Friday, October 15, 2010

ForeclosureGate - How Do We Resolve It?

I've been reluctant to write about ForeclosureGate because a lot of other people are writing much better analysis of the problem.  I'm going to approach this topic from the view of someone who doesn't understand what the hubbub is about. (Yes - I understand that the rule of law was broken, we'll get to that).

David Streitfeld, in today's NY Times, tells the story of the house in Maine that kicked off the entire crisis (by the way, if you have no idea what I'm talking about, a good place to start is here).  Let's pull some facts from Streitfeld's article:

"Nicolle Bradbury bought this house seven years ago for $75,000, a major step up from the trailer she had been living in with her family. But she lost her job and the $474 monthly mortgage payment became difficult, then impossible."

She got foreclosed on, and contacted a non-profit legal group for assistance.

"Mr. Cox realized almost immediately that Mrs. Bradbury’s foreclosure file did not look right. The documents from the lender, GMAC Mortgage, were approved by an employee whose title was “limited signing officer,” an indication to the lawyer that his knowledge of the case was effectively nonexistent. 

Mr. Cox eventually won the right to depose the employee, who casually acknowledged that he had prepared 400 foreclosures a day for GMAC and that contrary to his sworn statements, they had not been reviewed by him or anyone else."

She hasn't paid her mortgage in a long time...

"It has been two years since she last paid the mortgage, which surprises even her lawyers.
“Had GMAC followed the legal requirements, she would have lost her home a long time ago,” acknowledged Geoffrey S. Lewis, another lawyer handling her case."

How did she get into this house in the first place?  With a zero down loan, plus another loan for renovations:
"In 2003, her brother-in-law at the time offered to sell her a house on property adjacent to his. It was across from a noisy construction supply site. But it was ringed by maple, evergreen and willow trees, and who does not want to be a homeowner, especially when GMAC Mortgage will give you a loan for the entire purchase price and then another loan to improve the property?"

But the key point here is that GMAC "cheated" in the foreclosure process - they did not follow due process, the Rule of Law.  The second paragraph below has the details - signing officers are fraudulently attesting to statements of fact:
"Mr. Cox vowed to a colleague that he would expose GMAC’s process and its limited signing officer, Jeffrey Stephan. A lawyer in another foreclosure case had already deposed Mr. Stephan, but Mr. Cox wanted to take the questioning much further. In June, he got his chance. A few weeks later, he spelled out in a court filing what he had learned from the robo-signer: 

“When Stephan says in an affidavit that he has personal knowledge of the facts stated in his affidavits, he doesn’t. When he says that he has custody and control of the loan documents, he doesn’t. When he says that he is attaching ‘a true and accurate’ copy of a note or a mortgage, he has no idea if that is so, because he does not look at the exhibits. When he makes any other statement of fact, he has no idea if it is true. When the notary says that Stephan appeared before him or her, he didn’t.”"

The end of the article:
"GMAC, which this week expanded its foreclosure freeze to the entire country, is not giving up on Mrs. Bradbury. It will try for the third time to evict her when the case goes to trial this winter. 

If Mrs. Bradbury is not quite victorious, she is still in her house, and for her that is the only thing that counts. If she can get her pickup fixed, she will go back to looking for a job. 

“I am not leaving,” she said this week, standing out on her front lawn, the autumn splendor spread all around her. “We have nowhere to go.”"

Now, let's discuss this, shall we?  Because I don't think this article helps the layperson (myself included!) understand how this problem gets fixed, or what the solution is.

The facts as I see them are these:

-GMAC was grossly incompetent - they gave Mrs. Bradbury a loan she probably never should have gotten (zero down + a second mortgage!), and then couldn't even foreclose on it properly.

- The result of GMAC's incompetence is that Mrs. Bradbury has been able to stay in her home longer than she should have - she's the beneficiary of GMAC's incompetence.

- Mrs. Bradbury hasn't paid her mortgage in two years - a wicked long time, even by her own lawers' admission, and should have been foreclosed on legally already

- But GMAC's foreclosure process was flawed - the signing officer who signed the documents didn't actually review them.

Now - I ask the readers - What is the solution here?

Have someone look at the docs, verify the information, and foreclose on Mrs. Bradbury? 

Actually, GMAC already tried that, and they screwed it up again!  From the article:

"In a ruling late last month, Judge Powers said that GMAC, despite its expensive legal talent and the fact that it got “a second bite of the apple” by filing amended foreclosure papers, still could not get this eviction right.

Even the amended documents did not bother to include the actual street address of the property it was trying to seize — reason enough, the judge wrote, to reject the request for immediate foreclosure without a trial."

Note - I'm talking about THIS SPECIFIC CASE.  There are clearly other cases where there are disputes about exactly how much money is owed on a mortgage balance, and the banks don't have their details down. 

In the end, I'm not sure Mrs. Bradbury's case is a very good example of the real problems (relating to questions of title and ownership) behind ForeclosureGate.  It seems that this case is more one of gross incompetence on GMAC's part, and how it results in a delinquent homeowner being able to benefit for a period of time from that incompetence.

The bigger problems lie where the banks are missing the actual mortgage notes (I didn't get the impression that was the problem in this case) - what do we do in those cases?    Do we tell the bank that if they can't produce Mrs. Bradbury's (or others') Note then she gets to keep the house?   Something else?

There is a whole other issue too, aside from the homeowners.  The purchasers of mortgage backed securities have clauses in many of their issues that say that they can "put" the notes back to the issuing bank (ie, force the banks to buy them back) if the notes aren't delivered.  See Mike @ Rortybomb's multi-part series on those details.



Blue Moon said...

My $0.02

Start over. Any special courts that have been created by states to deal with this mess must be supported with the necessary resources to do real judicial review, not just rubber stamp. All pending forclosures abated - sanctions for lawyers presenting affidavits not based on personal knowledge. Prosecution for fraudulent forclosures.

Mandatory mediation in all forclosure cases where the borrower is solvent. Threaten sanctions/contempt for parties that do not mediate in good faith.

All mortgage companies must pledge not to offer employees incentives based on the number of people signed up for mortgages. Bonuses or commissions can only be based borrowers actually paying back the mortgage down the road. You sign up someone who defaults down the road = no bonus for you.

A politician brave enough to say "Not everyone is going to be able to afford a house - in fact, only 40% of you can." Any government involvment in financing mortgages limited to those with 15% down, and no more than 20% of your monthly income can go to mortgage.

Anonymous said...

Hi Kid,
This article simply demonstrates how the initial revelation of robo-signers first came out. It also serves as a great example of just how disfunctional the foreclosure process has become due to the huge volume in the pipeline.

More disconcerting, and potentially more damaging to the banks is a situation where the forging of notes etc. is proven to be widespread. If the servicers actually have the notes somewhere then why would they risk entering false documents into the court record? This brings up the more serious issues of organized fraud and brings the validity of RMBS securities into question.

HAROLD said...

Thanks once again, KD, for a good dose of common sense. Her monthly mortgage payment of $474 was a flat out bargain to begin with. I am a CPA in the Seffner, Florida area and I have a client who owns a mobile home park where he gets $100-$125 a week for his rental units. Mrs. B was able to live live rent-free for over two years (and counting). She should thank her Higher Power for sending her to GMAC!

Nemo said...

First, make them keep coming back until the courts agree they got it right. If they do not even have the right documentation, and I suspect is true in many cases, I am sure there are (expensive and time consuming) procedures for rectifying that.

Second, take the people who signed 500 of these in a day and their notaries and their employers... And prosecute them. This is systemic fraud.

Of course the borrowers are going to lose their homes. The questions are (a) when, (b) to whom, (c) how much it will cost the banks, and (d) how many people will go to jail in the process. My hope is that the answers to the latter two questions are big numbers.

Kid Dynamite said...

very well put, Nemo. I guess the question arises from the conclusion "of course the borrowers are going to lose their homes."

THIS woman is, obviously - but what about the mysterious Case of The Missing Notes - which seems abundant also? Obviously it effects the RMBS first and foremost, but where does the borrower stand if the lender can't produce the physical note?

There seems to be some sort of thought "out there" that if the bank can't find your note, then you get to keep your house.

Nemo said...

There seems to be some sort of thought "out there" that if the bank can't find your note, then you get to keep your house.

Which would be ridiculous, but also unlikely.

I am sure notes have been lost in the past. (Any documentation can get lost.) I seriously doubt that automatically voids the debt, and I bet there are well-established legal procedures for such cases. I also bet they are costly and time consuming. At least, I hope they are.

We cannot let the mortgage industry off easy here, though. If it is cheap to "fix" documentation problems, then they will continue to be lax with their documentation, only paying the cost to "fix" it on that small percentage of homes where they actually foreclose.

The documentation requirements exist for a reason, and the cost for violating them needs to be very high, especially when the violation is willful.

One consequence of this will be that deadbeat borrowers get to live rent-free for a while. I don't like it, but the alternative of letting this stuff slide is far worse.

Kid Dynamite said...

Nemo - thanks. You sound like you're trying to convince me of something - you don't have to - I agree.

Anonymous said...

The banks can't find the notes because the notes were destroyed.

The notes were destroyed because they were fraudulent, i.e., any fool looking at the note could tell that it did not meet the "tests" the originators were representing that it met. The Originators (and securitizers) just wanted to create as many loans (and MBS) as they could so that they could get as many fees as they could.

Ms. Bradbury gets to squat in her house until someone can, or is willing to take the time and expense to, prove that they have more of a right to possess the house than she does. Contrary to what we, as reasonable people, might wish with all our hearts, it's ultimately not a normative question; it's a mainly legal one.

There's an old saying that possession is nine-tenths of the law. And, sadly, we may be regressing back to a world in which that saying is true.

Transor Z said...

The solution is that:

1) The lender should be able to prove priority entitlement to payment. Notice by publication to give other potential claimants to priority opportunity to come forward. After notice by publication, judgment for lender suing borrower is final and cannot be collaterally attacked. This achieves the important policy objective of finality and certainty with respect to title and indebtedness.

2) Secured creditor who has committed fraud on the courts by filing forged/perjurious docs should be told to go fuck themselves. No soup for you.

Oh yeah, and it goes without saying you pay attorneys fees for the borrower, assholes.

3) Secured creditor who has negligently filed incorrect paperwork pays attorneys fees to borrower for having to defend but can refile.

4) Secured creditor who is unable to produce or properly certify the existence of the secured paper but who can prove the existence of the debt is converted to unsecured creditor status and may still collect from the borrower. Creditor may still place lien on borrower's home but as an unsecured creditor subject to discharge in bankruptcy.

Kid Dynamite said...

anon @ 12:03 - It sounds like you are confounding two issues. The MBS were fraudulent because the notes were never delivered.

But what do you mean when you allege that the notes themselves were fraudulent? How can a promissory note be fraudulent? It is what it is - it doesn't have to meet any tests... It doesn't attest to the borrower's ability to pay - it attests to the PROMISE to pay - right?

What did you mean by "any fool looking at the note could tell that it did not meet the "tests" the originators were representing that it met"

IF said...

A lawyer full employment program.

It appears to me that there are two worst cases that are being discussed
a) a large fraction of mortgages converted into unsecured debt (that *might* be wiped out in bankruptcy)
b) a large fraction of titles being damaged

If neither case is systemic let the lawyers have a field day, year, decade. If it is systemic let the government interfere as little as necessary:

For a) it seems one could change how unsecured debt gets discharged. Same idea why med students can't declare bankruptcy after getting a degree anymore.

For b) let the government provide title insurance or clean titles. Probably better than backstopping the banks, again.

I am mostly with Nemo otherwise, except that I don't see why one should stop at prosecuting monkeys. There is a reason all banks had the same illegal system set up. Throw the racketeering books at them. If any of the e-staff at affected banks has not paid their taxes etc., reopen Alcatraz.

Anonymous said...

There is a procedure to address lost notes, calculated risk had a story about it here the other day,
It seems to me most people agree they should be foreclosed on. However, the banks cannot just say it's a paperwork issue and leave it at that while they have committed perjury or an equivalent crime. The bigger issue for me is investors ability to put the securities back to the banks if they really never held the notes.

broc said...

I only have a topical understanding of the issue, but what about incorporating more technology, centralization, etc. kind of like what we have with credit reports... It seems like a lot of bureaucracy and inefficiency in the current system.

Kid Dynamite said...

Ritholtz has a relevant post up today on this topic:

Anonymous said...

Two points,
My understanding is an individual will have recourse to their state to resolve any complaints. BUT what if I'm a HF who bought a pooled security across many different states? who has jurisdiction then?

rjs said...

anon @ 4:59. since all 50 state AGs are investigating "foreclosure-gate", and armies of attorneys will eventually be involved, find yourself a soft place to sit for a half dozen year while you wait for it to all be sorted out...

KD, by virtue of being a regular at yves smith's naked capitalism, i have been following this pretty closely since it broke on the 20th of sept...she's actually been hinting at something like this all year, and the first few weeks she was putting up 4 or 5 posts a day (search there on keywords "real estate" for the whole history)...i thought i had a good understanding but this week it went so viral in its implications its gotten ahead of me...anyhow, i came here to let you know that this is way beyond whether a few homeowners get to keep their homes because of fraudulent foreclosures, but i see your ritholtz link covers most of what i wanted to point out...

the other thing to note is that since there is no federal jurisdiction, and mortgage transfer falls under the laws of 50 different jurisdictions, many of those aforementioned state AGs may press their specific laws, which may invalidate a bundle of real estate transactions which were done electronically, and where the note (see mike konzcal rortybomb #2) wasnt transferred in accordance with the laws of that particular jurisdiction...

Anonymous said...

It has been going on for a long time and it cannot be resolved, it has to be disseminated.

Whitewashing just means it will keep coming back to haunt

(You could have at least used other examples.... like this)

Brian said...

This is obviously a liquidity problem.

1) All Lost notes, blank notes, robo signed notes, are purchased from the banks at the current "market" price by the federal reserve.

2) Mrs B et al. are given a mortgage modification whereby the principal on their mortgage is eliminated. They are then given a 30 yr interest only mortgage by the treasury.

3) federal reserve purchases 30 yr bonds issued by ust to finance the new program.

Nobody loses.

Anonymous said...

Firstly, Mr Ritholz seems to be confusing different entities. The only entity in securitisation that needs title to the underlying mortgages is the REMIC. From there onwards the slicing and dicing is of rights to the cashflow of those mortgages. There seems to be this crazy idea that somehow the CDO investors "own" the mortgages. They don't.

Secondly, I haven't seen much evidence there is much issue with the underlying title. It seems to be more of an issue that the servicers for cost reasons didn't bother to go to the custodian to get the real life note or even bother to check it existed. They simply signed an affadavit saying it was lost. Of course the result of the reporting is such that now every single person fighting disclosure will scream "fraud" or thats not my note or prove it is, with more costs and pain to what is already a costly and painful experience.

The real worry about this is that with the frankly irresponsible reporting that people on the borderline who otherwise wouldn't default are more likely to simply stop paying and THEN we are back to a banking crisis - one that is completely and utterly manufactured.


rjs said...

danny, here's yves smith from a couple weeks back:
we have evidence that strongly suggests that major RMBS originators, the investment bank packagers, and the bank trustees failed to convey the notes (the borrower IOU, which is critical to having the legal standing to foreclose in 45 states) to the RMBS trusts starting in 2005, perhaps even earlier. And comments from industry insiders suggest this problem is pervasive. That puts a cloud over the entire US RMBS market, the biggest asset class in the world. This paper was sold as secured; the ability to offset the cost of borrower defaults by seizing and selling his house is critical to the value of the instruments. And if no assets were conveyed to a particular trust by closing, an even uglier possibility exists: under New York law, which was elected by RMBS as governing law for the trust, it would be considered to be “unfunded”, which means it does not exist.

secondly, if there isnt an issue with the underlying titles, why are the title insurance companies refusing to insure new REO sales? and if they think there is, then what does that say about other titles which they may have insured & transferred before this became a page one story everywhere except the WSJ?

the "show me the note" defense against foreclosure has already been commonplace in florida all year, where the worst abuses have come to light...

all this goes with the caveat that as a layman, im only commenting from my understanding of what ive read...

Kid Dynamite said...

danny - you wrote CDO, but did you mean MBS? we're talking MBS I think...

Brian - well done!

Anonymous said...

Well actually neither MBS or CDO investors "own" mortgages, they have the right to cash flows from those mortgages which I believe is an important distinction. But no I meant CDO because thats what Mr Ritholtz wrote.

rjs, don't believe there is serious issue with title. We'll see soon enough if that is true but so far the halt has been over people not using the proper procedures in notarising the foreclosure docs.

One thing i would be interested to know is what happens to the mortgage if somehow the collateral turns out to not be there for the loan. After all, we need to remember what we are talking about. There is no dispute in these cases the people owe the bank money. They is no dispute they have not paid that money and either are unable or unwilling to pay. That loan still exists, regardless of the collateral status. The question is does it become a non-recourse collateralised loan with nothing as collateral - ie the debtor can walk aways and the creditor can only seize the now non-existent collateral - or does it become a non-secured loan in which case the debtor gets made bankrupt and gets his assets seized to pay off the loan. I have no idea.

Also whilst we are getting excited the highest figure I have heard for the number of mortgages this will affect is 80billion USD worth which is a tiny percentage of the market.

My take on systemic risk here is purely manufactured one. People stop paying their mortgages whilst they find out if this is a loophole they can use. The Real Estate market grinds to a halt because suddenly no one wants to buy a house and none of the banks want to give a mortgage. Everyone starts suing everyone. You can't foreclose because the defendent will question everything. THATS the risk not this title nonsense.

Brian, the normal procedure for lost notes is to notarise a true copy and say it is lost. What appears to have happened here is that no one bothered to get the actual note out of the custodian fort knox like store and they just said it was lost.


Anonymous said...

If I was a vindictive bank in these "show me the note" cases is trot down to the local registry look up the last person with title and give the home to them. Kick out the person who is trying to not pay his mortgage and keep his house.


Anonymous said...

Anon @11.:06, there is one obvious reason which is that servicers work on pretty slim margins and getting an original note out of a custodian vault is expensive. Easier and cheaper and faster to swear you lost it and attach a photocopy, also illegal but hey....


rjs said...

Disputes May Affect 9 Million Foreclosures, Morgan Stanley Says (Bloomberg) - As many as 9 million U.S. mortgages in the foreclosure pipeline or already through the process may face legal challenges because of questions about the validity of documents, according to Morgan Stanley. About 2.5 million homes have been repossessed since 2005 and another 6.5 million mortgages are in foreclosure or may be soon, Morgan Stanley’s Oliver Chang, Vishwanath Tirupattur and James Egan wrote in a note today. The validity of documents used to verify ownership and payment obligations may be in question for each of those loans, Chang said. “We are talking about some pretty big numbers,” Chang, a San Francisco-based housing strategist, said in a telephone interview today. “There’s a lot of developing aspects” to determine the actual impact, he said.

rjs said...

A Primer On The Foreclosure Crisis - CNBC

When a mortgage is securitized it is typically sold to a Wall Street firm, which pools the mortgage with thousands of others. Investors buy slices of the pool, entitling them to cash-flows from the mortgage payments. The actual mortgages are assigned to a newly created investment vehicle. A servicer is tasked with ensuring the payments to borrowers get divided up properly and that delinquent borrowers get foreclosed upon.

Here’s where things get tricky. When a mortgage is securitized, the investors in the mortgage bonds don’t get assignments or notes. The investment vehicle doesn’t get the assignments or notes either. Instead, the physical notes are typically sent to a document repository company. The transfer of interests is noted in an electronic database.

But during the height of the housing bubble, investment banks were churning out mortgage bonds in such a frenzy, sometimes the assignments never got executed and mortgage notes never got delivered. Keep in mind that this was during the years when lenders were giving out low-doc and no-doc mortgages. It was inevitable that the fast and loose and slightly documented culture would not stop at the mortgage originator but stretch all the way through the process.
For most mortgages, the note probably still exists somewhere. One problem that has arisen, however, is that some of the original mortgage lenders have gone under or been acquired by a larger bank. This can make tracking down the notes difficult, if not impossible.

Anonymous said...

rjs, again what is important here is that the investment vehicle is the one that owns the mortgages, not investors of MBS bonds or derivatives thereof. No reason they should have the notes or care about them. Just like when you invest in a fund you don't get to hold the certificates of the underlying stocks in that investment.

Not sure what "The investment vehicle doesn’t get the assignments or notes either. Instead, the physical notes are typically sent to a document repository company." To me this reads as somehow it is dodgy that the trust - which remember is just some brassplate SIV - doesn't have the pieces of paper in a drawer somewhere in their non-existent office. I am going to let you into another secret, those funds you invest in also don't keep the stock certificates or bond certificates on their site either. Their custodian also uses a "document repository company" - assuming it is not dematerialised.


Anonymous said...

rjs, so in other words MS is predicting that the current broohaa may affect somewhere between 0-100% of foreclosures. I can see why they earn the big bucks!

Anonymous said...

sorry that was me


PS Good news KD looks like financial bloggers have another Abacus to bring in the hits!!!

rjs said...

diana olick from tuesday:

A source of mine pointed me to a recent conference call Citigroup had with investors/clients. It featured Adam Levitin, a Georgetown University Law professor who specializes in, among many other financial regulatory issues, mortgage finance. Levitin says the documentation problems involved in the mortgage mess have the potential "to cloud title on not just foreclosed mortgages but on performing mortgages." The issues are securitization, modernization and a whole lot of cut corners. Real estate law requires real paper transfer of documents and titles, and a lot of the system went electronic without much regard to that persnickety rule.

Mortgages and property titles are transferred several times in the process of a home purchase from originators to securitization sponsors to depositors to trusts. Trustees hold the note (which is the IOU on the mortgage), the mortgage (the security that says the house is collateral) and the assignment of the note and security instrument.

The issue is in that final stage getting to the trust. The law demands that when the papers get moved around they are "wet ink," that is, real signatures on real paper. But Prof. Levin tells me that's not the worst of it. Affidavits assigned to the notes and security instruments are supposed to be endorsed over to the trust at the time of sale, but in many foreclosure scenarios the affidavits have been backdated illegally.

So with the chain of documentation now in question, and trustee ownership in question, here is one legal scenario, according to Prof. Levitin:

The mortgage is still owed, but there's going to be a problem figuring out who actually holds the mortgage, and they would be the ones bringing the foreclosure. You have a trust that has been getting payments from borrowers for years that it has no right to receive. So you might see borrowers suing the trusts saying give me my money back, you're stealing my money. You're going to then have trusts that don't have any assets that have been issuing securities that say they're backed by a whole bunch of assets, and you're going to have investors suing the trustees for failing to inspect the collateral files, which the trustees say they're going to do, and you're going to have trustees suing the securitization sponsors for violating their representations and warrantees about what they were transferring.

rjs said...

i want to leave one more link because the banks abandoning the use of MERS leads me to believe they recognize that system, which has been in use to transfer mortgages going back to the 90s, doesnt meet the requirements of real estate law...from yves smith...

Even though the headline item is the fact that the attorneys general in all 50 states are joining the mortgage fraud investigation, the real indicator that the banks are stressed is that they have started abandoning MERS, the electronic database that passes itself off as a registry for mortgages. JP Morgan has quit using it as an agent on foreclosures; it clearly can’t withdraw from it fully, given that it has become a central information service. Despite this being treated as a pretty routine event in the JP Morgan earnings call, trust me, it isn’t. The withdrawal of JP Morgan from the use of MERS as the face in foreclosures is a tacit admission that the past practice of using MERS as the stand -in for the trust is problematic. I’ve heard lawyers discuss the possibility of class action litigation to invalidate all MERS-initiated foreclosures in states with strong anti-MERS rulings; this idea no doubt will get more traction given JP Morgan’s move. (An attorney who is in the thick of this situation told me another major bank has made the same move as JPM, but I see no confirmation in the news as of this writing).

Anonymous said...

By the way, I thought Rortybomb's take varied from over-simplified to downright wrong...

By far and away the best blog on these issues was, is and probably will remain CalculatedRisk. Tanta - whose insight is missed now more than ever - did a series of posts on ALL these topics back in 2007-2008 before others jumped on the bandwagon.


Anonymous said...

RJS, JPMC stopped using MERS in 2008. Guess Dimon's time machine is still functioning.


rjs said...

if you're still out there, danny, tell me if this is just bullshit:

Guest Post: Mortgages Were Pledged to Multiple Buyers at the Same Time - Bank of America alleged in a court filing this June: It appears as though many loans and other mortgage-related assets have been double and even triple-pledged to various constituencies - Boa Answer to Freddie Objection in Re Taylor Bean & Whitaker Mortgage Corp. scribd - April Charney – a consumer lawyer with Jacksonville Area Legal Aid – and CNBC’s Dennis Kneale noted in February 2009 that courts have found that some mortgages have been sold again and again to different trusts, when they should have only been sold once. (video) Kneale explained that that is the reason that two different banks sometimes try to simultaneously foreclose on the same home: And today, Chris Whalen told CNBC’s Larry Kudlow that Bear Stearns will be exposed as having sold the same loan to different investors on numerous occasions (see 6:45 into video): As I have repeatedly pointed out, the failure of the mortgage originators and banks to prepare and record proper documentation has led to an epidemic of fraud. The pledging of the same mortgage again and again to different trusts related to mortgage backed securities is just one result.
(typically posted 3 other sites)

then, what are the implications of this:

and this:

Some weekend foreclosure scandal, securitisation-related reading.

It’s based on a 159-page class action lawsuit, filed in Kentucky on behalf of all Kentuckian homeowners, and against MERS and several financials. And it rather sums up what’s happening in the States at the moment — an outright attack on the legality of mortgage securitisations, specifically the idea of true sale.

Anonymous said...

rjs, do yourself a favour stop reading nakedcapitalism. Little bit more facts, little less faux outrage.

Well the end result of this so far is that we got a few weeks of delay on foreclosures. BoA is resuming foreclosures in 5 days, GMAC is resuming as we speak, Citi never stopped - neither i believe did Wells but very well may be wrong. My prediction - this will all turn out to be a media storm in a teacup. They'll be a load of spurious lawsuits, a number of embarassing errors which be screamed out as "endemic fraud" and if we are really really really lucky the race to the bottom for servicers will end.

As for the MERS suit, the main thing that is interesting about that is the people who are actually bringing the suit. For all the screaming about poor people being kicked out of their homes, two of the five plaintiffs are multiple home owners. When I pointed this out on FTAlphaville - albeit in a pretty obnoxious way - I got banned....