The market-moving stories, namely the US debt ceiling drama and the rolling Greek/Eurozone mess, are crowding out anything other than tragedies (the Norway bombing, Chinese train wrecks) and good old fashioned high profile prurient interest (DSK and the Murdochs).
Let’s briefly cover an important development in the US mortgage saga. I’m told that the Department of Justice is putting the thumbscrews on state attorneys general to sign a mortgage settlement deal this week (how exactly the DoJ can pressure state officials is beyond me, since the Feds typically ignore state investigations until they look like they are about to be end run, but hopefully readers can enlighten me). New York and Delaware, as we already indicated, are out via having launched their own investigations, as is Nevada (ground zero of the mortgage mess) and likely California. We’ve been told Arizona was out a while ago, but haven’t gotten confirmation that that is still true.
We are also told the banks are pressing (as we predicted) for a very broad release, and the announcement today from Martha Coakley, the Massachusetts state AG, strongly suggests she is another dissenter. Per Bloomberg:
The banks in settlement talks with state and federal officials are seeking broad releases to protect them from legal claims. Massachusetts Attorney General Martha Coakley said yesterday she won’t support an agreement that includes releases for securitization of mortgages and conduct related to a database of mortgages known as MERS.
“Massachusetts will not sign on to any global agreement with the banks if it includes a comprehensive liability release regarding securitization and the MERS conduct,” Coakley wrote to the Norfolk County register of deeds in Dedham, Massachusetts. “These investigations must continue.” The registry keeps real estate records.
“Conduct related to MERS,” from what I can tell (and I did a fair bit of checking) does not mean the banks are on the hook for MERS in a direct manner. MERS is not a shell company, even though its corporate governance was particularly unorthodox, to put it politely. A past efforts to pierce its corporate veil failed and corporate veil-piercing has not succeeded in the past save for closely-held companies. It would be an uphill battle with questionable returns, since running a private mortgage registry per se is not illegal. Even though there is a potential elephant in the room, whether local recording fees not paid thanks to the use of MERS can somehow be clawed back, that liability might not sit with the undercapitlized MERS. It most likely rests with the poor chump investors rather than the banks.
What Coakley likely means is bank liability for foreclosures that relied on MERS as part of chain of title. When creates chain of title problems, that means problems for the servicers. But that liability does not result from MERS. Rather, it is liability they created all on their own by having relied on a defective registration/transfer.
Massachusetts has become an important front of the mortgage crisis both by virtue of having handed down an important decision, Ibanez, which was a major blow to the securitization industry’s argument that the pooling and servicing agreement (the contract that governed the securitization) was sufficient to effect transfer of the mortgages to the trust. The Massachusetts Supreme Judicial Court is very well regarded, so that decision carried more weight than a normal state supreme court decision would. \
In addition, Massachusetts is also a state where one of the registers of deeds, John O’Brien, in South Essex County, has ascertained that both that there was considerable evidence of robosigning right in his records (which more recently reports show is continuing, despite industry
lies claims to the contrary). O’Brien has also estimated the recording fees lost due to the MERS system in his county alone are $22 million and he’d very much like to get it back. Dave Dayen at FireDogLake wrote:
It’s telling that Coakley had to respond to a register of deeds, the unassuming, ministerial recorders of real estate transactions who are starting to wield considerable weight as a settlement is discussed….
They have the evidence. A simple crowd-sourced movement of registers can document years and years of fraud. MERS is central to that, because that’s the electronic registry which basically superseded the public land recording system in this country during the bubble years. This is entirely tied up with securitization failures, and liability for this mess, which is at the heart of the foreclosure fraud issue, should never be signed away. And now, Coakley is saying she won’t. I hope more AGs join her.
Amen to that.
how exactly the DoJ can pressure state officials is beyond me
At least for Democrats, how much party-line pressure is there by now?
Since we were talking about fascism the other day, let’s mention that the more fascistic a political party is, the more its members are expected to be loyal to Party first, regardless of any state position they hold.
If Coakley had run for the Senate based on the positions she claims to embrace as state AG instead of running as an Obama flunkey, she’d have won easily. Heckuva job.
But the higher you try to go within the system, the more you “have to” conform, assuming you ever thought anything different in the first place. Cf. Elizabeth Warren. (Obama was certainly a Reagan-worshipper and conscious political con man going back to his student days, though.)
This is Massachusetts, arguably the most politically corrupt one-party state in the country.
While Coakley appears to be not caving to the banks (thanks to my Consumer Complaint I’m sure), this is also the same State Attorney General that was delivered the now third-in-a-row convicted State House Speaker, Sal DiMasi, a fellow Democrat on a silver platter and deferred to the federal government.
I do like the fact that John O’Brien put a simple search feature on The South Essex County Registrar of Deeds website to see if a home is a victim of “robo-signing”.
Time will tell of course what happens from here, but so far, it appears banks lead the score, and no amount of penalty will make up for what they have done to The American People.
‘Corrupt one-party state?’ Too bad there isn’t a thriving green party but the lack of Republicans in Massachusetts is an indication of the good sense of the citizenry IMHO. I have a recording of Gov. Francis Sargent (R) announcing the cancellation of the Southwest Expressway (c1972) that would have wiped out commuter rail service and sliced through the middle of Boston and its inner suburbs. By today’s standards it is a real lefty speech.
These labels mean nothing. The corporations have seized the government and perverted its functioning. How corrupt is that?
Registries of Deeds (and libraries) in Massachusetts are sacred places (also in my not so humble opinion.) I am incredibly proud of Registrar O’Brien and I hope he gets some money back. We are going to have to fight, state by state, to limit the power of the corporations because our federal government is not on our side. There are public employees in all of these local institutions who are hard working and long suffering.
Also, no one in Massachusetts is turned away from a doctor because of inability to pay. How corrupt is that?
When I hear someone say the words ‘corrupt Massachusetts’ I know where they are coming from and it is not a good place!
I think it’s true that Massachusetts is a wonderful state in many ways, and is also a corrupt one-party state in other ways. All one party states, whether they are Republican or Democrat in nature tend to have more corruption problems. But not all corruption is NOT equal, there are many forms and types of corruption, some of whcih even end up benefitting the people. Despite the corruption here (which all states and cities have in some measure) the state is doing pretty well overall in comparison with other states.
IMO Martha Coakley is doing a great job as AG. She’s a real law & order, nose to the grindstone type. She’s doing more good for the state as AG than she would have done as another Obama courtier.
ooops… meant to say ‘not all corruption is equal’
I agree – well put.
Populists like Curley and Long were called ‘corrupt’ by the rich elites and, of course, in some real sense they were.
Right now we could use a bit more corruption that benefits the poor rather than the rich.
“the state is doing pretty well overall” –
Take out the College and University support, and a few of the Pharma/Bio corps, and Massachusetts folds. In the years to come, as more consumers/parents come to realize that a Liberal Arts degree isn’t going to do much, yet they keep paying $40k a year for, a corner will be turned. Right now, it’s all on borrowed money, courtesy of student loans, should be interesting when that shoe drops.
In the mean time, “Extend & Pretend”, especially here in The Commonwealth of Massachusetts.
Too true – in the end we will probably all ‘fold’ and the old nuclear plants will do us in. I’m a doomer too. But that’s not really the topic of this post, is it?
Yeah, but so what? Overall commerce is doing well in this state. More big pharma companies are setting up office in Cambridge or Boston, because other corps in their industry are there. Both Google and Microsoft now have research divisions here for various reasons (for about 3 years now), but especially to be close to the colleges and universities. Boston is still a medical mecca, and in the past 10 years has earned the nickname “Titletown” due to the success of all 4 mojors sports teams.
10-12 years ago when it became obvious that Boston didn’t have enough large hotel space to draw in conferences (despite ranking 2nd in surveys as “most desired city to attend a conference in”), the city set about changing that and now more and more conferences come here. When I was at the MFA/Museum of Fine Arts a couple of weeks ago for the Chihuly exhibit (nice but suggest Corning Museum of Glass in Corning, NY, if you really love glass art) I noticed they are doing huge renovations.
The Big Dig, despite all the problems and corruption, has improved many aspects of downtown Boston… and a number of waterfront areas have been renovated the past 10 years. This is an urban area that’s alive and well and continuing to attract people and investment despite the high costs here. The quality of life here is a big draw. MA is losing population in some areas but are experiencing a minor net positive due to immigration… this is still a city of immigrants and I generally hear other languages spoken when I go walking anywhere in the Boston-Cambridge and inner suburbs.
As you may be able to tell, I am NOT a doomer. I’m a realist.
An unexpected trend is an increase in small farms, which is also a good sign for the state economy.
Farming surges in state with new crop of devotees
I beg your pardon. As a resident of Rhode Island, I cannot cede to our northern neighbor the title of “most corrupt one-party state.”
Indemnification costs alome for mucking up first world property recording processes seem high to this observer. How about an average of 1B per county//parish? I suspect that each state has to pass special recordation clean-up rules to govern the discovery of errors.
The scope of fraud seems far beyond typical organized crime given a massive number of individual frauds and apparent government complicity. Roll forward many years and none of the actors are safe if this evolves into a large RICO situation. The TBTF bank executive may one day be hiding out similar to the old time Nazi war criminals when the average, unaware American finally understands the scope.
Just as soon as the Federal level of our government gets done gutting SS they will memorialize a solution to this problem for the banks but they are busy with other perfidy currently.
From neighboring Rhode Island. July 25, 2011…
CHASE BANK – MODIFY FAIRLY OR FACE $100,000,000 LAWSUIT FOR FRAUD
“DO NOT CIRCUMVENT OUR OFFICE – ALL CORRESPONDENCE REGARDING THIS MORTGAGE SHOULD BE DIRECTED TO US.
We have sent HUNDREDS of pages of documentation to you since November 2010.
The borrower came to us because they did the same and were ignored. We are going to try one more time to obtain a modification for our clients before we turn to the court system for relief.
Your company has run rough-shot over our state’s title statutes, and violated them as if they did not exist [and not only with regard to this particular property]. Unless you offer our clients an acceptable loan modification with a principal write-down to a new balance of $100,000,000.00 within 45 days, our intent is to amend our existing complaint to include acting in bad faith and outright fraud. The way you have treated our clients is disgusting and you should be held accountable.
A “kinder, gentler” title may have read like this:
Since the Plantiff has been harassed, lied to, and been abused as part of a huge national ponzi scheme that has unjustly enriched TBTF banks, we offer to accept a prinicipal correction in lieu of suing you for $100,000,000.00 in damages for your egregious behavior.
Take it or leave it.
The MERS system is the greatest instrument ever “forged” to achieve “Zero-Risk”. The “Zero-Risk” mentality was at the heart of the G.F.Crisis and, the ‘AAA’ rating of sub-prime derivatives was a product of the MERS.system. Quoting the VS20 Group..
* Each Sub-prime derivative was divided into maybe 10 Tranches. All of the top Tranches were ‘AAA’ rated because over 30% of sub-prime mortgages would have to default before a single default could enter a top tranche!
* Normally, because of the chain of title, there is no way to guarantee that ALL defaults go to bottom tranches. You would have to be prepared to change the INK on millions of mortgages as they defaulted.
* Or, you could invent a MERS computer system that could electronically switch the defaulting mortgages to lower tranche ‘owners’ instantly.
* The only problem is that the INK trail on 50 million titles is now broken. MERS overcomes this problem by exploiting a loop-hole that allows for “fixing” accidentally broken ‘chains of title’. MERS claims that all 50 million title deeds were “accidentally broken”.
* Those top tranches were so profitable that the bottom tranches did not need to be sold – they were retained as ‘junk’.
If all of this was ‘legal’ then our Law-makers are not in tune with societies sense of justice! Surely there is more to investigate than just ‘sloppy bookkeeping’ and loss of State Fees!
I don’t call it the (In)Justice Department for nothing.
message to banksters…. sometimes the people you don’t want in congress aren’t going to be any friendlier kept away from congress
“MERS is not a shell company, even though its corporate governance was particularly unorthodox, to put it politely.”
It was an open conspiracy, what is known as a Scam.
fixed it for ‘ya
“Poor chump investors”? Please tell me you didn’t mean that.
is it just me or do others feel like no matter where they turn they are surrounded by fraud?
After reading about MERS for over a year I was surprised to read an article that said MERS was set up by the banks, Fannie Mae, and Freddie Mac. I was not aware that Fannie and Freddie were involved.
Is this true, and if so how does this relate to the dynamic between the states and the fed? Do Fannie and Freddie need MERS challenges to be put aside? Or is this factoid of little relevance?
“MERS” is also related with crimes it is very surprising. Fannie and Freddie also involved that is more surprising. In this article you particularly mentioned many crimes scenes. If all of this was ‘legal’ then our law makers are not in tune with society’s sense of justice! Thanks for this allocation :)