Mortgage Industry Defense is Flimsy, Congressional Oversight Panel Provides Counter-Evidence

Reader MBSGuy wrote to express his disgust with the mortgage industry’s efforts to pretend that nothing is rotten in Denmark. His object of contempt was an article in Bloomberg which dutifully recited the current talking points. The flacks have clearly been working full time: the headline, “Mortgage Industry Bristles at ‘Robin Hood’ Foreclosure Theories,” is yet another example of creative phrase-mongering to try to discredit critics. And get a load of the assertions:

The “number of attorneys that signed off on” the policies used when Wall Street firms packaged mortgages into bonds means it’s likely that the trusts used to hold the debt will be able to prove they own the loans in almost all cases, said Philip Seares, a managing director at Citigroup Inc. who run its trading of whole loans.

The industry also has faith that loan assignments handled by the Mortgage Electronic Registration System, or MERS, can’t be broadly contested, Seares and Mortgage Bankers Association President John Courson said at the group’s annual conference.

As we indicated in a post earlier tonight, judges ARE contesting the use of MERS, and in particular, the casual assignments made by parties who were not employees of the company that owned the note. In addition, all state supreme courts that have ruled on foreclosures in the name of MERS (admittedly a different issue than MERS assignments per se), save Minnesota, which passed MERS-friendly statutes, have ruled against it. . These decisions have often objected to the multiple and inconsistent roles MERS typically plays, which lays the foundation for other challenges.

As MBSGuy noted:

When confronted with countless examples of why there are problems, industry insiders say it can’t be a problem because scores of attorneys signed off on the legal documents. It is almost embarrassing to see how feeble the industry sounds when confronted with evidence.

The part that the industry boosters are missing is the fact that the legal opinions for mortgage securitizations were qualified (in general, lawyers craft opinion so as to provide the minimum degree of comfort necessary to get the deal done). They took an “if-then” form: “if you did everything you said you would do, then all is fine.” And as we’ve indicated repeatedly on this blog, the industry did NOT do what it promised in the pooling and servicing agreement. It appears in many cases starting roughly in 2004, the parties to the securitization failed to convey the notes as described in their own contracts, basically because it was too costly and time-consuming.

The media has finally woken up and is reporting on a wide range and variety of bogus foreclosure actions, vitiating the industry claims that all foreclosure actions are correct. And before some readers try the argument that a few errors here and there are no big deal, try telling that to someone threatened with the loss of their home. This sort of thing was impossible in the pre-securitization era, and for good reason: the process of dealing with real property was cumbersome by design. It was fault intolerant because the consequences of error can be catastrophic to the participants. Any process that has a lot of safety features and checks is going to be inefficient. It was inevitable that a drive for efficiency at all costs would compromise the integrity of the system.

The New York Times, in “Homeowners Facing Foreclosure Demand Recourse,” provides examples of erroneous foreclosure actions:

Ricky Rought paid cash to the Deutsche Bank National Trust Company for a four-room cabin in Michigan with the intention of fixing it up for his daughter. Instead, the bank tried to foreclose on the property and the locks were changed, court records show.

Sonya Robison is facing a foreclosure suit in Colorado after the company handling her mortgage encouraged her to skip a payment, she says, to square up for mistakenly changing the locks on her home, too.

Thomas and Charlotte Sexton, of Kentucky, were successfully foreclosed upon by a mortgage trust that, according to court records, does not exist.

The price is worth reading in full, because it gives the gory details of these cases, but it has some technical errors (its discussion of allonges is all wrong, and it also fails to note that the use of allonges in foreclosures is suspect; the ones that magically materialize in foreclosures are almost without exception in violation of the requirements of the Uniform Commercial Code).

Even though more and more accounts like these are being reported daily, the denial in the industry remains high. I spoke to one expert who believes that the big white shoe law firms themselves do not understand how badly their clients failed to perform their contractual obligations. Thus lawyers may be offering their confident defenses based on ignorance of the relevant facts. (Before legally sophisticated readers point out that banks ought to tell their attorneys first about any legal problems, since the communication is confidential, remember, only a very few senior executives, plus members of the legal department, deal with outside counsel. An individual employee who was in a position to know what was really going on would be at a lower level. A general rule of corporate life is bearing news of serious problems is a career-limiting move).

But even allowing for the possibility of remarkable ignorance, the industry defenses are remarkably weak. Back to the Bloomberg story:

The American Securitization Forum trade group, JPMorgan Chase & Co. bond analysts and law firm SNR Denton have also dismissed such talk. In a commentary posted on its website, SNR Denton says that most attempts to question the validity of practices can be trumped by items such as the fact that all parties involved “clearly intended” for the trusts to take ownership.

We dismembered the SNR Denton article earlier this week, and the “intent” argument is laughable, particularly given the detailed, specific requirements of the pooling and servicing agreement. Consider: if you paid your estimated income taxes on time and filed for an extension, but then failed to send in your tax return, how sympathetic do you think the IRS would be if you argued you clearly intended to submit your return by the deadline?

A vastly more compelling analysis comes from law professor Katherine Porter, whose testimony to the Congressional Oversight Panel today is must reading. She is quite clear that current practices are not kosher:

I describe the legal and economic issues involved in impermissible or flawed foreclosures and then set out the possible responses to such wrongdoing. Specifically, I consider the ways in which systemic foreclosure problems may set off extensive and complex litigation, destabilize the housing market, and result in regulatory interventions. I believe that the foreclosure process lacks integrity in an unacceptable number of ways and instances and that these problems undermine foreclosure mitigation efforts.

She stresses that the problems with foreclosures are far more extensive than robo signers:

Robo-signing is only one of a number of alleged deficiencies in foreclosure practices. Several courts have determined that there were serious deficiencies in the foreclosure process. At a website that I maintain with Tara Twomey, my co-investigator in the Mortgage Study, we make available a list of judicial decisions in which the court finds inappropriate foreclosure practices or misbehavior by mortgage servicers or their agents. Although we stopped updating the document over a year ago, at that time there were already more than fifty such cases. The problems in such cases range from the imposition and collection of improper fees, a lack of standing to foreclose in judicial foreclosure states, the pursuit of foreclosure without rights in the note and mortgage, mortgage origination fraud, or liability to investors for poor underwriting or improper servicing. The key point is that the vast majority of the alleged problems cannot accurately be described as “technicalities.” The flaws in the foreclosure systems go well beyond improper affidavits

Twomey and Porter stopped updating their Mortgage Study document in 2009 because they were being flooded with the number of cases showing violations of servicing requirements and foreclosure standards.

She also confirms our view that the failure to convey the borrower promissory note as described in the pooling and servicing agreement is a serious problem:

The largest and most complex harm that may exist with the loans in default or foreclosure today is that the paperwork for the loans was not transferred correctly…..The concern being raised is that during the securitization process that the transfers from originator to sponsor to depositor to trust (to generalize the parties in a typical process) were not performed or were not performed correctly. A related issue is whether the physical paperwork or electronic records can be located and are accurate. These records are needed to sort out whether the transfers were completed and valid.

I believe the law is somewhat unsettled on what actually must be done via a securitization to complete the transfers correctly….

The implications of problems with transfer are serious. If the trust does not have the loan, homeowners may have been making payments to the wrong party. If the trust does not have the note or mortgage, it may not have standing to foreclose or legal authority to negotiate a loan modification. To the extent that these transfers are being completed retroactively, it raises issues about honesty in creating and dating the assignments/transfers and about what parties can do, if anything, if an entity in the securitization chain, such as Lehman Brothers or New Century, is no longer in existence. Moreover, retroactive transfers may violate the terms of the trust, which often prohibit the addition of new assets, or may cause the trust to lose its REMIC status, a favorable treatment under the Internal Revenue Code. Chain of title problems have the potential to expose the banks to investor lawsuits and to hinder their legal authority to foreclose or even to do loss mitigation.

This is a pretty damning list, needless to say. And there is another layer of problems this may create, that consumers may be able to sue the securitization trust (or whatever entity actually has the note now) for origination fraud:

For over 10 years, there have been allegations about violations of consumer protection laws and poor/nonexistent underwriting at loan origination. While the law gives great finality to completed foreclosure sales, loans that are currently in default (which some estimate to be as many as 20 percent of mortgages underlying privately-backed securities) are at risk of being challenged for origination violations. These challenges could come in the form of investor suits trying to force banks to buy back loans that did not meet the representations of the securitization documents, e.g., they were not underwritten to the reported standard. Another type of lawsuit risk is that consumers are able to sue the current holder of their note for violations that occurred at origination. Normally, these complaints fail because the holder of the note is thought to be a “holder in due course,” a person that receives protection from most of the claims that someone could bring against the originator of the note. However, if the notes do not meet the requirements of negotiable instruments, there cannot be a holder in due course. The person with the note merely is the possessor “bearer paper,” and can be sued for all wrongs associated with that note contract.

She also dismisses bank claims that their processes are fine:

The banks have repeatedly tried to minimize perceptions about the materiality of their foreclosure deficiencies…The general thrust of the banks’ defense has been that because the homeowners did take on a mortgage obligation, and have in fact missed payments, then the foreclosure is proper. As I have explained recently:

“Just because the homeowner hasn’t paid his mortgage doesn’t mean anybody in the world can kick him out,” …She added that the bank’s argument was a little like saying that someone who committed a crime shouldn’t receive a trial because he’s so obviously guilty.

Due process does not disappear merely upon the assertion by one party that the other is clearly liable. The allegations of problems in mortgage servicing should, if anything, only heighten the due process requirements on consumers. For example, in light of the lack of verification procedures for affidavits to support requests for judgments in judicial foreclosures, it may be reasonable to be concerned that there is absolutely no verification of the facts in the non-judicial foreclosure context. Thus, we might argue that states or the federal government ought to increase the legal requirements for foreclosures across the board, at least for loans initiated in the last five to ten years when widespread allegations of paperwork and procedural problems have existed. The banks’ arguments that we can ignore possible systemic wrongdoing by the banks because as a systemic matter, homeowners are in default on their loans, is unpersuasive. Indeed, it seems to reflect a fundamental misunderstanding of the obligations of any party wishing to invoke the aid of the law in enforcing its rights….

[t]he lawyers that I have met over years of my research on mortgage servicing—both creditor lawyers and debtor lawyers—have nearly universally expressed that they believe a very large number (perhaps virtually all) securitized loans made in the boom period in the mid-2000s contain serious paperwork flaws, did not meet underwriting or other requirements of the trust, and have not been serviced properly as to default and foreclosure.

There is a great deal more in her testimony that is very much worth reading.

Damon Slivers, a member of the COP, succinctly highlighted the key issue:

The risks to bank balance sheets is real as they reap the whirlwind they have sown. From the New York Times article cited earlier:

Some consumer lawyers say they are now swamped with homeowners saying they have been wronged by slipshod bank practices and want to fight to keep their homes.

And the more consumers fight, which increases costs to banks and investors, the more investors will push for a resolution (indeed, they’ve already started), and will go to court if need be. It’s going to be hard for banks to maintain their “no real problems here” party line as litigation against them continues to snowball.

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  1. Nicholas Shaxson

    You have probably pointed this out before, but in case not, this mess would not have happened had people heeded what John Maynard Keynes said in 1933: “Experience is accumulating that remoteness between ownership and operation is an evil in the relations between men, likely or certain in the long run to set up strains and enmities which will bring to nought the financial calculation.”

  2. Paul Repstock

    The words ‘Desperate’, and ‘Out of control’, come to mind. There seems to be no captain at the helm of these mortgage companies and banks. These are not normal practices. The whole process of property trans fer has been in place for a very long time. There have been cases of abuse and fraud in the past, but in general not much has changed for a hundred or more years. No, suddenly nobody is playing by the rules??

    A side note I have been stumbling over increasingly; If the banks and lending institutions are the “professionals” (as we have always been told), Then why were they so negligent in spotting all these so called deadbeats?? To most of us it is obvious that they intentionally pumped the market, happily lent any amount of money to homebuyers, missled people that they could afford the payments, ignored due dilligence; and then took a sharpe stick to the bubble so that they could scrape the resultant mess off the floor for nothing.

    1. Paul Repstock

      One could make many wild guesses as to the reasons. Perhaps the “Pump and Dump scam” was wildly more successful than anyone had dreamed. Now the fallout is so huge that the wiser rodents have abandoned ship, leaving less competent rodents to deal with the mess.

      Perhaps in their arrogance these people think that their best defence is to terrify everyone so badly that they will be seen as saviours when they step back in and restore reason to the process.

      IDK. As mentioned before, ‘this is obviously not business as usual’. That to me means more trouble coming down the pipe. Love them or hate them, bankers have a long history of calm and unflapabilty. To suddenly break from that pattern is a large warning sign.

    2. Susa

      Paul, the captains could be pirates. As the S&L crisis shows crooked executives sometimes take control of banks. I am dead certain that is the case for some banks this time too. In other words, the pirates are out to rob their own bank, and don’t care if it goes belly up as long they get those big bonuses that were inflated by short term gains. Possibly they also pillage bank assets by transferring them elsewhere through complex hard-to-track deals. What we think is incompetence could be signs of fraudulent practices.

      For example, when a bank says they destroy the physical note as a matter of policy… avoid that bank like the plague. The management is either grossly incompetent or engaged in fraud. Yves has previously posted about it being the equivalent of burning money. Penny wise pound foolish by cutting down on archiving costs. The bankster explanation that it is to avoid confusion doesn’t jive with what we see now, widespread confusion. But when I read about the ponzi scheme called double-pledging I realized we might be looking at fraud as an explanation.

      If you have one physical note but pledge it to multiple investors, then you might face the embarrassment of more than one investor asking for the unique specimen. But in our digital age they could come up with a new innovation in fraud, multiple electronic copies. It’s trivially easy to make identical duplicates of the same electronic document. Just gotta get rid of that physical note so the investors have no choice but to accept an electronic note. Leave no paper trail.

      Possibly this also explains why much of the other paperwork is deficient. Apparent confusion and incompetence masking deliberate fraud. Fill in the blanks or go to a foreclosure mill to “recreate” missing documents whenever necessary, such as during foreclosure procedings. Repeat document “recreation” for the other investors if they ask for papers.

      Remember, there was such a huge demand for securitized mortgages that lending standards plummeted. The banks wanted more more more and accepted lax standards because the mortgages were offloaded on investors. But some could well have gone further to feed that high demand by defrauding investors through multiple pledging. If you can’t find enough homebuyers, clone the documents instead.

  3. attempter

    Indeed, it seems to reflect a fundamental misunderstanding of the obligations of any party wishing to invoke the aid of the law in enforcing its rights….

    It’s been a long, long time since the banks were used to dealing with the law, as opposed to “the law”, their own rigged law.

    The trouble is that here their crimes aren’t just spread out over society as a whole, but are directly assaulting the very same “middle class” cadre they were counting on to politically support them even as they liquidated that very same cadre.

    The very basis of the astroturfing was this “American Dream/ownership society” scam. The banksters are now not only trying to trash their own rigged law, but are doing so in order to lawlessly assault the people literally in their homes. The very same homes, “ownership” of which was supposed to be what the banks themselves delivered and guaranteed, and which are why society was supposed to allow this finance sector to exist at all.

    This is looking to be an exercise in Machiavelli’s teaching that the people will put up with any level of economic and political tyranny as long as the tyrant doesn’t cross specific, gratuitous taboos.

    Here the people have seemed willing to tolerate the stealing of trillions pre-Bailout, the gutting of the real economy, the Bailout itself, “austerity” (gutting Social Security; it seems like most Americans don’t bother to even be aware this is happening), and their own complete liquidation as a middle class and reduction to debt servitude and worse, if all of that was done in a general, gradual way.

    But the banksters got so greedy and impatient that they couldn’t even adhere to their own extend and pretend. They were being allowed to compound all their pre-existing accounting fraud by pretending all these loans were still good, for as long as possible, until the Depression forced housedebtors to stop paying because they could no longer afford it. At that point the banks would’ve had a problem with the “investors”, but that’s the most easily finessed problem. Look at how much power shareholders have (the same shareholders whose weal is the proclaimed ideological/moral basis of corporatism, but who in reality have almost no power and are constantly swindled). Meanwhile they might have continued to get away with telling people having their homes stolen that it’s just a natural process of the economy, and/or its the debtor’s own fault.

    But instead they chose to rush to foreclose on as many of the zombie debtors as possible, apparently for no reason at all than to drum up short-run fees. In doing so they’ve rendered the entire regime of lawlessness and predation very stark and clear in a way this middle class can viscerally understand. They may not understand suspension of mark-to-market, or how the government has propped up the zombie MBS in the first place, as the main project of the Bailout.

    But they sure understand that the system has been intentionally set up so that in theory anyone claiming to represent FIRE sector authority can, with the most flimsy documentation, claim to have a right to seize your house, and have a decent chance of getting a corrupt judge to go along with it. They see how this is exactly what happened in practice, many, many times, and continues to happen.

  4. F. Beard

    It was fault intolerant because the consequences of error can be catastrophic to the participants. Any process that has a lot of safety features and checks is going to be inefficient. It was inevitable that a drive for efficiency at all costs would compromise the integrity of the system. Yves

    The “system”, more generally, is the government backed counterfeiting (fractional reserve) cartel which has once more hosed the economy.

    Like a foolish parasite, that system is threating its own existence by damaging the host too much.

    I learned a lesson about leverage years ago; I stepped on a garden rake. Wack!

  5. anon48

    I had chance to watch the Inquiry in question on C-Span 3 last evening. Porter was very angry regarding the banks conduct to the point of being emotional. For some reason, the panel members did not quetsion her very much until the end of the session.

    Phyllis Caldwell, head of the Treasury Department’s homeownership preservation office was part of the group of witnesses immediately prior to the one on which Porter testified. She was grilled by a number of the panel members. She literally refused to answer some of the questions posed to her. Her hemming and hawing was pathetic. For example, Damon Silvers absolutely obliterated her by exposing her suggestion that there was no risk involving BOA’s current circumstances. (It was agreed by other panel members that there was at least exposure to put backs of $23 billion in loans for BOA while it’s capital was probably less than $5 billion). Asking incredulously how she could not consider those facts grounds for being a risk her response was that we were still too early in the process to make the call. Paraphrasing Silvers- while he agreed that we were still early in the process he denounced the other part of her response as ridiculous.

    Her response to a another panel member, who point blank asked how a potential homebuyer who was considering to buy a foreclosed home could prove that they were getting clear title, was just as weak. After stammering and fumbling for a response she blurted out that is why there is title insurance.

    I understand that it’s not healthy for a top Treasury official to publicly state that a particular bank posed a systemic risk or that homebuyers may have difficulty buying foreclosed homes and getting clear title, because of the potential repercussions, but the weak flimsy nature of the actual responses and inability to answer those question in a straight forward fashion was eye-opening. It also goes without saying that there was tremendous skepticism among all of oversight panel members regarding anything that Treasury, the banks or the servicers had to say about the quality of the current documents being relied upon in foreclosure proceedings.

    1. DownSouth

      Here is a link to the C-span video of the hearing.

      I haven’t had a chance to take a look at it (it’s almost 3 hours long) but will probably do that later in the day, so will perhaps have a response to your comment later.

  6. beesymph

    I think Mr. Silva’s statement of the issue is terrifying in itself:

    “We can either have a rational solution to this foreclosure crisis, or we can preserve the capital structure of the banks. Which should we do?” Statement of Damon A. Silvers from COP Hearing Today: The Money Quote

    Thus, we can abandon the Rule of Law to save the banks or stick with legal precedent. I have a problem that these choices are even presented. If we abandon the Rule of Law, we weaken the entire social contract and invite lawlessness in all areas: voluntary tax payments, vigilante justice, squatters in abandoned homes etc. Mr. Silvers is part of the elite and instead of posing this choice he should have come down on the side of the Rule of Law. We should not be catering to every bank crisis willing to throw hundreds of year of settled real estate law and our Constitution out the window to save bank malfeasance.

    The Oversight Panel should have made a strong statement that we intend to uphold our laws and punish the malefactors. Not save the banks again so that they can award themselves record bonuses. Where is the moral outrage?


  7. Pascal Blacque

    The puzzle is unraveling rapidly now … the investors are gathering strength and the monolines are palying hard ball… the hommeowners are already there … the courts are wisening up… so who’s left? The Obama administration and the voters next week… scary thought!

    Ambac Sues Countrywide, Alleging False Information On MBS
    2010-10-27 —
    “Ambac Financial Group Inc. (ABK) sued Bank of America Corp. (BAC) over “false and misleading” information it says the bank’s Countrywide unit provided to trick it into insuring mortgage-backed bonds. Ambac filed suit after a review of 6,533 of the home loans — just a fraction of the 268,000 loans included in 12 mortgage-backed securities it insured for Countrywide. The review found more than 97% of the loans didn’t meet the guidelines Countrywide had said they’d followed in assembling the bonds, according to the complaint filed Tuesday in New York State Supreme Court. ”

  8. GC

    Yves, just wondering at this unholy mess, but with the breakdown in title transfer, is there danger smart-arse lawyers might try to evict a current and fully up-to-date homeowner in favour of the last listed legal title owner?

    If more than once removed then owners cannot show payment or contractual transfer from the last legally listed owner which could open up a whole new can of worms.

    1. dejavuagain


      That is the point, and the smart arse might be a bankruptcy trustee of the original lender shown on the recorded document.

  9. dejavuagain

    You are ruining my morning productivity again.

    Question: assume a REMIC Trust forecloses on a property and ends up with REO – ownership of the property, is the Trust allowed to rent out the property and engage in non-passive activity. After all, the servicer is merely an agent of the Trust.

    I am not sure if I have posed the correct question – but, I do wonder whether when setting up the Trusts, there was consideration of the possibility that properties would not sell at a foreclosure sale and that the Trust would end up owning real estate, not just a mortgage note.

    1. f247

      Isn’t this what Carrington is doing and getting sued for? From what I remember reading, I think Carrington’s REO liquidation timelines are the only ones worse than CFC’s. (Recall that Carrington bought New Century’s servicing platform after it went bust.)

      This isn’t the exact article I’m looking for, but it discusses the inverse (?) idea, where Carrington sued AMHSI for selling REO too quickly “at fire-sale prices”. Carrington owns the stub tranches of the New Century deals, so he gets wiped out when the REO gets sold.

      Here, this second article goes through Carrington’s REO rental strategy:

      From the article:

      “A key part of the Carrington mortgage servicing strategy is to rent out REO properties, rather than reselling them; it’s a strategy that senior bondholders say allows the firm to prevent recognizing losses that would otherwise negatively impact Carrington’s subordinate bond position in
      any individual MBS deal.

      “Carrington knows it sounds patriotic when they tell parties that they are trying to keep homeowners in their homes by renting it out after they foreclose on them,” said a senior bond investor under condition of anonymity. But such a strategy actually increases investor losses, he said.

      More importantly, Carrington appears to have little interest in trying to sell the REO properties. I spoke with two REO brokers hired by Carrington Capital last year, who said they are coming to terms with the fact that Carrington Mortgage Services used to them to do its dirty work and propel the myth that it is trying to sell REO properties.

  10. Susan LaCava

    Once again, the banks are portrayed as merely losing the documents in the rush to create MBS. There are more serious motives: the banks pledging the loans to other securitizations;destroying the documents to cover up origination fraud; and, making it difficult, if not impossible, for the investors to discover breaches of the underwriting quality warranties and representations.

  11. Justicia

    In our new normal bizarro world we now weigh the “number of attorneys that signed off on” a legal conclusion to determine whether or not it’s correct. Extra points for fat lawyers.

  12. Neva

    This is getting really serious now. If they go the route of trying to save the banks at the expense of the US Constitution, property rights and homeowners’ rights to due process, then anarchy will ensue. We could have a total breakdown of law and order. Is money going to take over everything? Of course, everyone knows that this should never have taken place. The American Dream has turned into the American nightmare.
    We would like to be of assistance with mortgage, foreclosure and servicing issues. 864-241-8602 Thanks.

  13. Opinionated Bloviator

    You CANNOT run a first world economy on THIRD WORLD LEGAL PRACTICES. Either Americans get serious about fixing the breakdown in the rule of law as personified by TBTF banks or 10 years from now we will be the United States Of Argentina if we are lucky or PANEM if we are not.

  14. Just a thought...

    I’m greatly intrigued by the ramifications of the potential legal outcomes from the foreclosure crisis. If the transfer of legal documentation was so mismanaged that establishing title becomes impossible by legal standards, would a consumer be allowed to keep the home in which they live free and clear regardless of payment history or default?

    The reason I ask is, if we consider the potential breadth of the problem, homeowners who have mortgages they are certain do not meet conforming standards may want to choose default to see if the gamble pays off. From a simple expected likelihood perspective, what should the rational consumer choose?

    Conversely, assuming no default, will loan originators be forced to go back to home buyers, paperwork in hand, to ‘rebuild’ the mortgage documentation necessary to establish the legal paper trail specified in the trust documents. In which case, should a homeowner even agree to sign?

  15. Blurtman

    Don’t worry. When the recovry comes, all will be fine. Here’s a little wealth effect tease for you. How’s that taste, eh? Just stick with the program and there’s more where that came from.

  16. jal

    The truth has been told to the lawmakers. These lawmakers have been trained as lawyers. Their assistants have law training.

    Surely they can see that what has happened to J6P CAN AND WILL end up on their doorstep. It “pay” a lot more to “steal” from the wealthy than to steal from J6P. The lawmakers are wealthy.

    They will fix the mortgage problem to save their own wealth/assets.

    If they cannot see the danger then they will end up being part of the wealth distribution.

    Do these lawmakers have any assets into the MERS system.

    Why don’t you find out for them and let them know that their asset ownership are in danger of disappearing.

    That could motivate them to make sure that they make different decissions.


    Testimony of Katherine Porter
    Before the Congressional Oversight Panel Hearing on the TARP Foreclosure Mitigation Program

    October 27, 2010

    Look at the other testimonies in the link.


  17. Brighton

    I too stand by my prior post that mortgage backed securities should be prohibited.

    Yes, loan prices would go up. They need to. “The Flaw” admitted to by greenspan was that there was a “tsunami of credit” available on the cheap because of the delusional belief that home prices would rise forever. Here:

    1. frances snoot

      Why should we give the feds control of the mortgages and make landowners renters? Might as well cede the land to the Queen.

      Leave the feds outta it.

  18. Cedric Regula

    In a court of law, attorneys as a group are only right 50% of the time. It’s outside a court of law that attorneys as a group are right 100% of the time.

    1. Richard F. Kessler

      Securtization practice ran afoul of legal requirements when securitization of mortgages went paperless. A note may be negotiated in blank so that whoever holds it is the “holder”. A mortgage may not be conveyed without identification of the successor in interest to the mortgagee. A note is an unsecured instrument held by a general creditor. However, a mortgage creates a security interest in the collateral in a secured party. Unless there is some way to identify the secured party, the mortgage cannot be enforced even though the holder of a bearer note can enforce repayment of the debt in default as a general creditor.

      The mortgage follows the note but a path must be created for the mortgage to follow the note to a secured party. If there is no identification of the secured party either by assignment or in some other legally recognized fashion, the mortgage becomes unenforceable until proper identification can be made of the mortgagee’s successor in interest. The legal requirements to be the “holder of a note” are different from the legal requirements to be the “holder of the mortgage”. The note is promiscuous; the debt is monogamous. Anyone can hold a note. Only a secured party can hold the mortgage.

  19. Victor

    “We can either have a rational solution to this foreclosure crisis, or we can preserve the capital structure of the banks. Which should we do?”

    A rational solution that would preserve the capital structure of the banks: 1. nationalize the endangered banks; 2. fire the top administrators and Boards of Directors; 3. give the federal government control of the mortgages, with the understanding that foreclosures will cease and current residents will be allowed to remain in their homes as renters, with rents determined on the basis of what the former homeowners can afford to pay; 4. set up grand juries to investigate for fraud and bring anyone who did anything illegal to trial.

    The underling problem is NOT with the mortgages or the banking system per se, but with the political climate, in which nationalization equals socialism and is thus not an acceptable alternative.

  20. Fractal

    “Twomey and Porter stopped updating their Mortgage Study document in 2009 because they were being flooded with the number of cases showing violations of servicing requirements and foreclosure standards.”

    Let’s take up a collection to fund paralegals for a month to compile all cases filed since Twomey & Porter stopped updating their list. Depending on the number of new cases that “flooded” in since they stopped updating, 2 paralegals might be enough. At the rate of 30 minutes per case, two paralegals could vet and update 560 new cases in a month (20 workdays at seven hours per day covering 14 cases a day per paralegal). Several thousand cases since 2009 would require maybe six to ten paralegals for a month. Temp agencies bill about $30-40 per hour for paralegals ($52.50-75 per hour for temp attorneys), before overtime. Total cost for 8-hour workdays could be $4800-6400 per paralegal, so total cost would be $9600-12,800 for the low-cost two-paralegal team, three to five times more than that for the high end. I bet we could raise ten grand on this website in a day to cover the low cost deal. Not sure about the high end (the $64,000 question).

  21. Blurtman

    Has anyone run the numbers of what real US GDP would look like over the last five years if we subtracted out the bogus contribution of the FIRE industries? My guess is that it would be negative in a big way, hence the continued complicity of the USG.

  22. Rahul

    Additional risks to banks

    The foreclosure mess may deem the bailout process illegal in cases where US FED bought mortgages and mortgage based derivatives. FED should check if they have ownership of what they bought or they are simply holding null and void papers.

    Further, it will not allow US FED to bailout banks any further, because bailout is based on ownership of assets. If FED does not know who owns the asset how will they bailout. They cannot, ethically and morally (which I have doubt has any meaning these days), cover the transaction losses, can they?

    P.S. The book is awesome and though I don’t comment as much I read all the posts.

  23. razzz

    Congress would have to pass new law exempting the banks from the foreclosure mess as they are to big to fail, again.

    In the meantime, founded law supports all who bring suit, so the private sector has recourse and could bring down the whole house of cards even if Congress does nothing.

    Mortgage payers who are current, may not be, depending on who owns the note/deed. Monthly payment being thrown out the window since no one clear title is present. And what if a legal note holder shows up at a later date demanding payment?

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