Banks Getting Worried About Rising Challenges to Foreclosures?

I’m not quite certain how to calibrate journalism American Banker style, but I found this article, “,” (sadly, subscription only, e-mailed by Chris Whalen), to be both interesting and more than a tad disingenuous.

The spin starts with the headline, it’s a doozy. The “challenge to foreclosure documents” message persists throughout the article, and it’s perilously close to a misrepresentation:

Because the notes were often sold and resold during the boom years, many financial companies lost track of the documents. Now, legal officials are accusing companies of forging the documents needed to reclaim the properties.

On Monday, the Florida Attorney General’s Office said it was investigating the use of “bogus assignment” documents by Lender Processing Services Inc. and its former parent, Fidelity National Financial Inc. And last week a federal judge in Florida ordered a hearing to determine whether M&T Bank Corp. should be charged with fraud after it changed the assignment of a mortgage note for one borrower three separate times…

In many cases, [plaintiff attorney] Kowalski said, it has become impossible to establish when a mortgage was sold, and to whom, so the servicers are trying to recreate the paperwork, right down to the stamps that financial companies use to verify when a note has changed hands…

In a notice on its website, the Florida attorney general said it is examining whether Docx, an Alpharetta, Ga., unit of Lender Processing Services, forged documents so foreclosures could be processed more quickly.

“These documents are used in court cases as ‘real’ documents of assignment and presented to the court as so, when it actually appears that they are fabricated in order to meet the demands of the institution that does not, in fact, have the necessary documentation to foreclose according to law,” the notice said..

Yves here. Let’s parse the two messages:

1. Note how the problem is presented as one of “documentation”, implying it is not substantive.

2. Because everyone knows mortgages were sold a lot, (which is clearly mentioned in the piece) the idea that some somehow went missing (or as the piece suggests, the “documentation” is missing even though the parties are presented as if they know who really owns the mortgage) is presented as something routine and not very alarming.

OK, let’s dig a little deeper. Even though the media refers to “mortgages”, under the law there are two pieces: the note, which is the indebtedness, and the mortgage (in some states, a “deed of trust”), which is the lien against the property. In 45 of 50 states, the mortgage follows the note (it is an “accessory”) and has no independent existence (as in you can’t enforce the mortgage if you don’t hold the note. You need to have both the note and the mortgage. This is a bit approximate, but will do for this discussion).

Now, the note is a bearer instrument if it is endorsed in blank (as in signed by current owner but not specifically made payable to the next owner, which was common for notes that were sold). It isn’t some damned “documentation”. Remember the days of bonds, when you had the real security, or stock certificates? This is paper with a hard monetary value, the face amount of the note (as long as it’s current, anyhow).

So now go back and look at that little extract. This “oh business was so busy we mislaid a lot of paper” isn’t some mere filing error. It’s like saying you left an envelopes full of cash in the subway on a regular basis. In the late 1960s back office crisis on Wall Street, when the volume of stock trading overwhelmed delivery and settlement infrastructure, a LOT of firms went out of business, in the midst of a bull market.

OK, now the second item with the article finesses is the sale of mortgages versus the role of the servicer. For the overwhelming majority of first mortgages, and I believe about 50% of second mortgages and HELOCs, the servicer is working for a trust that holds the notes pursuant to a securitization.

The standard documentation for a RMBS calls for the trust to gave a certification at closing that it has all the notes and it has to recertify that it has all the assets at two additional future dates, usually 90 days out and a full year after closing.

So this “notes were flyin’ around, yeah we lost track” is presumably impossible if we are discussing securitizations. Or put it another way: it means the fraud here is much more extensive than servicers making up documents ex post facto. It means the fraud extended back into how the securitization took place (as in what investors were told v. what actually happened).

And before you say these reports are exaggerated, my limited sample and my discussions with mortgage professional (not merely plaitiff’s attorneys but mortgage industry lifers) suggests the reverse.

But what about the second claim in the headline, that this activity has reached a “fever pitch”? Wellie, that’s a distortion too, perhaps to energize those who would be enraged by visions of deadbeat borrowers staying in houses due to fancy legal footwork. Trust me, there are FAR more overextended borrowers living in “free” housing due to banks slowing up the foreclosure process than due to legal battles.

First, the story is ONLY about Florida, despite the hyperventilating tone. And Florida is way ahead of other jurisdictions. There is a group of lawyers that are sharing G2 on these cases, and there are also a fair number of sympathetic judges. Note some states (Minnesota in particular) have both extremely pro bank laws and a business friendly bar. So it’s misleading to make sweeping generalizations; you need to get a bit more granular, which this article fails to do.

Second, the “fever pitch” headline also conveys the impression that this is an epidemic, ergo, these cases are widespread. While it is hard to be certain (this activity is by nature fragmented), at this point, that looks to be quite an exaggeration. The vast majority of borrowers, when the foreclosure process moves forward, don’t fight. They lack the energy and the resources. And when the borrower prevails, the case is typically dismissed “without prejudice”, meaning if the servicer and trustee get their act together, they can come back to court and try again.

Most of the battles against foreclosure appear to fall into one of two categories:

1. The borrower can afford the mortgage, but has fallen behind due to what he thinks is a servicing snafu. I can give you the long form, but the way servicers charge extra fees is in violation of Federal law and is designed to put the borrower on a treadmill of escalating fees. And they do not typically inform the borrower that fees have compounded until 6 or more months into the mess, and by that time, the arrearage can be $2000 or more. The borrower is unable to fix the servicing error, the fees continue to escalate, and the house goes into foreclosure.

2. The borrower has filed for a Chapter 13 bankruptcy, but the trustee is fighting the bankruptcy stay and trying to seize the house.

So why this alarmist American Banker article? Even if the numbers of successfully contested foreclosures are not (yet) large, the precedents being set are very detrimental to the foreclosure mills, the servicers, and the trustees. Moreover, the costs of fighting these cases can quickly exceed the value of the mortgage. So it would not take much of an increase in this trend to wreak havoc with servicer economics, and ultimately, the losses on the trust, particularly on prime mortgages, where the loss cushions were considerably smaller than on subprime.

I suspect the real reason for alarm isn’t the “fever pitch,” meaning the current level of activity. It’s that a state attorney general is throwing his weight against the servicers, and what he is uncovering is every bit as bad as what the critics have been saying for some time. That may indeed kick up anti-foreclosure efforts in states with open-minded judges to a completely new level.

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43 comments

  1. Vinny

    Well, why am I not surprized these criminals engage in systematic fraud. Until we start sending them to “Lender’s Prison” en mass, nothing will change.

    Vinny

  2. Wow! What sort of a casino are you people running up there?
    If the mortgage is not registered on the relevent title in the Lands Title Office, whose fault is it?

    1. Yves Smith Post author

      This isn’t a matter of the mortgage, but that is goofy too (IMHO) but the note.

      Mortgages are increasingly registered only once, in the name of MERS (Mortgage Electronic Registry Service), whose sole purpose is to “streamline the mortgage recording process” aka “save fees and reduce income to local governments.”

      So any member of MERS can transfer title once a mortgage is in the MERS system. Members are typically banks and servicers. And from what I can tell, its quality controls stink. No audit trails, no system to insure integrity of information entry.

      But the problems discussed above involve the transfer of the note. Remember, in the vast majority of the states, where the note goes and how it is endorsed is controlling, no matter what MERS says.

      1. Mindrayge

        Don’t forget that some courts have ruled that MERS has no legal standing in the court proceedings. That, too, isn’t widespread.

        1. Yves Smith Post author

          It shouldn’t, ex states that have implemented MERS-friendly statutes. Remember, only the holder of the note (the debt) has legal standing to foreclose. The mortgage is not the debt, it’s a lien against property to secure the debt. MERS is supposed to be a mere mortgage registry.

      2. David Laon

        Philly-based real estate lawyer here. In those US securitized loans that I’ve seen, whether residential or commercial, a mortgage (or deed of trust or deed to secure debt: I’ll call them all “mortgages” from here on) is recorded at the county in which the mortgaged property is located, usually in favor of the loan originator. Then, an assignment of that mortgage is also recorded (sometimes the same day as the original mortgage), usually to a trust for the benefit of the investors in the security (e.g., “Bear Stearns Commercial Mortgage Securities Trust, Series 2007-xxxx”). Same with the Assignment of Leases, if it’s a commercial loan. The note is not recorded, it’s held by the lender and passed along to the new “holder” if the loan is sold. If you’re a lender, it’s a good idea to hang on to all of these documents (at least if you ever want to enforce them), and it’s a really bad idea to separate the note from the mortgage: whenever you want something from a county judge, it’s a really good idea to be able to state what you want in a single sentence that starts with a capital letter and ends with a period. I don’t know a blessed thing about MERS, but I don’t imagine that MERS is going to cut much ice with a county judge if the county records aren’t right.

        I think this story indicates another hidden — but huge — risk inherent in the real estate securitization model: enforceability. Folks on Wall Street love to get together and chat about the wonderful complexity of the different tranches of their innovative financial instruments; but I’m kind of old fashioned, and when my clients spend lots of money, I like to make sure that they end up getting a property interest in return for their money. If you’re lending money, then that property interest is a mortgage. And a mortgage is only worth something if it’s enforceable. And it’s only enforceable if you have the loan documents in hand, and the ones that need to have been recorded were properly recorded.

        I don’t think it’s prudent or reasonable for a mortgage lender to expect our court system to fill in the gaps or cure fatal laws in the lender’s own documents; that’s why God made lawyers and legal malpractice insurance. And if the lenders chose not to use lawyers to close their deals, or didn’t follow their lawyers’ advice about what to do with their documents after the deals closed, well, BP evidently chose to cut a few of their risk prevention protocols to save a few bucks, too, and it didn’t work out too well for them, either.

  3. burnside

    I’m reminded of some of those critics’ horror stories, especially those arising from note/mortgage electronic recording where the d-base entity was represented in court as ‘agent’.

    It’s said the original documents are almost always found in the end, after what drudge work I can only imagine. Appears servicers and lenders alike are getting schooled, and I they’re not enjoying it.

    1. Yves Smith Post author

      The servicers and the foreclosure mills would like you to believe that they “locate” the notes. That doesn’t appear to be happening. Remember, these cases are generally dismissed without prejudice. How often do you think the trustee shows up later with the note? Anecdotal, but April Charney, who has been pursuing these cases in FL (she’s a bit strident, but sincere) has been getting clean title for her clients because she successfully disputes the foreclosure, no one shows up a second time, and after 7 years (!) she can get the mortgage dismissed (I’m not using the right legal terms of art here, I’m not sure this is a statue of limitations issue, but the end result is similar, and you get the drift of the gist).

      Her experience does not appear to be uncommon.

      1. i on the ball patriot

        Why would anyone think they would get a fair trial in scamerica?

        From April Charney motion to dismiss ….

        Excerpt;

        “The Judge Sasser’s Stock Ownership Requires Disqualification.

        A. The Judge’s equity stake in BoA is a significant interest.

        Under California law, that amount is a one percent share of the company or $1,500. In this case, the Judge’s holdings (worth $25,820.00) are more than seventeen times the amount that requires disqualification under California law.

        B. The Judge’s investments in BoA can be substantially affected by the collective outcomes of this case and other cases brought by the same banks and assigned to the same Judge.

        While the Defendants may only estimate how many cases are currently pending before this Judge in which a Bank of America Corporation subsidiary is the Plaintiff, it cannot be disputed that Florida has consistently ranked in the top three states having the highest number of foreclosures in the past three years and that the tri-county area (Palm Beach, Broward and Miami-Dade) ranked tenth in the nation for foreclosure filings last year. At last report, 55,000 foreclosure cases were pending before the Fifteenth Circuit for Palm Beach County—all assigned to one judge, the Judge in this case. If just 14.2 percent of these cases were filed by a of America Corporation subsidiary, they would collectively have 7,810 cases in front of this Judge. If these cases involve homes with values averaged at $200,000, the total collateral at stake for BoA in cases assigned to this Judge would be over 1.5 billion dollars. The total debt for the promissory notes in these cases—assets on the books of BoA—would be far greater. This single Judge, therefore, not only makes the legal decisions in more than one and a half billion dollars of BoA assets, but also sits as the trier of fact. As the only judge presiding over one of the largest foreclosure caseloads in the country, Judge Sasser has, in all probability, more BoA cases assigned to her, and thus more of its assets under her jurisdiction and control, than any other judge nationwide. There can be no doubt that the Judge in this case, therefore, is in a position to substantially affect the value of her own stock. Because, under these circumstances, the Judge’s impartiality might reasonably be questioned, the Judge must disqualify herself…”

        More here;

        Go April Charney!!!

        Deception is the strongest political force on the planet.

          1. i on the ball patriot

            Sun Tzu is a deception.

            Deception is the strongest political force on the planet.

  4. koshembos

    The disorder, fraud and criminality involved in the mortgage process is not much of a surprise. If the banks/mortgages were allowed to role the day, make money hands over fists and get away with the largest casinos ever known to humanity, why the heck do we expect them to be orderly and stick to prudent procedures? Doing so doesn’t pay as much as run of the mill banking-criminal acts.

    The bible talks about the desert generation and makes clear that a new start is needed and it can take place only after the desert generation is gone. If we had a president, such steps could have been taken.

  5. Siggy

    The note and mortgage/deed of trust represent a two part contract. A note for a real estate loan does not necessarily require a mortgage. Standing to make a claim for foreclosure is predicated upon ownership of the note.

    If the note is not endorsed to a new owner, the new owner may not have standing. If the new owner did not record the note, he may not have standing. Ultimately, standing is determined by possession of the note and being recorded as owner of the note.

    County records are the final arbiter of standing; that is, the passage of ownership is recorded at Vol xx, Page xx. If you hold the note, but are not recorded as the bonifide holder of the note, you’ll have a very hard time denying any effort to negate your foreclosure which will typically be overseen by the county sheriff.

    MER may, or may not be holding a lot of notes, but critically, did they bother to record them as they passed from one owner to another.

    1. Siggy

      Incidentally, it is the original lender who bears responsibility for recordation in real property transactions. That’s where the problem begins.

      The MBA is pumping propaganda here because a good many loan orginators are nolonger in business. Note that the foreclosure of the loan demands that it have been executed, consideration delivered and title received, all of which must be duly recorded in the county records. If it’s not recorded the assertion that the transaction never occurred is a defense against foreclosure.

    2. Yves Smith Post author

      MERS does NOT hold the note and has nothing to do with the notes, it’s strictly an electronic database used to avoid mortgage recording fees. Mortgages are recorded at the courthouse in the name of MERS and then subsequent transfers are (supposedly) handled within the MERS system.

  6. ella

    Fundamental black letter law. You must possess and present the promissory note to sue on the note. The note for a real estate transaction is secured with the mortgage, deed of trust or similar instrument. Both are needed to foreclose or sell the property at a trustee sale.

  7. Tom Stone

    Yves,does using the MERS system to avoid the fees required by counties cause problems? I would think that it might tick off cash strapped jurisdictions and subvert the whole recordation system.The whole idea of being able to easily tell who holds the note seems to be threatened.

    1. Yves Smith Post author

      Yes, that’s an issue I’m surprised that no states and municipalities have gotten upset about. This is effectively a transfer from your local government to the mortgage industrial complex.

  8. Ryan

    Yves.

    Is it possible that the reason its difficult to “track down the note” is because financial institutions were selling mortgages more than once?

    1. Yves Smith Post author

      Yes, that has happened in some cases, there are instances of more than one trust claiming to have the same note.

      It appears the source most often is a mortgage broker realizing it was much easier for him to sell the same note multiple times than go out and find multiple borrowers.

  9. bird

    MERS and the Florida Banker’s Association have both publicly declared that they destroyed most of the notes. Remember, the only thing that MERS has is the ghost recording of a document that has been digitally recreated. The lost note count may be far closer to 90%. It was in MERS advantage to destroy it as it puts more reliance on them to create the fraudulent documents required after such destruction. You will find that most movants come to court with nothing, or with fabricated documents created last week for a loan that was created last decade.

    1. Yves Smith Post author

      Do you have a link to support this statement? Frankly, it does not seem plausible, since MERS would not be in a position to have notes to destroy (MERS is not set up to receive or scan documents, the notes are supposed to be with the trustee or the custodian acting as its agent).

  10. Anonymous Jones

    Really great post. Impressive command of the legal aspects of real estate secured lending and spot-on analysis of lending industry BS. Well done.

  11. PJ

    I would not get my hopes up for a “free houses for deadbeats “program. If courts start giving away free houses they will have to give a free house to everyone in America with a mortgage. Something quite impossible: as no one will pay their mortgage if their neighbor receives a free house. And people who worked 30 years to pay their mortgages will also be close to bloody murder at that prospect. If you do not believe that the government (who owns most mortgages now via Freddie, Fannie and Treasury buying toxic trash) will find a way around the law, you were not paying attention during the GM bankruptcy.

    1. Yves Smith Post author

      PJ,

      This isn’t about “free houses for deadbeats.” As I indicated, that is PRECISELY what the banking industry wants to make this about, as opposed to their utter incompetence. If a bank does such a poor job of doing what is required for it to have a secured interest in property (when what is required is very clear and well understood), it deserves to fail.

      Why should banks get bailouts or be able to foreclose on houses when they set up procedures designed to satisfy various legal requirements and then run roughshod over literally HUNDREDS of years of legal precedents? Real estate and trust law are very well established areas; there is simply not much ambiguity here.

      These banks and their allies are the same folks who screamed “sanctity of contract” to take advantage of credit card borrowers with all sorts of “gotcha” features, to get AIG CDS paid out in full, to insist that contracts for employee pay in otherwise bankrupt entities be honored (if the firms which were insolvent had BK’d, the contracts would be void, but it was deemed too risky from a systemic standpoint to put them under) and refuse to modify mortgages, hiding behind the same securitization documents (technically, the pooling and servicing agreement) to refuse to do mortgage mods, when the real reason is that foreclosure is far more profitable to a servicer than a mod?

      I hate to tell you, but you have been conned into supporting a two-tier system of justice, one for the banksters, another for ordinary people. The banksters insist on strict adherence to contractual terms only when it suits them, and use the court system to try to back their abuses.

      You are aiming your concern in the wrong direction. This mess IS coming, and the banks created it.

      And you are missing the OTHER implication: they’ve made a complete mess of title. There is a reason we had a system of recording mortgages, to insure that title was clear. MERS has not only made it opaque, it’s made it uncertain. So the banks have undermined one of the foundations of the economy.

  12. James

    The MERS method of doing business may invalidate the security according to the Kansas Supreme Court. I have raised this issue in all of my MERS cases now. Have the 1st hearing major hearing on the issue June 29 in front of guess who? Judge Sasser. From Landmark National Bank v. Kesler, 289 Kan. 528 (Kan. S. Ct. 2009):

    The relationship that MERS has to Sovereign is more akin to that of a straw man than to a party possessing all the rights given a buyer. A mortgagee and a lender have intertwined rights that defy a clear separation of interests, especially when such a purported separation relies on ambiguous contractual language. The law generally understands that a mortgagee is not distinct from a lender: a mortgagee is “[o]ne to whom property is mortgaged: the mortgage creditor, or lender.” Black’s Law Dictionary 1034 (8th ed. 2004). By statute, assignment of the mortgage carries with it the assignment of the debt. K.S.A. 58-2323. Although MERS asserts that, under some situations, the mortgage document purports to give it the same rights as the lender, the document consistently refers only to rights of the lender, including rights to receive notice of litigation, to collect payments, and to enforce the debt obligation. The document consistently limits MERS to acting “solely” as the nominee of the lender. Indeed, in the event that a mortgage loan somehow separates interests of the note and the deed of trust, with the deed of trust lying with some independent entity, the mortgage may become unenforceable.” (Emphasis added).

    The Kansas Supreme Court then holds that the mortgage becomes unenforceable under the “MERS as nominee” method of transacting business:

    “The practical effect of splitting the deed of trust from the promissory note is to make it impossible for the holder of the note to foreclose, unless the holder of the deed of trust is the agent of the holder of the note. [Citation omitted.] Without the agency relationship, the person holding only the note lacks the power to foreclose in the event of default. The person holding only the deed of trust will never experience default because only the holder of the note is entitled to payment of the underlying obligation. [Citation omitted.] The mortgage loan becomes ineffectual when the note holder did not also hold the deed of trust.” Bellistri v. Ocwen Loan Servicing, LLC, 284 S.W.3d 619, 623 (Mo. App. 2009).” (Emphasis added).

    1. David Laon

      Great comment. Pretty incredible chutzpah to think you can enforce the note without the mortgage or cice versa. I wonder whose bright idea it was to separate those interest, and whether they had malpratice insurance.

  13. Kate Berry

    I’m the reporter who wrote the story for American Banker. This blog should have included a link to the story out of common courtesy. Here it is:

    —————————————————-
    Kate Berry
    Reporter
    American Banker
    w – 562-434-5432 (Long Beach, Calif.)
    c – 310-503-6201
    e – [email protected]

    1. Marc Hochstein

      KB: Oh, be nice.
      Ms. Smith: I imagine the pay wall was the reason for not including a link to the story, but we’ve opened up this particular article for free viewing. We would greatly appreciate it if you could embed the hyperlink in your post so your readers can see the piece being blogged about. Thank you for your consideration and coverage.

      Regards,

      Marc Hochstein
      Executive Editor
      American Banker.com
      [email protected]

      1. i on the ball patriot

        Thanks for dropping the pay wall and giving the unwashed masses a look into the BJ chamber of Scamerican Banker — where the obeisant butt sucking clique in high school on roids pays daily homage to the parasitic scum terrorist bankers …

        Excerpt:

        “American Banker has been naming Bankers of the Year each year since 1991. In 2001, it held its first awards dinner and ceremony, in New York City. This year, however, in light of the many challenges occupying the industry’s time and attention, American Banker did not host a live awards event.

        Prior years’ honorees, in various categories, have included Bill Cooper, Jamie Dimon, Bob Glassman, Mary Houghton, Dick Kovacevich, Arkadi Kuhlmann, Ken Lewis, William McDonough, Peyton Patterson, Jim Rohr, Bill Seidman, Bob Wilmers, and Deborah Wright. Past keynoters have included FDIC Chairman Sheila Bair, Treasury Secretary Lawrence Summers, and Congressman Barney Frank.”

        Gag me with a fucking spoon!

        Deception is the strongest political force on the planet.

      2. Yves Smith Post author

        Thanks, did so upon receiving Kate’s comment via e-mail (I have the blog set up to send comments to me as they come in).

    2. David Laon

      Thanks for the link, and thanks for dropping the pay wall. Interesting article. As I have written in a comment in a different thread on this same post, I am a Philly-based commercial real estate lawyer. I don’t really have a dog in this hunt, because I haven’t represented banks since the mid 90s (by which time most of our Philly-based banks had either blown up or gotten taken over) and I don’t represent owners who did a lot of real estate mortgage borrowing. I’m not surprised, though, to see lots of successful challenges to securitzed mortgages. The residential ones I’ve seen are often very messy (very basic things, like Bank 1 foreclosing on a property, followed by a deed out to a new purchaser signed by Bank 2, with no evidence of a transfer from Bank 1 to Bank 2), and even big commercial ones are often wrong (mortgage never assigned of record to the bank that seeks to foreclose). When the RTC came in and cleaned up the S&L mess in the early 90s, all they had to do was lock the bank’s doors, open the files, figure out which foreclosures to file, and file the papers; foreclosing on their securitization is much more complex, because those papers may or may not be in those files. The banks are probably lucky that there aren’t more borrowers out there who can afford lawyers to attack their paperwork; if every low income borrower in the US could challenge their bankers’ papers with the same energy with which GS is challenging the SEC and the FCIC, this “fever pitch” might seem quite relaxing by comparison.

      1. i on the ball patriot

        “The banks are probably lucky that there aren’t more borrowers out there who can afford lawyers to attack their paperwork; if every low income borrower in the US could challenge their bankers’ papers with the same energy with which GS is challenging the SEC and the FCIC, this “fever pitch” might seem quite relaxing by comparison.”

        Excellent point, and one of many reasons so many are losing faith and trust in the now blatant scam system!

        Deception is the strongest political force on the planet.

  14. PJ

    Yves
    Banks undermined one of the foundations of the economy. Yes!
    People with a mortgage receive a free house because of that.
    No!
    The Government IS the Bank.

  15. F. Beard

    Speaking of the Bible, debt forgiveness is mandated every 7 years (Deuteronomy 15:1, Leviticus 25) . However, it would be far simpler if the US Treasury just printed a sufficient amount of legal tender and gave an equal amount of it to every adult. That would fix the borrowers, the savers, the banks and state governments.

    Will it happen? I doubt it so the next few years should be very interesting.

    It’s nice to see the lawyers vs the banks. It almost gives me faith in our system.

  16. Foghorn Leghorn

    PJ,

    It isn’t really an issue about a “free house” for deadbeats, it really is a question about standing, as in, if you don’t have it, go sit in the cheap seats with the rest of the spectators. If you are trying to foreclose on a home, and you can’t prove standing (see “I have the note, properly endorsed and in a timely manner if securitized) you are not a party, and therefore, are stealing – which, at this level, in most states, is a felony. When I went to law school, there still was no case law that said Wells Fargo, or any of the other TBTF banks didn’t have to prove they owned something before taking it.

    It seems to me, that this is PURE capitalism. If you are so poorly versed in your business, in this case, lending, that you have to forge, steal, or outright lie about collateral, because you never took the time to properly perfect title when you “supposedly” acquired the asset, then you die. In this case, a very bloody, nasty, gnarly death, but death no less. And that is what you deserve, in our capitalistic society.

    Socialism, of course, would have the government come in on their white horse (better known as the taxpayers backs) and rescue the stupid fucks who don’t have the where-with-all to run a business that really shouldn’t be all that complicated.

    If you are an advocate of the Courts not requiring proof of ownership, then please publish your current address, and I begin foreclosure on your home next week…………I hope it is a nice one.

    1. Vangel

      I agree. Let the deadbeat borrowers get their homes free and clear. Have the pension plans, money market funds, and banks that own the paper write down those loans to their true value. Let the members of those pension plans, investors in those money market funds and banks, and depositors take the losses. Let the prudent borrowers keep paying their debts as they agreed to and let taxpayers and depositors in sound institutions bail out the FDIC so that it can keep its promises to protect depositors in failed banks.

  17. monday1929

    “Gist of the drift”, indeed.

    Lack of RICO indictments means capture is complete.

    What effect will the fraudulent selling of forged (ie non-existent/same property sold multiple times) notes/mortgages have on the ultimate losses to be seen in otc derivatives?
    It might add another trillion or three.

  18. Isabel

    There is a pretty good website devoted to foreclosure and servicing fraud that lists the court cases wherein the lender was thrown out of court due to standing issues, i.e. they could not show that they owned the note. Note that there are many cases in California, New York and Ohio. It seems to me that more and more judges are seeing through the fabricated documents that foreclosure mills are routinely presenting as evidence of their standing to foreclose.

  19. Vangel

    I suspect the real reason for alarm isn’t the “fever pitch,” meaning the current level of activity. It’s that a state attorney general is throwing his weight against the servicers, and what he is uncovering is every bit as bad as what the critics have been saying for some time. That may indeed kick up anti-foreclosure efforts in states with open-minded judges to a completely new level.

    The solution seems simple. Some borrowers get their debts wiped clean by paying the lawyers a percentage of the debt that is forgiven. The holders of the securities write down the values by the appropriate amount. If they are pension plans they have to disclose the shortfall and force employers and/or employees to make up the shortfall. If they are money market funds they have to let investors know the extent of the losses. If they are banks they have to write down the loans, which probably means that shareholders are wiped out and that the bankrupt FDIC has to take them over to make the depositors whole. The taxpayers will have to make up the FDIC shortfall.

    Of course, those prudent borrowers who did what was right will not have their debts wiped clean. They will still have to pay what they owe and will see an increase in their own taxes. Some will not be able to handle the burden and may see their own homes go into foreclosure. Perhaps they can also become winners and have their debts paid off thanks to those public minded lawyers. What a great country you live in. If you don’t need a functioning capital market, don’t have a pension plan that has invested in real estate related paper, don’t work or invested in the financial sector, and don’t have real estate that is free and clear you could be a huge winner.

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