement and no jury trials, even for what may simply start out as commercial disputes in civil court can wind up as criminal proceedings with jail time measured in years. You may also recall the mandatory caning, public beatings, for vandalism, spitting, jay walking and chewing gum, that would happen if you improperly dispose of yr gum as a litterbug.

      http://travel.state.gov/travel/cis_pa_tw/cis/cis_1017.html#criminal_penalties

      1. wintermute

        In case you haven’t noticed the world is not perfect. Singapore has done a far better job of building an equitable society with good living standards than most countries.
        Perhaps strict penalties for litter, graffiti, unsocial behaviour are a good idea when you see the dross that confronts you on many streets of many cities in the West.
        Shock, horor, they have the death penalty. Well, maybe it would be something to scare the TBTF bankers with – then the rampant fraud, forgery, lying and cheating which we read about every day just might not be happening!

  5. LeeAnne

    Rooted in real estate securitization was the scheme to deprive home owners of access to the courts and their legal protections under real estate law and state regulations.

    Real estate securities created by Wall Street under the scheme of securitization bypassed securities laws that require full disclosure via prospectus for solicitation of securities and registration of sales representatives for selling securities to the public while fraudulently ignoring Real Estate laws and state regulations.

    That was the scheme from the start. WHA HAPPENED? Looks like the Phil Gramm (Americans are whiners) retired senator and wife Wendy Gramm former head of Commodity Futures Trading Commission hired by Enron to enable their fraud against the public at work here: THE WENDY AND PHIL GRAMM FACTOR; appointing pay to play judges, working the lobbyist-regulator-private corporation revolving door payoff circuit, scamming and denouncing the public while picking their pockets, etc.

  6. Random Blowhard

    Always look ahead, for looking back may force you to think about the consequences of your actions and that is Unamerican. Forwards always, may the bridges you burn light your way into the future.

  7. DownSouth

    Yves said: “And another aspect of the DC insider versus outsider dynamic is the blatant bias in favor of people with the right credentials, meaning top schools, past roles at well respected firms or top policy positions. That bias means anyone representing the borrower point of view is going to be discounted because they are not members of the club.”

    attempter is fond of using the word “neo-feudalism” to characterize our current state of affairs, and this is an example of where the term is appropriate.

    The feudalistic order was upheld by the Church’s priestly class being in collusion with European royalty. The current power structure is upheld by our current priestly class—-the economists—-being in collusion with corporations. It wasn’t meant to be this way, either with the priests of old or the priests of new. As Robert H. Nelson points out in Economics as Religion,

    …Samuelson followed the Roman Catholic model. The members of the economics profession, and other scientific and professional elites, would be motivated by the higher considerations of a priesthood, as compared with businesspeople and other ordinary citizens in the commercial realm. There would be no popular votes held for the scientific leaders of society. Samuelson acknowledged the practical necessity to allow wide rein for the pursuit of self-interest in the marketplace. However, the professional economists and other scientific managers of the progressive state would function according to the ethical standard of the Roman Catholic priesthood. They would reject the commercial motive of self-interest and instead act in their professional and public capacity to serve the common good—-“the public interest”—-of all of society.

    In Darwin’s Cathedral David Sloan Wilson makes the observation that churches seem to have a “life cycle.” Religious denominations range from huge established churches that encompass most of the population to tiny sects that reject the larger churches as corrupt and regard themselves as keepers of the original faith. The huge established churches begin as sects, grow into churches, give rise to offspring sects, and then mysteriously senesce, to be replaced by their own offspring sects. I would just add that it seems like theology follows function in this life cycle. For instance, as Wilson points out, the early Christian church, while it was still a small sect, had “a policy of extreme altruism and forgiveness toward the downtrodden” and “a policy of unyielding opposition” toward the main Jewish religious institutions, which it perceived to be in league with the Roman Empire. As the Christian church matured and became the established church, however, it became part and parcel of the power structure, championing it and defending it against the downtrodden. What began as a small sect with a theology based upon knowledge and moral authority morphed into a church whose theology was all about defending wealth and power.

    Eventually a new sect rose to challenge this priestly class. As Nelson explains:

    Indeed, it was this strong distinction between ordinary people and the church priesthood that, among a number of other tenets of Catholic doctrine, incurred the wrath of Martin Luther. Luther saw the Roman Catholic Church as selling ordinary people short and thus declared a new Protestant “priesthood of all believers.” The ministry of the Protestant churches would stand on an equal plane with the faithful—-both, for example, would marry. The leadership of Protestant parishes would be elected by the ordinary members of the church, while the Roman Catholic Church would continue to select its own leaders in a hierarchal fashion, as when the pope designates the cardinals of the church.

    What Luther had to say about the priestly class of the Medieval Catholic Church would most certainly be an accurate assessment of our modern-day priestly class, the orthodox economists. As Luther wrote the pope in letter in 1520:

    But they See, which is called the Roman Curia, and of which neither thou nor any man can deny that is more corrupt than any Babylon or Sodom ever was, and which is, as far as I can see, characterized by a totally depraved, hopeless, and notorious wickedness—-that See I have truly despised… The Roman Church has become the most licentious den of thieves, the most shameless of all brothels, the kingdom of sin, death, and hell… They err who ascribe to thee the right of interpreting the Scripture, for under cover of thy name they seek to set up their own wickedness in the Church, and, alas, through them Satan has already made much headway under thy predecessors. In short, believe none who exalt thee, believe those who humble thee.

    1. i on the ball patriot

      So … the scam works like this … create what amounts to an encrypted language — Catholicism, economics, rule of law, bogus electoral system, etc., and then give the encryption keys only to those who are credentialed by the rich scam creators and owners, and paint all others as not intelligent enough to understand and so lesser people.

      I would say ‘neo- foodalism’ would be more appropriate though, as the end result of a lot of these home robberies (foreclosures) is that a lot of people get a lot less food …

      http://images.google.com/images?gbv=2&hl=en&safe=off&rls=ig&newwindow=1&q=homeless+people&sa=N&start=20&ndsp=20&biw=1020&bih=619

      Can we all say ‘Rich Terrorist Bankers Suck!’

      Deception is the strongest political force on the planet.

      1. DownSouth

        I on the ball patriot,

        Nelson spoke to that also:

        There are other surprisingly close parallels as well [between modern-day economists and Medieval priests]. The medieval Roman Catholic priesthood conducted its religious preaching and other discussions in Latin, a language no more understandable to ordinary people then are the mathematical and statistical formulations of economists today. Latin served as a universal language that had the great practical advantage of allowing easy communication within a priestly class transcending national boundaries across Europe. Yet that was not the full story. The use of Latin also separated the priesthood from the ordinary people, one of a number of devices through which the Roman Catholic Church maintained such a separation in the medieval era. It all served to convey an aura of majesty and religious authority—-as does the Supreme Court in the United State, still sitting in priestly robes. In employing an arcane language of mathematics and statistics, Samuelson and fellow economists today seek a similar authority in society.

        Then there’s the story of William Tyndale and the publication of his famous—-infamous in the Vatican—-English translation of the New Testament. Here’s the story according to William Manchester:

        William Tyndale had conceived his translation while reading ancient languages at Oxford and Cambridge, and he had begun work upon it shortly after his ordination as a priest in 1521, the year of Luther’s condemnation at Worms. A Catholic friend reproached him: “It would be better to be without God’s law than the pope’s.” Tyndale replied: “If God spare me, ere many years I will cause the boy that driveth the plough to know more of the Scripture than you do.”

        Had he valued his own years on earth, he would have heeded his friend. It was one thing for Erasmus to publish parallel texts of the Gospels in Latin and Greek; few, after all, could read them. This was another matter altogether. It was actually dangerous; the Church didn’t want—-didn’t permit—-wide readership of the New Testament. Studying it was a privilege they had reserved for the hierarchy, which could then interpret passages to support the sophistry, and often the secular politics, of the Holy See.

        [….]

        British agents had never ceased stalking him. Now they arrested him. At Henry’s insistence he was imprisoned for sixteen months in the castle of Vilvorde, near Brussels, tried for heresy, and, after his conviction, publicly garroted. His corpse was burned at the stake, and admonition for any who might have been tempted by his folly.
        –William Manchester, A World Lit Only by Fire

    2. Siggy

      What have we here? A collection of quotes that are the allegory which makes parable. Too round about that.

      When the Obama Administration fails to see anything here in the rampant foreclosure fraud before it; that, dear allegorist Down South, is abrogation of responsibility by notorious inaction. I see it as an impeachable abrogation of the Constitutional rights of due process. It causes me to believe that Mr. Obama did not understand the oath of office when he affirmed that he would ‘preserve protect and defend the Constitution’.

      Where is Mr. Holder? Should he not be convening the State Attorneys General to urge prosecution under State statutes, should he not be requesting referrals for Federal prosecution?

      The issue here is not about default, late payments or a mere paperwork error. Foreclosure fraud is as it says, a fraud and most importantly it is about well documented denial of due process by blatant fraud and perjury. Foreclosure fraud is about the destruction of legal system and absent vigourous prosection it will be about the destruction of our government and society.

      No No, we need neither allegory nor parable here. Here we need a call to action to demand prosecutions. We need heads on pikes!

      1. DownSouth

        Yes, I agree.

        But, as J.H. Elliott wrote, dedication requires a cause.

        Or, as Martin Luther King put it, “Our position depends upon a lot more than political power… It depends upon our ability to marshal moral power as well.”

        When actions are “carefully organized around well-defined issues,” King continues, “they represent the power which Victor Hugo phrased as the most powerful force in the world, ‘an idea whose time has come.’ … When the idea is a sound one, the cause a just one, and the demonstration a righteous one, change will be forthcoming. But if any of these conditions are not present, the power for change is missing too.”

        The reigning priestly class exalts the goals of “efficiency, growth and progress,” which have become all but ubiquitous in American culture. If one is going to challenge this priestly class, one must either 1) convince Americans that there are other goals more important than efficiency, growth and progress, such as the pursuit of some higher social ideal; 2) demonstrate that the policy prescriptions urged upon the nation by the priestly class do not work to maximize collective utility, that is the efficiency, growth and progress of the nation as a whole, or; 3) some combination of 1 and 2.

        The reigning priestly class asserts that maximum collective utility is achieved by each individual striving to maximize his own self-interest, not just in economic life, but in every area of life. So what began with Adam Smith asserting that self-interest should dominate in economic life has morphed into the likes of Gary Becker and Richard Posner asserting that self-interest should dominate in every aspect of life, including politics, marriage, family, health, sex, etc.

        In order for one to “marshal moral power” it is necessary to 1) know exactly what one’s own moral position is and how one arrived at it, and 2) have an intimate knowledge of the moral position of the opposition. So I do not see this as useless navel gazing.

        The ordinary man is much more likely to do the right thing if he really understands why he is doing it, and what will probably happen if he does something else; and the best basis for sound judgment is a knowledge of what has been done in the past, and with what results.
        –J.C. Slessor

        Every art has its rules and maxims. One must study them: theory facilitates practice. The lifetime of one man is not long enough to enable him to acquire perfect knowledge and experience. Theory helps him to supplement it; it provides a youth with premature experience and makes him skillful also through the mistakes of others.
        –Frederick the Great

        Every theory becomes infinitely more difficult from the moment it touches on the province of moral quantities.
        –Clausewitz

        1. i on the ball patriot

          “Too round about that.”

          Deception is the strongest political force on the planet.

          1. i on the ball patriot

            Less round about this (parable free) …

            Obama lied, he failed his Constitutional oath!

            His government further shits on and defiles the now scam ‘rule of law’!

            These are serious terrorist crimes against citizens that require prosecution and the ultimate in penalties!

            Deception is the strongest political force on the planet.

          2. DownSouth

            i on the ball patriot,

            That is very concise and to the point. And I must say that I do not disagree. But saying something is not the same as doing it.

            The arguments of your enemies are well crafted. They are carefully designed to appeal to people’s self-interest. They go something like this: “If we do to the bankersters what needs to be done, there will be all hell to pay. It will crash the global economy and bring on a worldwide depression.” Or this: “If foreclosures are stopped and the banks can’t recoup their money, the taxpayers—-and that means you—-will have to step into the breech and pick up the tab.” Or this: “If this isn’t fixed, and fixed fast, it could throw a cloud on your title too.”

            Our democratic civilization has been…under attack by the children of darkness, by the moral cynics… It has come close to complete disaster under this attack, not because it accepted the same creed as the cynics; but because it underestimated the power of self-interest… The children of light have not been as wise as the children of darnkness.

            The children of darkness are evil because they know no law beyond the self. They are wise, though evil, because they understand the power of self-interest. The children of light are virtuous because they have some conception of a higher law than their own will. They are usually foolish because they do not know the power of self-will…

            It must be understood that the children of light are foolish not merely because they underestimate the power of self-interest among the children of darkness. They underestimate this power among themselves.
            –Reinhold Niebuhr, “The Children of Light and the Children of Darkness”

          3. i on the ball patriot

            DownSouth says: “That is very concise and to the point. And I must say that I do not disagree. But saying something is not the same as doing it.”

            Being concise and to the point is the issue Siggy brought up in his very concise and to the point comment which included a bit of, I thought, a mild chastising sideswipe of your “allegory which makes parable” approach, saying it was “Too round about that.” I was agreeing with Siggy and I favor the directness of his approach.

            In many ways speaking in allegory and out of context quotes and parables is an ‘encryption’ approach similar to the one you deride — as I do — which is; encrypting so as to require the priest canon lawyer, the scam ‘rule of law’ lawyer’, the economic specialist, etc., to decipher the encryption for the made lesser person. You require more foreknowledge to be brought to the table.

            Having said that I also recognize that the reader audience is segmented by smarts and experience and all approaches are useful, as even this little discourse is as it highlights the jargonized bullshit (the encryption) that I am sure we are all pretty much on the same page about. I don’t think the masking deception involved can be overdiscussed, at any level of smarts, and I would like to see the comparison to intentional encryption get more traction.

            As for “doing it”, or something about it, that is a different matter entirely. First the DEPTH of the problem has to be exposed to ALL audience segments.

            When the student is ready the master will appear.

            Deception is the strongest political force on the planet.

    3. Christopher

      Actually, I cringe every time that I hear someone describe what is going on as “feudalism” in any sense, because it bears little resemblance to actual feudalism. Feudalism was a largely decentralized political order, one in which little control was centralized. Kings were really kings only in the most nominal sense, their title coming only from the extent to which they could depend upon the various nobles beneath them, all of whom had their own military forces and could easily depose the head ruler if enough of them banded together.

      What is occurring now is much more reminiscent of what both Juergen Habermas and Benedict Anderson referred to as the dynastic order. It is a system in which pure ideology rather than rational ideas provides the philosophical backing (divine right of kings in the medieval, the “hard science” of neoclassical economics in the present) and rulers are increasingly concerned with public displays in order to affirm their authority in the minds of the public.

      It also bears much more in common with the Dominate of Diocletian in the twilight of the Roman Empire (at least as described by Joseph Tainter) than the feudal period that came after its collapse. During that time, power was increasingly centralized and consolidated in the imperial center, any remaining social mobility was effectively outlawed, and the Empire itself was cannibalized in order to maintain the status quo just a little bit longer. The current bailouts and mortgage fiascos are a present-day cannibalization of the middle and working classes in the United States, for the purpose of maintaining both global hegemony and that of the elite financial/political classes.

      Of course, this will probably work out at least as bad as it did for the Roman Empire, considering the fact that we are falling from a much higher level of energy requirements and complexity than that of Ancient Rome.

      1. Kevin de Bruxelles

        I cringe too for the same reasons as you on feudalism. The term has lost all its real meaning and is now just a synonym for oppression or slavery.

      2. attempter

        I take it you’re not familiar with Peak Oil if you think power can remain as centralized as it has become in the Oil Age.

        One of many ways in which the term neo-feudalism has a farily high level of precision is how the elites must find a way to maintain their power as intact as possible during energy descent, but that this descent will necessarily cause considerable decentralization of the power. They’ll try to maintain the highest level of concentrations possible, which are likely to be closer to the looser nobility structure of medieval era than the modern totalitarian state.

        And I’m sure scholarly scruples are going to be very effective in a knife-fight in a dark alley. I’m can’t speak for others, but I’m looking for winning political formulas.

        I would’ve thought a scholar learns early on to judge texts within the context of their intent.

        But like I said, the term feudalism is used here with some precision. Far more than bogus terms like “capitalism”, “democracy”, “socialism”, “Keynes”.

        The way those terms are commonly deployed must send you running from the screen screaming!

        1. Dave of Maryland

          Hasn’t anything to do with energy. Has to do with mass production & market size. Below a certain volume, mass production becomes impossible, factories collapse & we revert to artisanal hand-crafting. Which is okay if you’re rich & you can afford to pay $50,000 for a one-off hand-crafted watch. The spiral downwards looks darn frightening.

          I have to laugh at peak-oil fantasies. That’s so 2006. Economic collapse means less energy demand, provided we leave the Pentagon out of it. On the other hand, hoist with your own petard, the technology needed to get dwindling supplies of oil & gas to market are dependent on viable factories providing the necessary infrastructure. Lose them, there might be no going back.

          Think of banks as vampires. As they suck the blood out of their victim, the victim doesn’t just have less blood. He slowly dies. No point wondering about his craving for fatty food. His lungs die, his stomach dies, his hands & feet die, his tongue dies.

          Money is the one essential. Without it, we’re as good as dead. We Americans are not indifferent sloths. We’re frogs in water that is slowly rising in temperature. Personally I think we’ll end up boiled.

          1. attempter

            Thanks for the laughs.

            To recap: fossil fuels, natural resources, and food don’t matter.

            Money’s the only thing that does.

            You remind me of characters in movies I’ve seen who get themselves killed because when they should be running for their lives they stop to pick up that last nickel.

      3. DownSouth

        Christopher said: “Kings were really kings only in the most nominal sense, their title coming only from the extent to which they could depend upon the various nobles beneath them…”

        That is factually incorrect. A bishop’s investiture of a Frankish chief was recorded in the fifth century, and by 754, when Pope Stephen II consecrated the new king of the Franks—-Pepin the Short, Charlemagne’s father—-impressive ceremonies and symbol had been designed. The liturgy drew Old Testament precedents from Solomon and Saul; Pepin was crowned and solemnly armed with a royal scepter. The Holy Father exacted promises from him that he would defend the Church, the poor, the weak, and the defenseless; he then proclaimed him anointed of the Lord.

        Granted, the early chieftains had been chosen for merit, and early kings wore crown only ad vitam aut culpam—-for life or until removed for fault. Because the papacy opposed primogeniture, secular leaders tried to maintain the fiction that sovereigns were elected—-during the Capetian dynasty court etiquette required that all references to the king of France mention that he had been chosen by his subjects, when in fact son succeeded father in unbroken descent for 329 years—-but by the end of the Middle Ages, this pretense had been abandoned. In England, France, and Spain the succession rights of royal princes had become absolute.

        The conspicuous sacerdotal role in the crowning of kings, who then claimed that they ruled by divine right, was characteristic of Christianity’s domination of medieval Europe, and is the most explicit example of what I was speaking about in my opening comment when I commented on the church’s priestly class being in collusion with European royalty.

        1. Anonymous Jones

          I’m sorry, I like you guys, but this is totally off the rails. If you think you can encapsulate any long-running regime of power by one word and then link other regimes with that same exact word over completely different societies in completely different times with completely different population levels and completely different technologies, you’re not going to be winning over many skeptics, I can assure you of that. It’s weird, and your responses look more defensive than anything. Again, sorry, I know I’m a pedant about semantics (and perhaps even a dillettante), but really, this is off the rails. Truly. Words are unruly beasts some time. Treat them with care and caution, and never forget that you are unlikely to have a mastery of them. They have a life of their own, and you can never truly make them your own because they are subject to many, many forces outside your control.

          1. i on the ball patriot

            Good comment, words, and language, as human externalizations are deceptions — tools of dominance — made for the sole purpose of getting the perceived needs of their individual creators met so as to sustain life.

            Words are the basis of ever shifting alliances. Yes treat them with care and caution and perception too. Mastery is a deception.

            Their underlying force is evolution.

            Deception is the strongest political force on the planet.

          2. DownSouth

            Wow! Did I ever step off into it there. I get piled on by you, Kevin and Christopher, and all because of the alleged misuse of the word “feudalism”?

            I don’t believe it.

            Christopher’s comment is totally incoherent. He begins by saying “I cringe every time that I hear someone describe what is going on as ‘feudalism’ in any sense, because it bears little resemblance to actual feudalism.” Then in the very next breath he completely contradicts himself when he says “What is occurring now is much more reminiscent of…a system in which pure ideology rather than rational ideas provides the philosophical backing (divine right of kings in the medieval…)” Go figure.

            There’s something else in my comment that’s sticking in you guys’ craws. But instead of talking about that, you guys want to argue over semantics.

            Why don’t you tell me what’s really bothering you? That’s like in DownSouth said: “blah blah blah blah blah” and that’s wrong because of “blah blah blah blah”?

          3. DownSouth

            And by the way, my definition of “feudalism” is the system of social, economic and political organization that prevailed in Europe from the 9th to about the 15th centuries.

          4. Kevin de Bruxelles

            Sorry DownSouth, to be honest I was reading fast and when I saw the words “king” and “feudalism” it tripped off my silly pet peeve about feudalism but I didn’t say anything. When I looked again a while later I saw Christopher’s comment I forgot that he was referring to you and I meant to agree that King and Feudalism don’t belong together. For what it is worth I very much appreciate your posts and actually really look forward to reading them each time and I always come away enriched. I very much like your recent theme of economists as high priests. And I have quite a little pile of books on my shelf that you have referred to although my wife has imposed a little austerity plan on my Amazon account so it has been a few months since I have added to the pile!

            Azar Gat has a great discussion of feudalism in his book “War in Human Civilization”. It starts on page 330 or so and it is on Google Books with only a page or two blanked out.

            The key factor of feudalism in my mind is the power of the aristocracy over the king. In fact the king is the enemy of feudalism and in most cases he worked very hard to overthrow it.

            I wrote a longer definition and comparison to the current US system in the thread below.

            http://www.nakedcapitalism.com/2010/10/satyajit-das-pleasant-unpleasant-truths.html

          5. DownSouth

            Kevin,

            I was aware of that tension between the king and other members of the royal class during the Middle Ages, that no matter what their ambition had been they remained “first among equals” rather than “one and only.” Under the illiterate kings of the Middle Ages, the clergy had been their aides, but during the monarch’s revolution of the 17th century the clergy was replaced by able bureaucrats, who installed the bourgeoisie as the main agency of monarchial rule.

            And since we’re talking semantics here, in my opening comment I never used the word “king.” I used the word “royalty”. It was Christopher who interjected the word “king.” (And yes, this is a defensive comment.) I’ve got my trusty Webster’s dictionary here and included in the definition of “royalty” are “a regal character or bearing,” “nobility,” “a person of royal rank,” “a privileged class.” So I think “royalty” would include all those vassal dukes, earls, counts, barons and marquises that the king never could bring under control.

            And there was an incestuous relatonship between the priestly class and the royalty, with much of the clergy coming from this class.

            I’ll head on over now to your comment to give it a read, as well as the reference material you cited.

          6. Doug Terpstra

            I don’t think this is off the rails at all. Like Kevin, I’m always rapt when DownSouth writes. Though it flies overhead at times, well-defined connections to historic precedent help expose the similarly flimsy legitimacy of today’s ruling elite in context, providing a sound moral foundation for the coming revolution (this time without the reign of terror). History doesn’t repeat, but it does rhyme as Mark Twain said.

            So Attempter’s use of “NEO-feudalism” seems to rhyme well here, though it is not as dissimilar to feudalism as neo-liberalism is to liberalism or neoconservatism to conservatism. As class distinctions have widened vastly today, the lord, vassal and serf relationships of Medieval feudalism are now ‘quasi’ analogous to our time.

            As Attempter uses ‘neo-feudalism’, so too “writers of the Enlightenment wrote about feudalism,” according to Wikipedia, “to denigrate the antiquated system of the Ancien Régime, or French monarchy … Enlightenment authors generally mocked and ridiculed anything from the ‘Dark Ages’ including feudalism, projecting its negative characteristics on the current French monarchy as a means of political gain … When the French Constituent Assembly abolished the “feudal regime” in August 1789 this is what was meant.”

            “Adam Smith used the term “feudal system” to describe a social and economic system defined by inherited social ranks, each of which possessed inherent social and economic privileges and obligations. In such a system wealth derived from agriculture, which was organized not according to market forces but on the basis of customary labor services owed by serfs to landowning nobles.”

            “Karl Marx also used the term in political analysis…[he]described feudalism as the economic situation coming before the inevitable rise of capitalism. For Marx, what defined feudalism was that the power of the ruling class (the aristocracy) rested on their control of arable land, leading to a class society based upon the exploitation of the peasants who farm these lands, typically under serfdom.[12] “The hand-mill gives you society with the feudal lord; the steam-mill, society with the industrial capitalist.”[13] Marx thus considered feudalism within a purely economic model.”

            Because history rhymes, it is well worth trying to understand how these old models might apply to us today, along with their obvious differences. So hats off to Attempter and DownSouth.

          7. attempter

            Thanks, Doug. You made my point better than I did. My use of the term and concept is Marxian-influenced, and not concerned much with the ornamental trappings.

            BTW, one of my detractors above is referring obliquely to a time we tangled over my political use of the term “human rights”. He insisted I comply with his contention that rights don’t metaphysically exist and stop using that term. I refused.

            So it looks like we have a similar issue here. There are different tracks of discussion, and some people are intolerant of that diversity. It make them “cringe”. Some people say I’m intolerant, but I’m not the one cringing at the existence of a different discussion.

            That’s the only reason I responded to this in the first place, to express how much I care that someone “cringes”, and to point out that even by his own lights he’s wrong.

      4. i on the ball patriot

        Its a transitional dynamic, crumbunism to externalizationism …

        Where crumbunism, a pyramidal pecking order ladder of crumbs system where crumb supply is/was controlled at each rung by the old Profit Driven Vanilla Greed, now morphs into the system of externalizationism, a ruler and ruled pecking order where all of the past externalizations of humanity are controlled by Control Driven Pernicious Greed who uses those externalizations to control and eliminate, as required, the ruled, by blowing out all of the rungs of the old Profit Driven Vanilla Greed crumbunism ladders.

        It is a precursor of humanity morphing into the onotron and bears much more in common to the pupa hatching into the butterfly. If you look closely the pupal skin of humanity is becoming very transparent signaling rapid change.

        Deception is the strongest political force in the planet.

  8. MinnItMan

    Historically, title insurance is underwritten differently from nearly all other lines. It insures against the consequences of the past based upon detailed rules incorporating statutes (in particular, statutes of limitations), judicial decisions, state-specific peculiarities and general principles of real estate law. Historically, it fixed past defects before insuring. It is referred to as “risk preventive” or “risk elimination” insurance. The consequences of claims is frequently a lawsuit that puts the subject proeperty into limbo – cannot be sold or leveraged – so a stated rationale for T/Ins. is avoid ever getting there. This is a hard concept to grasp, and may seem like a distinction without a difference, but I can show that it isn’t, and it does explain in large part, why this is “expirimental.”

    Indemnities are band aids to title defects, and are usually limited to situations where the actual documentation in public records raises an unresolved question, for example, a mortgage or deed of trust that has no corresponding release of lien or reconveyance from the trustee of Deed of Trust, that can be “resolved” without actually having to fix the problem. There are standard ways to substantiate the lack of claim risk here: closed accounts on a credit report; someone produces a cancelled note (really old school); and an indemnity from the title company that paid it off.

    By accepting this indemnity, the title insurer, or frequently its agent, has determined that the risk of big policy limit loss is minimal or non-existant, so it will accept that minimal risk. But there are three other, albeit smaller, substantial risks: 1) that the formally unresolved defects cause a future insurer to decline insuring the property/transction; 2) that the insured is still sued and the title insurer’s duty to defend” is triggered; and 3) that regulatory powers step in and question “wtf” is this “risk elimination” rationale when you guys are just piling up risk of stalled transactions, lawsuits against people who think you dealt with the problem – and, most importantly, complaints to us? These situations tend to get people very upset – commissions and profits get put on hold, retirments to warmer climates are delayed, the former title company gets accused of “fraud” for not informing its insured of the defects it “insured over.” The two most common accusers are Ma n’ Pa, and “bottom feeder” real estate investors who may: a) see may have potential windfalls that others don’t and/or b) are looking for quick turnarounds that obvious title defects may stall. And consequently, judicial decisions pull in two different directions, depending (not always) on whether it’s Ma ‘n Pa or Snake Eyes whose title problem was insured over. Needless to say, this is the minimal/non-existant risk scenario still. And even where there is “no real” problem, this can get expensive. First and foremost, title insurance protects against the legal fees of lawsuits. It’s a variation of the phrase: “it’s not whether you win or lose (so much), it’s whether you are forced to play the [litigation] game [at all].” Title insurers’ “duty to defend” is the first source of loss for them, but it is not the same thing as “actual loss” when they lose cases. Duty to defend expenses can easily sink them before they’ve ever lost a case.

    The risk of defective foreclosures, on the other hand, raises all the risks at once: 1) overwhelming duty to defend obligations; 2) risk of total loss; 3) consumer-complaint lawsuits; and 4) regulatory action for all sorts of problems.

    Another peculiarity of real estate law, and thus the title insurers, is the doctrinal and statutory protections of the “bona fide purchaser without notice” of title defects. If, for example, BOA indemnifies FNF against its own defective foreclosure, must FNF disclose this defect and the indemnity to its insured, either new lenders, or purchasers? If so, does that require explicit waiver by the insurer of the exception to coverage to its insureds regarding “matters known to the insured,” and does that disclosure undo bona fide purchaser without notice proection?

    This little blurb may help show how dicey this can be:

    “Although a title insurance company has a duty to search the public records and reveal to the insured any defect that a search might disclose to protect a purchaser against title surprises, when the insured knowingly purchased land by warranty deed expressly made subject to six tax liens not shown on a subsequent title policy, it could not be said that the insured experienced a “surprise,” and the insured was deemed to have “agreed and assumed” the six tax liens. Commonwealth Land Title Insurance Company v. Ozark Global, L.C., 956 F.Supp. 989, 992 (S.D.Ala. 1997), citing Pohner v. Title Insurance Company of Minnesota, 652 F.Supp. 348 (N.D.Ill. 1987).”

    This is just getting started.

    I was talking with a client recently and he asked me what I thought the risks were. In addition to the above, for any post-foreclosure seller, there is the risk of buyers and purchase money lenders being unable to insure in 3, 6 months, a year, etc. when at least some SHTF. Assuming that immediate post-foreclosure buyers accept BOA’s/FNF’s assurances here, immediate post-foreclosure buyers are buying the defect and are going to be on their own, particularly if they are looking to sell quickly.

    In short the ALTA/BOA/FNF pattern agreement seems to cover the T/Is for claims’ expenses in addition to claims’ losses, but when that actually gets triggered, and when the T/Is say they have to get paid up-front on the expenses part, there will be great saddness across the land.

    1. Pascal Blacque

      Thanks for that detailed explanation … in other words, if they don’t get us via all their legal loopholes, they will via financial attrition (pay the up-front expenses?)… Lovely.

      As the pie gets smaller and smaller, remaining players at the table circle the wagons and raise barriers of entry… thereby increasing the number of crumb-eaters below until the situation becomes untenable for all… it then blows up and we start all over again… history seems to repeat itself with minor variations…

  9. Random Blowhard

    For a look at America in 2012 or so google the ‘United States Of Argentina’, for 2020 onwards read ‘The Hunger Games’.

  10. MinnItMan

    apologies for the typos, but I like one of them: “expirimental” may be a newly discovered word that is highly descriptive of this situation.

  11. killben

    “indeed, Singapore was able to become an economic success against considerable odds by having a clean government and tough enforcement.”

    Singapore had one of the best leaders after WW-II.

    And what has USA got .. Obama…
    supported by Geithner and Bernanke.

    Is there a need to say how it is going to end..

  12. Jackrabbit

    As I understand it, Fidelity, and presumably other Title Insurance Companies will have Banks warrant their performance (including, I suppose, reps and warrantees to third parties). Thus, it is somewhat incorrect to say that the Government is in the title insurance business.

    Insurance regulators should not play along. This is head exploding stuff. The banks are essentially making a guaranty that they can not possibly cover if significant problems are found. How can any reasonable businessperson count on the guaranty of banks that are still on Fed life support and are now subject to resolution provisions of Dodd-Frank?

    One can understand the participation of the Title Insurance Companies – they may already be exposed to the bank’s failures so they are doubling down – but State Insurance regulators have a responsibility to maintain underwriting integrity. At the very least regulators should ask the right questions. Like, “what due diligence have you performed on the bank’s loan origination and securitization process? What is the size of the potential problem and will the bank reasonably be expected to make good on their warrantee?”

    1. David Bernier

      I’ll try to rephrase in my own words some
      of what Jackrabbit wrote. Let’s assume
      that from now on, Fidelity, and
      presumably/possibly other Title
      Insurance Companies will have Banks
      warrant their performance.

      Then one can ask, what is Fidelity insuring
      against? Or, insuring what risk? Perhaps
      one can compare with deductibles in car
      insurance. The deductible is the portion
      of any claim that is not covered by the
      insurance provider. Now suppose the deductible
      is set at $50 trillion in a car insurance
      policy. Then the insured is on the hook for
      the first $50 trillion in any given claim.

      In the case of Fidelity Title insurance, it
      appears that Fidelity takes in a premium but
      never has to pay out in any case of Title
      defect. That is insurance in name only.

      David Bernier

  13. Eleanor

    So this is meant to protect the banks against foreclosure lawsuits, if I am understanding correctly. What will protect them against investor lawsuits?

    1. Jackrabbit

      They aren’t fully protected from foreclosure lawsuits. They are making a guarantee to the Title Insurance Company that if the Insurance Company has to pay because the Bank wwas at fault, the Bank will pay what is owed.

      A better question might be: how well protected are the homeowners? if their title insurance company fails because the bank goes into resolution then the homeowner has no protection.

      Nothing protects the Banks against investor lawsuits per se but it seems that investor suits might be a long and difficult legal process. And it seems likely (and understandable) that banks will fight hard to ensure that any problems with conveying the Note to the Trust is not uncovered because that has very expensive ramifications.

      1. svsm

        The biggest irony is that they will hold the bondholders to every single procedural hoop they can in order to avoid an action (e.g. 25% of bondholders have to participate).

        Then they turn around and call having to prove standing to foreclose too cumbersome. Having provided fraudulent documents to courts across the country is a mere paperwork problem. I think if anyone attempted to sue them with fraudulent affidavits they would be tearing that litigant to pieces.

  14. T Ruth Teller

    So new ‘technology’ [including MBS] ran ahead of traditional/technical documentation requirements – but really, people are not generally being foreclosed except after serious default, and most all [relative to the millions] of mortgage ‘ownership’ issues are causing no insurmountable problem – SO MAYBE THIS NEVER WAS A ‘CRISIS’ EXCEPT IN THIS AND SIMILAR BLOGS where smart, knowledgeable peoples’ judgment is seriously warped by bank-hate? Of course bank-hate is justified, but not when it warps otherwise good judgment.

    1. Bullsmith

      The thing is MBS wasn’t just a new technology, it was also a sham company aimed at avoiding taxes and making it impossible to see who actually owned what property.

      That’s a real, genuine problem, an outrageously illegal and reckless act that undermines the core principles of owning clear title. You think you’re taking out a mortgage with a bank, but you’re not. HAMP members think they’re negotiating with the holder of their mortgage, but they’re not.

      Are the majority of people who are being foreclosed on delinquent? Yes. Are the banks committing widespread criminal fraud upon borrowers, investors and courts? Also yes. The former in no way “solves” the latter.

    2. Jackrabbit

      I think its too early to say if there is or isn’t a crisis but the foreclosure crisis has brought to light practices that are a cause for real concern and justify investigations by State AGs, investors, and others.

    3. svsm

      The technology ran ahead of the Law. There is a question of whether this was done for the sake of mere efficiency or if it was done to intentionally cover up the quality of the mortgages being bundled into securities. Regardless, their recording system is not in compliance with well established law. Then as waves of foreclosures cascaded through the system, the banks chose to engage in fraud upon the courts.

      Whatever your personal feelings about a defendant may be, they are still entitled to due process. Ownership of a home cannot be transferred to a note holder without going through a legal proceeding for the very good reason of protecting the innocent from bank abuse. Even if that number is small, we have a system in place that presumes innocence for a reason. I don’t want to see that turned on it’s head for the sake of banks. There are clear constitutional violations of due process and equal protection in play here. Your attempt to minimize it, in my estimation, is a serious “flaw in judgment.”

      1. micr line

        the rule of law has lost favor after 9/11. the ‘constitution is not a suicide pact’ has become the new law. i.e. if something threatens the ‘security and freedom’ of the ‘homeland’ then laws can be ignored for the ‘good of the people’. and if the entire shadow banking system collapses, and takes down the real financial system, and thus the real economy, well, in their minds, they are acting like the CIA did in the secret prisons. they know they are saving america and history will forgive them for violating the fundamental principles of civilization. or something.

    4. micr line

      no, i dont see how it’s reasonable to believe bankers and politicians after what happened in 2008. i believe it is logical, reasonable, and rational to pay more attention to people like Yves Smith and her associates, because they were right, and the bankers and politicians were wrong, and now me and the taxpayers own trillions of dollars of mystery meat securities, and it seems illogical and unwise to believe someone who just gave me a $3000 tax bill for something i cannot even find the most basic facts about. Yves never took any of my money, except for 30 bucks but she gave me a book in return. Please tell me what GS has given me in return for my money, which the government forcibly will take from me over the rest of my life.
      please tell me, logically, why i should listen to people who missed the largest financial bubble in history, and why i should ignore the people who got it right. . . simply because they are a little bit angry and rough around the edges in their forms of expression.

      i for one am not happy with ‘well spoken, presentable men in nice suits’ telling me to stop worrying my silly little head and stop hanging out with the angry bloggers. if we had listened to the angry bloggers we wouldn’t be in this situation in the first place.

      do i believe everything the angry folks say? no. but i pay close attention to it, and i weigh the evidence. that is the least we can do. just simply listen to them.

  15. Justicia

    The rot is pervasive and bandaid fix for the title insurers won’t resolve the problems about who really owns the note. Just wait until the investors start suing over misapplication of borrower payments to junior level tranches and servicer fees.

    1. MichaelC

      ..and the havoc that’s going to wreak on the CDOs and CDS linked to those RMBS ‘owning’ the notes.

  16. real estate BROKER

    Anyone who has EVER read a contract the banks use to sell their foreclosed REO properties knows that their agreement with the title companies to warrant the title is worthless. Their lawyers have gutted all normal buyer protections in state real estate contracts with pages of “no warranty, hold harmless” addenda. Anyone buying an REO is required to sign these addenda and agree that the bank is making no warranties whatsoever and will be indeminfied from any representations and issues which later occur. So, suppose Joe Buyer THINKS he’s getting title insurance and purchases a reposessed property from the bank and the former owner comes back and reclaims the property alledging fraud in the foreclosure. Now, the title company will refuse to honor the claim under the title policy and so will the bank. So moral of today’s story, anyone who purchases a foreclosed bank property right now from the auction steps OR from the bank’s REO departments has no assurance that they are getting a cleanly title insured property. The courts are going to be overwhelmed with all this litigation because the government under the Obabma Admin is carelessly dismissing the abuses of hundreds of years of PROPERTY LAW and PROCEDURE which is supposed to protect consumers of real estate! This is NOT and never was simply about paperwork mistakes or who might have been signing ten thousand times.

  17. David Jones

    Ask the Singaporean’s about ruling families or money deposited from the Burmese junta. Singapore’s success is a murky mess of kleptocracy and amoral financial services. Sound familiar?

  18. Koshem Bos

    Too bad, the standard scapegoats are gone, i.e. Rahm and Summers.

    It is beyond me why it takes more than two months to find out that the mortgage notes have disappeared or were falsified. The task force Obama convened is not bringing up charges, which requires a more thorough investigation. There is already ample evidence of wrongdoing on the part of the lenders. Obama is hiding behind a process, but his rear end sticks out. (Very much like the military torturously long assessment of the impact of dropping DADT on the military. The impact is NONE.)

  19. Rick Halsen

    We’re evolving into a medieval monarchy as it were.

    “I decree, therefore it is.”

    The rule of law becomes subservient to the monarch’s wishes. The only problem is, others have to agree with the King. The serfs in his own country have no choice other than out and out rebellion to accept his decrees, but others like Singapore as mentioned as an example above, may not recognize the King’s decree.

    Who will hail the King?

  20. Eclaire

    Even ‘though I’ve been reading about this stuff for the past few weeks, I’m still feeling like a Bear of Very Little Brain.

    Is what we are facing the implosion of a carefully constructed system to insure the proper transfer of property rights/ownership? Starting, in the USA at any rate, with the original land grants from Kings, Emperors and so forth and continuing through the next 400 or so years, there was an unbroken paper trail documenting orderly and legal transfer of parcels of land, with improvements.

    This paper trail, in the case of many real estate transactions that occurred since, say, 2000, with an attached mortgage, has been compromised?

    Am I missing the point? Or, one of the points.

    1. svsm

      In my state, the property is owned by the homeowner and is recorded as such. The note holder files a lien against the property. If they sell the note, that needs to be recorded as well. No property can have clear title until that lien is released. The question now is who owns that lien. The transfers of assignment were not recorded. The underlying notes were not transferred between parties. They did it all electronically and the database itself is a mess.

  21. kravitz

    HUD asked the banks to speed up foreclosures. And fines those that take – ahem – ‘too long.’
    http://www.mortgagebankers.org/tools/FullStory.aspx?ArticleId=17796
    HUD regulations require mortgagees to meet a series of event-specific timeframes during the default, foreclosure, conveyance and mortgage insurance claim cycles. Failure to timely meet any processing deadlines result in monetary penalties.
    Over the years, HUD has placed servicers under increased performance pressure by reducing the timeframe to initiate foreclosure from 12 months to six months. While this change has provided HUD with significant cost savings, MBA said it has also increased the risk for servicers that must now manage loss mitigation and foreclosure timelines concurrently.
    http://www.mortgageorb.com/e107_plugins/content/content.php?content.6969
    In recent years, the U.S. Department of Housing and Urban Development (HUD) has slashed in half the allowable time frame for servicers to initiate foreclosures – reducing the span from 12 months to six months. The reduction has boosted cost savings at the agency but increased the risk for servicers, which must take loss mitigation actions and foreclosure timelines concurrently, an MBA NewsLink report explains.

  22. RPF

    Most of to comments and the article itself excoriate the Obama administation for its “fraud. What fraud ? It’s just a simple paperwork issue” attitude which is asssumed to be down to its dyed-in-the-wool bankster friendliness. While not in any sense minimising this I’d like to ask a different question.

    If we were to take a counterfactual position and assume, for the sake of argument, that their position is actually rational (yes I *know* this is a BIG stretch …) then what could the hidden reasons be ?

    One possibility that pushes to the front of my mind is simple FEAR. If it becomes common knowledge that the whole area of real estate law, chain of title, etc. has been hopelessly, irredeemably, corrupted over the last 10 years then who, in their right minds, would consider any property purchase in the USA at the moment.

    In short what the current administration fear most is a country wide buyers strike leading to the next house price collapse. Focussed initially on foreclosed and REO properties but probably extending to any property that’s been bought/sold since the securitisation madness took hold. What would this do to the banks ?

    Even shorter: Replace “where’s my note ?” with “show me the title chain”.

    EndOfThoughtExperiment

    1. PQS

      Not to mention, of course, all those MBS floating around out there that are worth, what, more money that exists in the universe?

    2. Doug Terpstra

      Good point. Fear, like temporary insanity, may explain certain crimes or partly excuse evident “evil”. If Obama were stricken with fear by TPTB that all commerce would collapse and anarchy/martial law would ensue unless “extra-constitutional” emergency measures were taken, then it could explain some of (not all) his actions (including his capitulation to the military.) But that slippery slope is almost always a one-way trip to disaster, and Obama’s presidency of lies and betrayals is snowballing fast.

  23. Shack Seizure

    Check out Lindorff on Counterpunch. There’s that rebellion thing again – Storm the barricades!

  24. Dan

    Both democrats and repubs want nothing to do with this issue until election time? Shocker

    Making this all the more repugnant is that Obama is a lawyer and former con law professor. As if he needed less of an excuse to plead ignorance.

    Rest assured, with elected gov’t jobs secured until 2012 and beyond, there will be more political support to let the market act like, you know, the market.

    50 state moratorium on foreclosures like in 1933

    Dow 5500 (or worse)

    To say the writing is on the wall would be the understatement of the century.

  25. Ed Seedhouse

    Well I never had any illusions about Obama’s progressive credentials, and as a Canadian I have no say of course.

    But at least he appears to be clinically sane. That in itself is a big improvement over the alternatives, at least to my mind.

    1. Psychoanalystus

      I take issue with him being clinically sane. See my comment below. Obama has what is known as a personality disorder. In psychiatry and clinical psychology, personality disorders are considered as not treatable mental disorders.

      Psychoanalystus

  26. Psychoanalystus

    Thank you for another great article. I cannot express enough my disappointment with Oh’bama. What a Trojan Horse, what a sham. He will go down in history as the worst, most cowardly, phoniest, and corrupt president this nation has ever seen. How quickly he forgot that it was the Internet donations of millions of regular Americans that won him his current job.

    Now, speaking as a mental health clinician, I will say that this man meets the criteria for Narcissistic Personality Disorder. He was the worst possible choice we could have been offered. And, by the way, NPD is not treatable, so the only thing we can do is to put up with the disappointments the remainder of his term is guaranteed to bring us, and then vote somebody else in. Anybody is a better choice than a man with a personality disorder.
    Psychoanalystus

    1. jake chase

      Not to disagree with your diagnosis, but can you identify even one candidate for high elective office who does not suffer from NPD, and how can you tell ahead of time?

    2. Roger Bigod

      IANAS, but Narcissistic Personality Disorder sounds right.

      Do you have an impression of what diagnosis Dubya carried?

    3. Progressive Ed

      I don’t know anything about mental health or NPD, but I’d think some who keeps changing his name and, although 1/2 white, hates whites, and lies in such an blatantly obvious way without any guilt whatsoever has some sort of emotional problem. Nevertheless, he’s a committed Marxist who understands Rome wasn’t built in a day. Have patience, there are many winding paths up the mountain to the Workers’ Paradise, but it takes time! Keep the Faith!!

  27. HerrHansa

    I noticed another news item on Seeking Alpha about the US Treasury figures for recent purchases of MBS. Is it possible the administration is sitting on their hands simply to avoid devaluing the MBS rescue process?

  28. Barbara Ann Jackson

    It is NOT always “the banks” who wait “years” or a long time before completing foreclosures. In many instances, the reasons for foreclosure delays lie with FORECLOSURE MILL LAWYERS.

    Some lawyers deliberately prolong foreclosure while concealing MALPRACTICE against their lender-clients, and while committing UNFAIR DEBT COLLECTION PRACTICES and fraud against homeowners. Sometimes lenders (who are NOT required to know laws / statutes), are oblivious that foreclosure lawyers’ mistakes, errors, frauds on the court and upon opposing parties actually provided reasons, defenses, and opportunities for opposing sides to have grounds for debating key facts and issues in courtrooms –hoping to reach negotiation, as to avoid homelessness. Meanwhile, the mill lawyers rack up billable hours and fees for litigation those lawyers manufactured –sometimes erroneously, sometimes intentionally.

    Illustrations: A property owner who seeks reorganizing his / her debts through Chapter 13 Bankruptcy is not to be blamed for contesting a FALSE “proof of claim” or a FALSE “Motion to Lift Automatic Stay” filed into the record by lenders’ lawyer. (Besides, problems arise with multiple ‘proof of claims’ by different lenders.) Or, when mortgage lender’s lawyer commits injurious frauds, fails to “effect service” or fails at any SUBSTANTIVE Civil Procedure requirement, the blame is on the lender’s lawyer –NOT the homeowner who REFUSES TO COOPERATE WITH UNLAWFUL EVICTION FROM THE SHELTER OVER HIS OR HER FAMILY’S HEAD.

    SPECIFICALLY, countless foreclosure lawyers owe $$$$$$$$$$$ to their mortgage clients for fatally botching foreclosure proceedings –and countless foreclosure attorneys have been derelict about informing lender-clients, WHAT SAITH the APPLICABLE LAWS.

    **Important Facts About Foreclosure and Mortgage Fraud
    http://www.lawgrace.org/2010/09/30/important-facts-about-foreclosure-and-mortgage-fraud/

  29. someguy

    I am living in a home I am renting, but would like to purchase from the owner. MERS holds the note. I honestly feel like I need to bring an action against MERS concurrent with purchase to discover who the actual owner of the property is in order to get a release of lien and file in the deed records of my county. Thoughts?

  30. Maya

    Singapore is a comminust country. The illusion of freedom and prosperity is the same as that in western societies and the US.

    All countries have fascist govts, it is just a question of which country has better propoganda machine.

    If you tell a lie big enough and keep repeating it, people will eventually come to believe it. The lie can be maintained only for such time as the State can shield the people from the political, economic and/or military consequences of the lie. It thus becomes vitally important for the State to use all of its powers to repress dissent, for the truth is the mortal enemy of the lie, and thus by extension, the truth is the greatest enemy of the State

    1. Yves Smith Post author

      Maya,

      With all due respect, your comment is barmy.

      You can legitimately criticize Singapore for being authoritarian, but communist? It’s hyper capitalist, it has ranked #2 on the world economic freedom rankings for at least the last six years (I didn’t bother checking earlier):

      http://www.cato.org/pubs/efw/

      1. charles 2

        It is a little more complex than that.
        If one defines Communism as “collective property of assets”, Singapore actually fits the bill more than many governments on Earth :
        - circa 70% of the population lives in Government Sponsored housing on a rent or leasehold basis. The government is simply the landlord for 95% of available land ! Actually, I think this was one of the source of this economy’s success; not having a unproductive landlord class to support removes a substantial burden on economic agents. Compare that with Europe and some part of the US where full property of land and astute usage of zoning laws was the basis of many fortunes !
        - a big chunk of the economy (50 to 60%) is operated by companies effectively controlled by the government. Singapore is often dubbed “Singapore Inc.”. I think “Singapore LLC” is more accurate, with the LPs being the residents and the GPs being the meritocratic civil service/military elite.

        On the other hand, if one equal “communism” with “egalitarianism”, Singapore is clearly as the opposite end of the spectrum as its Gini coefficient similar to the US attests.

    2. Skippy

      Have to agree with YS the banding of non sequitur socialist, communist, capitalist…is becoming redundant, words used to agitate, define a antiquated perceived position. Better to see the a job at and and construct structure to facilitate it.

  31. wintermute

    Censorship at the “Texas Insider” ?

    “We Don’t Know”
    Texas Insider – ‎16 hours ago‎
    James K. Galbraith Professor of Economics, University of Texas Possibly the most important fact bearing on the consequences of massive foreclosure fraud is …

    Excellent article by Galbraith critical of MERS is now a broken link and can’t be found…

    http://www.texasinsider.org/?p=36154

    Not an accident..?

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