Ok, y’all obviously have lots to say about this subject — so what say we open it up to all comers:

What are the banks doing wrong with foreclosures? What are they doing correctly?

What are the negative consequences for the economy if the legal/financial/RE sector cannot untangle this mess?

What is the best and worst case scenarios?

What say ye?

Category: Foreclosures, Legal, Real Estate

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

81 Responses to “Foreclosure/Banking Open Thread”

  1. What are the banks doing wrong with foreclosures?

    Everything, because no one even knows if they hold legal title to the foreclosed houses. Their hang up on earning fees for every last thing will become their undoing.

    What are they doing correctly?

    They halted foreclosures. I guess that’s something.

    What are the negative consequences for the economy if the legal/financial/RE sector cannot untangle this mess?

    It’s gone from SNAFU to TARFU and it’s heading now to FUBAR, once the shit hits the fan. It might take a little while though. I’ll give it to the end of the year.

    What is the best and worst case scenarios?

    Best case? That some of the TBTF get finally get put out of business. The worst case? The economy sinks yet again, and then who knows.

  2. Lollipop says:

    Great read from the Cincinnati Law Review: http://mattweidnerlaw.com/blog/wp-content/uploads/2010/04/lawreview1.pdf

    There’s a word for an error of this proportion, but I don’t think I’m allowed to use it here.

  3. chartist says:

    Barry,

    Why didn’t you tell the broad opposite you on Kudlow’s show to have a big glass of STFU?

  4. rktbrkr says:

    I have a hunch about the mysterious “shadow inventory” of foreclosures the banks were holding off the market. I think the banks were able to obtain these foreclosures but then realized after the foreclosure that they couldn’t provide adequate documentation to satisfy the title insurer of the new buyer – and thats why the number of all cash sales zoomed and banks were offering additional discounts for these all cash sales.

    The best scenario for the banks is if they get blanket legal relief for their documentation fraud like they attempted with the notary law change.

    An in between scenario is if they have to do-over large numbers of completed, fraudulent foreclosures, start running into waves of new, contested foreclosures and have to deal with increasing numbers of strategic defaults while Fannie & Freddie come at them with put-backs and note holders sue them. This will likely put them out of business without a politically unacceptable TARP II.

    The worst case scenario is if the flawed mortgage documentation for millions of homes during the boom years leave a huge class of homeowners with clouded titles and greatly diminished property values. The US government may move heaven and earth to save the 19 immortal banks but the innocent homeowner will be left to twist in the breeze.

    Either of the latter two scenarios will put us into the second leg of a depression.

  5. ab initio says:

    Its all about the RMBS.

    The TBTFs will make sure that the taxpayer will take the losses. Pimpco and Blackrock aint gonna take any kinda hit. I can see the Fed buying another boatload of these. Of course with Fannie and Freddie leached onto the taxpayer teat they could also be used to make sure that Jamie does not have his bonus cut.

  6. VennData says:

    I love how the Constitution-admiring and private-property-supporting flag wavers are all suddenly not so concerned about property rights and so much more concerned about “economic efficiency” and the “threat to the broader economy of not proceeding full steam ahead with foreclosures…”

    Oh how the Constitution and the law must must be followed to protect the health insurance companies, the big financial companies, the big oil companies… investor’s in bankrupt auto company debt who don’t “feel” like they like pre-packaged bankruptcy… etc… etc… remember all that?

    They’ve changed the blatantly obviously wrong “Socialist” fanciful name tag to “anti-business” because of these “examples” as Bush-nationalized businesses get sold back to the market by Obama left and right.

    But now those “principles are all gone (as missing as any domestic donors to The US Chamber of Commerce…)

    A reminder to you naval-gazing, lumpen GOP genuflecters that the powers that be behind the GOP are NOT really about the Constitution, are NOT really about free markets, are NOT about the importance of private property law, they are about support for the current concentrations of wealth.

  7. Tom says:

    I don’t know if we have a best case anymore, probably just continue to try to muddle through as we have after some sort of moratorium. After all, the Feds ran roughshod over the bankruptcy process for the auto companies so I can almost imagine something like that happening here. Worst case? What if we find that not only can’t the banks find the appropriate documentation for the bankruptcy cases but also can’t ‘prove’ which mortgages are in which tranches of their CDOs? After all, as these mortgages get wiped off the books someone out there is getting redeemed. How do we really know it is the correct someone?

  8. Captain Ned says:

    No do-overs of foreclosures. The fact that borrowers weren’t making the payments had nothing to do with the paperwork mess. If gov’t money is to be spent, it should be spent in tracking down the damn documentation and properly recording the chain of custody so that a proper foreclosure may commence. After all, people that can’t afford the house they bought need to be foreclosed out and the market reestablish the proper value for that house. Using robosigning as an excuse to keep zombie homeowners in houses they cannot afford is sheer madness.

    The Federal Gov’t will either have to give the blanket legal relief and deal with the short-term pain (given what’s likely to happen next month that would be a proper use of the Obamacle’s “legacy”) or it will have to backstop the losses the investment banks will take. There’s no in-between that works on a financial basis. Since this mess is aimed primarily at the 23 judicial foreclosure (and recourse) states, the legal relief should include a full waiver and release running to the homeowners foreclosed out by the extraordinary relief bill.

    Whatever happens, MERS must be disestablished and the business of securitization must return to the pre-bubble practices of manually endorsing every note and ensuring delivery to the next holder in course while also recording the assignment of the deed in the appropriate land records. Require every employee of every originator, securitizer, and servicer to pass a test based on Tanta’s UberNerd articles.

    If you want to get those who caused the mess to put sufficient money into it to sort it all out, wave a bill making all existing and future residential mortgage debt non-recourse to the borrower in front of their noses. They’ll find the people they need to fix the problems in the 23 judicial (and recourse) foreclosure states and they’ll still make money.

  9. lawyerguy says:

    The mainstream media is still fixated on this being a “foreclosure” problem. While millions of people are affected by this narrower classification, there are many millions more that aren’t paying attention as this problems “doesn’t directly impact them.” What seems to be missed, except by a few blog postings, is that this is a potential crisis of title that impacts all mortgages (whether in default or not, residential or commercial) that were securitized during this past 5 years or so. A macro solution is going to be needed, but this is hampered by the prospect that the banks have engaged in systematic fraud with the blessing of many insiders. Unlike the mark to market fiction, and other taxpayer bailouts (which resulted in a transfer of wealth from the masses to the few) this fraud is resulting in the eviction of real people, who have lawyers that are demanding due process. As the days go by, expect many more layers of the onion to be revealed, and we’ll see who in our government stands with the people, and who fights against us.

  10. What are the banks doing wrong with foreclosures? Simple! Threatening the collapse of the RMBS market once and for all.

  11. prozach says:

    What are the banks doing wrong with foreclosures?

    Well, like Calvin says, “Everything.”

    First, the foreclosure mistakes are total crap but it should be (relatively) easy for the home owners to get full restitution such that their home is returned to them fully paid for (if there was a mortgage) plus some amount. To the point where I almost wish they’d accidentally foreclose on me.

    Second, the mortgage modification program is a joke. People should have an answer as to if they are acceped into it before their next payment. If they are rejected and they’ve made the normal scheduled payments during the period between when they’ve applied and they get their notification of rejection they should be refunded the payments.

    So, banks need to slow down and do the foreclosures right, make sure the documentation and other aspects of the process is correct, and I agree with you, they (esp the decision making executives) need to be held to the fire and tossed in jail/personal property removed from them for restitution.

    So, once banks are convinced it’s in their best interest to be sure that the foreclosure process needs to be properly heeded, we need to get these properties processed. There should be an expedited process that allows the banks to turn these properties into rentals by renting back to former owners who were unable to pay their increased mortgage rate but could pay the original pre-adjusted-rate-increase as a rental payment. It would be revenue for the banks and ex-homeonwers could remain in their houses as renters plus the properties wouldn’t show on the market to increase supply.

    Untangle? Haha, it will be untangled one way or the other. Either the banks untangle it peacefully or everything falls apart and becomes untangled on it’s own (which might take much longer and be much more painful thanks to the political and other powers that the banks and other financial institutions have i dont see them going down without a fight).

  12. brianinla says:

    The best thing that could happen is that people wake up to the fact that debt does not equal wealth. Of course banks need people in debt and so will do all they can to keep the debt slaves as long as possible.

  13. johnhummel says:

    I don’t profess to be an expert in foreclosure mortgages, but here’s a few:

    1. The banks seem to be focused on speed rather than accuracy. They have the “robo-signers” trying to get through as many documents as possible, combined with reports of people being evicted from homes that are not under foreclosure (or evicting people before the foreclosure process is complete).

    I understand they’re trying to get homes back out into the market when they’re not collecting the mortgage. But in the rush, they’re being sloppy, avoiding the law, and making the process longer.

    Done right is done once – done wrong means you have to do it over again.

    2. Unwillingness to negotiate the mortgages.

    There are articles that show that banks don’t want to negotiage with homeowners because they love charging fees, and other research finds smaller firms better able to reduce the principal of the mortgages – mainly because it seems like the larger firms simply don’t have the process to handle this.

    However, the question should be asked: which makes more money – reducing the principle of a home and reduced interest rate to a significant degree so the mortgage holder can make the payments, or foreclosing?

    Either way, it seems that major banks (BoA, Chase, etc) don’t seem to be looking into it. It’s just “get rid of it as fast as possible”, or “ignore the problem.”

    3. Ignoring it won’t make it go away.

    Maybe the people who’s interest rate will change in a few years can make the payment. Maybe the market will pick up so the houses they pick up under foreclosure now can be sold for a profit – or less of a loss.

    Either way, it seems that the major financial institutions are sticking their heads into the ground. They’re trying to place more bets instead of actually fixing the problem *now*. Yes, they might have to higher more people to evaluate the paperwork and not make bigger profits. They might have to do the research and find the titles to the houses and do things right. They may even have to really work with homeowners and risk not making huge profits in the future.

    But right now, banks are frozen into thinking of how to fix the problems and just repeating what they know – foreclose, hope it gets better. But they’re trying to fix a problem 10 years in the making without really doing the work, hoping they can get through the next quarter without stockholders getting upset when they don’t get huge dividends.

    Do it right, take the hit, and then it’ll be over. Keep trying to rush through, and they’ll just be putting off the pain until later.

  14. Petey Wheatstraw says:

    y’all?

  15. constantnormal says:

    What are the banks doing wrong with foreclosures?

    IANABA (I Am Not A Banking Analyst), but from what I can see, pretty much everything. They have thoroughly corrupted the document trail, to the point that it will likely take many tens of thousands of dollars per foreclosure to ensure that a proper document trail exists, and several months per mortgages as well. It seems likely that a substantial number of mortgages will not be able to be legally foreclosed upon, as the laws stand today (laws which the banksters hope to change, I suspect).

    What are they doing correctly?

    [nil]. From a certain perspective, one might conclude that they have spent the funds used to co-opt the government perfectly.

    What are the negative consequences for the economy if the legal/financial/RE sector cannot untangle this mess?

    I cannot imagine, but I suspect we’re going to find out. My best guess involves the White House and Congress pitching in to whitewash the problem, and rip hundreds to thousands (millions?) of houses away from the homeowners without any shred of due process. Then the banks find themselves with even more properties that are rapidly becoming worthless, putting increasing pressure on existing housing prices and the ranks of the lower 99% growing substantially more impoverished. The way that the TBTF international banksters are interconnected, if Citi or BoA goes casters up, we could easily see some sort of domino effect (or so the banks would like us to believe). Bailouts ensue, and the public rage intensifies. Perhaps a few sovereigns implode. Somewhere along the way, social unrest reaches a boiling point, inflamed by multitudes of agitators and decades of being ripped off. Eventually we descend into riots that make the unrest of the 60′s look tame, with many urban areas going up in flames and thousands being killed by the authorities.

    What is the best and worst case scenarios?

    The best case scenario is that against all evidence to the contrary, this involves only a small number of mortgages (insert laugh track here), and the banks will push the expense of repairing the document trail onto either the borrowers or the government.

    The worst case? I dunno, it’s well beyond anything this nation has dealt with to date. See my response to the question about “negative consequences”. It will be memorable to see how this unfolds. Hard to see how the big banks survive this one — but then I find it incredible the lengths that we have gone to in preserving them to this point. Clearly, I lack imagination. History in the making.

  16. Captain Ned says:

    And yet you all are still saying that a borrower who has not made payments for 12 to 24 months should be rewarded for that behavior. That’s where I and most everyone else who makes their mortgage payments on time parts company with the rest of you.

    ~~~

    BR: Ned, this is not about the defaulted homeowner — forget them, they eventually get evicted

    This is about property rights, rule of law, and the ability to transfer good title. Stop parroting talking points and THINK what this means to the m,illions of REOs the banks are holding

  17. mitchcalderwood says:

    Right? – If they’re foreclosing, then presumably they won’t have a wildly overstated valuation.

    Wrong? – Being involved in this clusterf$%& to begin with…

    Best Case – TBTF gets wound down

    Somewhat worse case – more extend and pretend

    Worst case – “Welcome to 1984…”

  18. Petey Wheatstraw says:

    “What are the banks doing wrong with foreclosures?”

    The banks are immune from prosecution for the crimes they have already committed, continue to commit, and are planning on committing. They’ve decided that chain of title and the laws governing such are no longer important, and they’re ready for the next round of bail-outs and bonuses, so it really can’t, in any practical sense of the word, be said that they have done anything “wrong,” specifically. In a society ruled by laws, it would be different, but that’s no longer our system.

    “What are they doing correctly?”

    They have successfully taken over our government, so it looks pretty much like they’re doing everything right.

    “What are the negative consequences?”

    There will be no negative consequences for the economy (and I’ll limit that observation strictly to the economy). There will be plenty of problems for those in the middle class who are functionally no longer participating in the economy, but the economy itself will hum along quite nicely without them.

    “. . . if the legal/financial/RE sector cannot untangle this mess?”

    It will be treated as the Gordian knot that it is, and will be cut, by edict — all assets and available cash going to the banks.

  19. willid3 says:

    wonder how they would feel if some one foreclosed on the headquarters? after all, if they can foreclose on property that isn’t theirs, some one else could do that to theirs

  20. Raleighwood says:

    I believe the correct version when addressing larger groups is “all y’all”.

  21. Petey Wheatstraw says:

    lawyerguy Says:

    “As the days go by . . . we’ll see who in our government stands with the people, and who fights against us.”
    ______________

    The time to fight has passed. We will be railroaded. Alan Grayson stands with us, and to a lesser extent, Paul, Kucinich, and Feingold.

    Corporatists: 531
    People: 4

  22. deanscamaro says:

    I don’t believe its really all that tough to figure out. Its the basic problem that haunts this whole country: We don’t want to commit the resources needed to manage operations. The government doesn’t have enough to properly do what’s expected, the big banks are trying to increase profits by under-committing resources to do what’s needed with foreclosures……it goes on and on in all parts of the country. The people in the U.S. want things their not willing to pay for.

  23. Lariat1 says:

    Personally I am so sick and tired of the outright fraud that has been perpetrated by the TBTF banks and the whole RE industry. I pay my mortgage in GOOD FAITH every month but you know if my neighbor is underwater and decides to just say FU to the big bank and stop paying, then good for him. And if gets to stay because they can’t show him the note well good for him again. I’m not underwater so I’m not in his shoes. Now I get to sit in my house and watch those new nauseating JP Morgan/ Chase commercials about how concerned they are with the average homeowner and how they are here to help. What bullshit. I know this is probably stupid but I would love to see every mortgage holder that is current and has their mortgage with one of the TBTF banks to Not make their November payment. For that 30 day period no payments from current mortgage holders. A real Thanksgiving for the little people. Make the payment in December. Just take the month of November off as a sign of protest for their abhorrent behavior. And then maybe do it again in February. Why not? What do we have to lose? Instead of shouting from the rooftops, use your wallet.

  24. constantnormal says:

    @Captain Ned

    “And yet you all are still saying that a borrower who has not made payments for 12 to 24 months should be rewarded for that behavior. That’s where I and most everyone else who makes their mortgage payments on time parts company with the rest of you.”

    2 questions:

    1) Say we have a person who has not made payments for 12 to 24 months. Also say that no provable mortgage exists — i.e., no legally binding contract for the debt exists. Whose fault is that? Who should pay for it? I have no answers here, this is a very difficult problem. Sure, many people participated in the frauds, but wasn’t it the responsibility of the lender to verify the information and to maintain a proper document trail? If the lender had done their job properly, would any problem mortgages have been issued?

    2) What about the poor sod who has been “making their mortgage payments”, and finds out when they go to sell the property that they have no legal claim to it. Who should bear the expense of resolving that? And whose fault is that?

    Both of these situations were preventable by the lender, and would never have arisen if the system would have worked as it was supposed to. THAT’s what all the uproar about “foreclosure fraud” is all about. The collusion of some borrowers in buying houses they could not afford, either through ignorance or criminal actions, is a secondary issue.

    How were they able to get through the process in the first place, if not for the cooperation of the original issuing bank. And sloppiness in the securitization of the mortgages as they were sold from bank to bank to bank has only smeared the problem over the entire industry.

  25. philipat says:

    Ultimately, you cannot have a thriving democracy without the rule of law. The Banks, Credit Card Companies, Insurance Companies and many others if truth be known (Pharmaceutical Companies) have reached the point whereby they seem to believe that they can only maximise profits by confusing and cheating customers.

    The main problem in the US is that it has lost its moral compass and has lost the ethical high ground.

    Incidentally, it beats me as a non-US person (aka “Alien”) why the GOP supports all this crap? I thought that Republicans are concervatives. Conservatives believe in good old family values, motherhood and apple pie. Making monay the old-fashioned way? Perhaps another example of how the whole system in the US is totally broken.

  26. JayHank says:

    oh, the rhetoric on this is mostly over the top and hysterically removed from reality. A paperwork delay of a few months is no disaster and won’t be much more than a blip on the broad trajectory of a decade’s long recovery in housing. A breathing period of a few months is probably sensible. Ultimately a small handful of people will get spared a nightmare of a paperwork error and the vast majority of people unable to pay their mortgage will be foreclosed on, a month or two later than otherwise. Just as the stimulus pulled some demand forward a couple of months, this is merely pushing some supply back, but it’s not fundamentally changing the volume of supply or demand and in three years it would be hard to believe the tenor of internet commentary on the issue, if not for the fact that the tenor of internet comment is invariably unhinged.

    At some point in the next few years, Washington is likely to decide how entangled it wants to be in national mortgage finance. This foreclosure sideshow will be a wart on the elephant of gse reform — there’s no cosmic significance to this minor stuff with an existential battle over national mortgage policy looming ahead.

  27. Lariat1 says:

    Why don’t all mortgage holders that are current not make their November payment as a sign of protest for all the fraud being committed from the top down. No payments for that 30 day period. Just make your November payment in December. Especially if you hold a mortgage with the TBTF. Instead of shouting from the rooftops why not use our wallets. And then do it again in February. Why can’t we make the rules?

  28. willid3 says:

    well Philipat in a way they are making money the old way. it wasn’t that long ago that business’s weren’t concerned with actually doing any thing at all (like delivering what they sold for example). we sort of stopped doing that some 50-100 years ago. but that was then. and now we have the new economy.

  29. louis says:

    You guy’s know where I stand, redo all the purchase one’s from 03-07 and both sides get a haircut. Game over, shoot the Ostrich.

  30. Soylent Green Is People says:

    1) The only winners will be the lawyers.

    2) Once the government says there won’t be a National Foreclosure Moratorium, rest assured they are working on one as we speak.

    3) Nanny statism will seek to eliminate all consequences of poor judgement.

    4) Pitchfork and Torch sales will geometrically expand.

    On the one hand it would be great to have a national “do-over”. Somehow I picture HRC standing over a big red “Reset” button (of course, mistranslated like the Russian version) allowing all borrowers, no matter their condition to get current market rates and crammed down loan balances. Rip the band aids off quickly and hope the healing starts right away.

    On the other hand that would be the worst of all possible scenarios. Expect it to be floated soon by those who purport to know better.

    My .02c

    Soylent Green Is People.

  31. Rescission says:

    Prediction:
    It’s an operational issue, technical fraud yes, but not real fraud. (wrong signatures)
    They will figure it out pretty quickly with technology and language changes in the documents to meet the letter of the law and then proceed.
    It all works out and turns out to be a non-event.
    Anyone who has or does incur substantive mistakes (borrowers) will be made whole.
    That is if we can keep the glory seeking politicians out of the way.

  32. constantnormal says:

    @Soylent Green

    “The only winners will be the lawyers.”

    Amen to that.

  33. maddog2020 says:

    I dunno what’s gonna happen, but I hope it looks something like this (like the pitchforks and torches Soylent mentioned):

    http://www.break.com/tv-shows/saturday-night-live/its-a-wonderful-life-lost-ending-626321.html

  34. mrmike23 says:

    This is just incorrect paperwork, some laziness on the part of the processors and is not some vast conspiracy by the banks to screw people out of their houses. They are processing many, many foreclosures, each with a ton of paperwork and enduring lots of pressure from everyone involved to get it done quickly. Is it any wonder there are some screw-ups?

    Get a life, people.

  35. Goodwrench says:

    Another chance to make a fortune shorting MBS Closed end funds? Lot of those holders gotta be wondering how ironclad that paperwork that backs up them to the mortgagee 3-4 times removed is.

  36. Petey Wheatstraw says:

    mrmike23:

    Wow! I wonder why no one else noticed that! That’s probably the same reason they lost the titles in the first place! When investors are creating a huge demand for securities, there’s plenty of money to be lost in crossing Ts and dotting I’s — why miss such an opportunity when you can always go back and take care of the legalities retroactively? Just make the securities and fix the the titles to the underlying assets later. That’s goddamned brilliant!

    Everybody buggin’ over nothin’.

  37. edh says:

    What if similar carelessness about title transfers took place when the RMBSs were constructed?
    How confident are we that they are not defective, too?

  38. Andy T says:

    These greedy bankers shouldn’t foreclose on anyone. They tricked everyone into signing these mortgage obligations anyway. This is just another example of the banks screwing the people.

    We should set up a National Mortgage Board that will be responsible for resetting the principle and interest to a more fair rate….maybe we should assign a “Mortgage Czar” to oversee this whole mess.

    I nominate Elizabeth Warren to take over this role as well as her role as head of the new “Consumer Protection Agency”….all we really need is better regulators and better regulations.

  39. wunsacon says:

    Andy, I know you’re snarking. But, if we did appoint people like Elizabeth Warren, Paul Volcker, Harry Markopolous, Bill Black, Taleb, Roubini or our favorite bloggers to important positions, our regulation and our markets *would* become much more effective.

  40. tt says:

    barry,

    this is another proof positive of the amerikan corporatist regime of D and Rs alike.

    only choices in modernity are corporate military fascism or soft socialism.

    the difference is everything. germany/italia circa 1939 versus 2010

    federal reserve bank of ny private corporation is the nucleus. and like jim rogers says, she is getting very long in the tooth.

    don’t know if you have the knowledge and the balls to hammer this publicly. it has proven the 3rd rail for anyone that dares go after her. ain’t no conspiracy or tinfoil shit. read up on it.

    andrew jackson was the last one to successully do it. but he was one tough son of a bitch. stopped the civil war in it’s tracks, because SC and the confederates were deathly afraid of him.

  41. wunsacon says:

    …and Brooksley Born, Paul O’Neill, and…

    Hey, Barry, do you have a list of Cassandras? … Crowd query time??

  42. RR111 says:

    It amazes me that some people see this as simply a foreclose-specific issue. I assume that this is just a lack of knowledge or research on their part. This is much, much bigger than that.

    Lawyerguy’s post shows much better understanding and grasp of the situation. This mess involves, not only foreclosures, but current mortgages, as well. Furthermore, there is little doubt that CMBS are soon to be in the picture. There are, however, some differences between CMBS and RMBS PSAs. But, the chain of title (or lack thereof), in my opinion, has the potential to be a factor in CMBS, as well.

    Anyone heard of MERS’ Commercial Unit?

  43. tel1 says:

    There is only one profession that can go toe-to-toe with a greedy banker and that, undoubtedly, is a greedy lawyer. Let the lawsuits begin!!!!

  44. tt says:

    y’all is silly.

    i grew up in nyc area. lived in SC for 9 years. never once said y’all, let alone typed it. like talking beatnik jive. daddy o.

    amerika, fuck yea

  45. Robespierre says:

    @rktbrkr Says:

    “The best scenario for the banks is if they get blanket legal relief for their documentation fraud like they attempted with the notary law change.”

    Funny just like in the past the “best” solution is to save the fraud enhanced bankers otherwise the world as we know it will end – We should be that lucky!

  46. davefromcarolina says:

    What’s wrong? Lying, forgery, and trying to buy Congress (and very nearly succeeding) to let your lying and forgery go on unabated.

  47. beaufou says:

    It’s the same problem again and again.
    No respect for anything but making a quick buck, by cheating and being dishonest.

    Some think it’s gonna go away, I don’t think so, it could be the crime of the century.
    http://www.bloomberg.com/news/2010-09-29/ambac-sues-countrywide-over-mortgage-backed-securities.html
    Ambac sues BoA (countrywide) because 97% of their loans could be concerned.

    As for consequences, I’ll leave it to Janet Tavakoli.
    http://www.washingtonpost.com/wp-dyn/content/article/2010/10/06/AR2010100607227_pf.html
    “Referring to the federal government’s $700 billion Troubled Assets Relief Program for banks, she added, “This problem could cost the banks significantly more money, which could mean TARP II”

    How many opportunities will Obama get to show he has a pair of balls and let those crooks go down?

  48. RR111 says:

    rsadj – Yes, those are two problems that the mortgage market is facing. But, that has nothing to do, almost at all, with the problems that have surfaced in the past couple of weeks.

  49. Robespierre says:

    As I have said in the past this is not about foreclosure fraud. This is about RMBS fraud. The reason IB had to commit fraud on the packaging of RMBSs was time was ticking thefore getting while the getting was god trumped ANY and ALL legal considerations. When you know you are selling huge amount of crap (as good) that will go bad in a very short time you are force to sell as much as you can before the stench becomes to obvious and everyone sees the Con.

    Best case scenario, IBs are forced by a deluge of class action suits to buy back at par all the suspect RMBS and their BoD and Execs put in jail for fraus (hey you ask for best case scenario!).

  50. tt says:

    bankers are 100 to 1 odds winners in the outcome. how can you bet against them in 2010.

    unlessl vladimir putin wins the amerikan election for pres, no oligarch will be harmed. mccain/bush/obama/palin/clintons, is their a cun% hair’s difference?

    amerika is a country of baby seals, begging to be clubbed by wall street.

  51. Transor Z says:

    Perfecting secured interests in real property (through proper recordation of mortgages and title) and personal property (through UCC-compliant filings) is not rocket science. Foreclosing on collateral in the event of nonpayment, likewise, is not rocket science. But somewhere along the line, the Law got it in its head — because fraudulent RE schemes have been around forever, maybe? — that a legitimate lender should be able to get the paperwork right, follow some basic dance steps, and should be able to certify to a court that it performed due diligence, is a real party in interest, isn’t making shit up. This isn’t to say that good-faith mistakes don’t happen. Of course they do, which is what legal malpractice and title insurance are for.

    Secured transactions law is pretty harsh to lenders with “compliance issues.” Every reputable lender knows this cold. So this whole “aw, give the banks a break, everyone’s got one or two lazy employees” thing is completely uninformed . It’s a risk management issue — ounce of prevention/pound of cure stuff. Cut corners in mortgage compliance and face not being able to enforce a mortgage lien, collect deficiencies after foreclosure sale, etc. Push the legal envelope and use MERS instead of recording your mortgage liens properly? You’re screwed and you had every reason to know that when you did it.

  52. JasRas says:

    Winners: ironically banks? Is a mortgage bad now or isn’t it? If the bank can proove what they need to, do they need to write it down? If a bank can’t clear a mortgage off its books, does it further hamper their lending practices? How does a frozen foreclosure affect capital requirements? Does it matter? Does it cease any other communications with whomever is residing in said property? (ie. you can live there so long as you pay the utilities and keep up the yard and property? Really? Who says you have the authority to instruct even that?) If most of this is already written off the balance sheet, yet can’t be cleared off the balance sheet, does it “exist” as far as the bank is concerned? At what point does it not matter to anyone but the taxing municipality?

    New home builders. Why buy an existing with potential nightmare legal issues when you can buy a brand new, built for you with now issues at all home in a cornfield? I would say, from a stock stand point, the longer this issue lingers, the more new home builders benefit.

    Losers: How do you put a lien on a property in this state? And if the lien stays with the property, and the property can’t get cleared through foreclosure, then who ultimately pays the lien? America is a big loser if we can’t muddle through these property rights issues. How does one define my, yours, ours, no ones?

  53. bergsten says:

    Well, I don’t know about how to fix the world’s financial problems, but (thanks to my wife watching Dancing with the Stars, and consequently, me having some time on my hands) I managed to fix what was causing Internet Explorer to crash on TBP (and ONLY on TBP):

    It was “Gears.” Disable the stupid thing and the crashes go away.

    After that, fixing the world’s financial problems should be a snap.

  54. dcsos says:

    I think the banksters themselves broke this one out!
    They decided that there were too many foreclosures left in the USA,
    so they figured a strategy of revealing the fraud would preclude any more foreclosures!
    THEY ENGINEERED THIS REVEAL!
    no they will get another bailout instead of realizing losses
    this is where this years bonuses are coming from ….bailout.

  55. rflacco says:

    Not a conspiracy on the part of banks to foreclose on millions? No, they’re _doing_ it, no conspiracy is required. And of cours,e they didn’t actually have the money they ‘lent’ to the working stiffs: fractional reserve lending! Now they take everyone’s houses having ‘lent’ ‘em thin air! And this isn’t a scam?
    Yes, people should be responsible. Like not lose their paperwork, that’s included too, eh?
    Does everyone know how the Spanish Californians were dispossessed (after the Native Americans, who also lacked papers…). They were thrown off their _haciendas_ where they’d live for up to a century because–well, they had no paperwork. No title, skedaddle. And this doesn’t cut both ways?
    The banking system, including existing regulation, is thoroughly corrupt. Almost everyone knows this.

  56. BILL says:

    What amazes me most is the little talk about HR3808 ( robo notary signing law in all state foreclosures) being passed by Congress in the dark , and then by the Senate in the dark . These men ( cowards) didn’t want their names on a list of fraudsters , so they did a voice vote . This seals for me that fact that the cowards should be evicted from their places of misused power in November . To a man , no mercy , vote them all out . We are losing our nation at a break neck pace – Time to take it back is short .

  57. Old Timer says:

    Just how many folks who are keeping the promise they signed on their Deed of Trust have been foreclosed on? NONE! Just how many people are gaming the system here after failing to pay for what they bought and are making lame excuses in an attempt to keep a house without paying for it. MILLIONS!

    If you murder someone in cold blood and the police make a technical error in the legal process – you are set free – does that make the crime legal? NO Come on people. If you try to keep something you are not paying for – it is called THEFT! A couple thousand CAT D-9Gs with logging chains can quickly clear up the surplus housing problem. And to hell with anyone stupid enough to have loaned the money to the buyers!

    ~~~

    BR: A mortgage contract explains the rights of all parties. If the buyer of the home stops paying on that note, the bank has the right to repossess the house by following legal steps of that state. It is not theft, it is contract default.

    And if a Prosecutor commits fraud in a murder trial, you are entitled to a new trial — not to run free.

  58. philipat says:

    willid3 Says:

    “well Philipat in a way they are making money the old way. it wasn’t that long ago that business’s weren’t concerned with actually doing any thing at all (like delivering what they sold for example). we sort of stopped doing that some 50-100 years ago. but that was then. and now we have the new economy.”

    If you believe that the Rule of Law is no longer relevant, then the US is truly screwed.

  59. [...] A foreclosure scandal open [...]

  60. FrancoisT says:

    Captain Ned wrote:
    “The Federal Gov’t will either have to give the blanket legal relief and deal with the short-term pain (given what’s likely to happen next month that would be a proper use of the Obamacle’s “legacy”) or it will have to backstop the losses the investment banks will take.”

    The Federal gov cannot provide blanket legal relief, unless they want to get into a huge fight with the States. The States won’t forgo their prerogatives in real estate law just because banks are hurting. As a matter of fact, it would be good politics for the States to stall and lawyer up the process so much as to twist the knife into the federal gov (remember how the OCC blocked the AGs to sue mortgage fraud?) and the banksters too, for maximum pain, while pressing their privates where it hurts the most to extract a maximum of concessions. It also just so happen the States have pressing financial needs that CONgress has refused to provide. It’ll be payback time if the federal try anything like you suggest.

    As for backstopping the losses of the iBanks, how the hell could anyone justify that? See this http://icio.us/1iety3 and tell us how it would be even remotely conceivable w/o witnessing the federal govermin performing guaranteed political seppuku.

  61. honeybadger says:

    I am with Lariat1.

    The comments above establish that the fraud (or lack of due diligence/process) initiated on the lender’s side. I propose a national “Strategic Default Day”. No-one pays their mortgage in November. Given the massive fraud on the lender’s side, one can make a strong argument that the moral thing to do is to default on “your” loan.

    Can someone who is a better economist than me explain the following two scenarios?
    1) The US federal government “restructures” the national debt
    2) The US taxpayers “restructure” their individual debt

    Is it possible to avoid both of these defaults? If not, which is to be preferred?

  62. They’re getting closer to what they should have done at the outset of the crisis…

    Stop foreclosures for anyone owing less than 200% of what their home is worth. Nobody is forced into the street. However, nobody is let off the hook (unless they choose to go the road of bankruptcy). If you want to stay in your home, you keep paying the minimum of whatever your original payment was. The terms still remain the same (so if you have negative amortization, you’re losing equity). If your loan balance goes to 200% of current value, the bank may foreclose (but why would they want to?).

    RESPONSIBILITY: People don’t get off the hook for taking loans they couldn’t really afford (The “ignorance of the law is no excuse” principle). Banks don’t get off the hook for making loans to people they should have known couldn’t likely afford them. The banks get their money back eventually, just not on the time table they expected. People are given the opportunity to work themselves out of a bad situation they have gotten themselves into.

    Homeowners and mortgage holders can still renegotiate new terms at their discretion. This plan would put the incentive there for them to do this (banks want their money back – at least their principal). Homeowners who realize they don’t have a chance of catching up can take the normal path of bankruptcy.

    HOW THIS HELPS THE MARKET: Had this been done from the start, it would have reduced supply of homes on the market, prices wouldn’t have collapsed so fast, and with higher values, more people could refinance and improve their chances of keeping their home. This will still be a benefit (not all the horses are out of the barn before we have a chance to shut the gate).

  63. hammerandtong2001 says:

    Lariat1 at 9:28 and honeybadger @4:43

    It’s not really “National Strategic default Day” – or “Don’t Pay Your Mortgage Day” —

    This needs better marketing, refine the messaging to what’s really at issue and help make people see what this is really all about. That way it goes viral and expands participation. And makes real headlines.

    How about this — though it needs to be shortened and honed:

    “National – I’m happy to make my monthly mortgage payment if you can first prove that I owe it to YOU – DAY”

    .

  64. mathman says:

    Interesting meta-comment here (looking at reality and the coming elections):

    http://questioneverything.typepad.com/

  65. wait until the FED has to disclose the emergency lending details of 2007-09.
    that will complete the mess…

    check out themacronavigator.blogspot.com

  66. Petey Wheatstraw says:

    tt:

    I’m a southerner, and I’ve been using ‘y’all’ all of my life. It’s a perfectly good word. My original questioning was of BR (a New Yorker) using it.

    True story:

    In 1995, I was dating a woman who lived and worked in Manhattan. On a weekend visit, while driving my new Dodge Ram PU, w/an extended cab and full length bed, at a busy intersection just off Central Park, I pulled into a crosswalk, but didn’t make the light. As a result, the hundred, or so, people who had been waiting to cross the street had to go around my truck. Many of them were glaring at me. I rolled down my window, and said, “sorry, y’all!” My date, and several of the pedestrians started laughing. When I asked her what was so funny, she replied, “two things you never say in NY city: “sorry” and “y’all.”

    Oy.

  67. dead hobo says:

    Julia Chestnut Says: (from previous thread)
    October 11th, 2010 at 5:26 pm

    Read the depo, hobo: what concerns me is the water already under the bridge. Yes, the entire media are owned by big corporations now, and do only their bidding. Yes, there is an election coming up, and people are being drummed for that reason. But it doesn’t change the violence being done to the rule of law. It just doesn’t. Again, I’m not happy about a damn thing here: I will be screaming until people are indicted. I want corporations disbanded and/or barred from doing business in federally insured areas.

    It’s been going on for a long time – does that mean that we should ignore it?

    reply:
    ————–
    Agree. Problems with documentation on Main Street should be fixed and Congress should pass a Mortgage Modernization Law to make sure the world is never held hostage again by renegade Notary Publics. (sorry, couldn’ resist)

    I still think the real push behind the sudden undifferentiated hysteria is coming from Wall Street derivative creators who just noticed they might have to buy back some of the crap they sold and will likely be sued because they were cobbled together so poorly that more than a few owners of their derivative crap are being paid improperly. There might even be some violations of the 1933 or 1934 Securities Acts involved. This is a muddy the waters campaign and it is starting out masterfully. All those here who appear to fall for it are carrying GSs water for them and doing it with passion. Suckers.

    By undifferentiated hysteria, I simply mean that nobody really knows the problem but everyone acts as if the trickle of info is fact, and anyone who cobbles up a scenario that vilifies the banks and pretends to be expert in real estate law is held out as an expert and is used as a footnote in someone else’s cobbled scenario. Toss in a few real mistakes and a Florida fraud or two and you have a hysterical outcry to give away free houses to anyone who stopped paying on their mortgage.

    Halted foreclosures will continue after the election. State AG investigations will be resolved after the elections and 96+% of foreclosure activity will resume as before. MERS and other aspects of the foreclosure process will be persecuted like the CRA is persecuted by financial morons who blame the housing crisis on it. If questions exist about who the cash from sale of foreclosed property should go to, it will end up in escrow and derivative owners will fight it out. GS will issue a statement that claims it is as pure as new snow and evil notary publics are the bane of society.

    Sometime later, the real problem of securitized mortgage holders not being paid properly will surface and the real entertainment will begin.

    But for the next few weeks, It is obvious that the mob will be managed to keep attention away from bad securitizations and to create new facts based on speculation that uses big words and legalistic phrases from people who thought about taking business law in college. Toss in a real lawyer or two who once helped with a closing and the mob will dominate for a few more weeks. Thus the phrase ‘undifferentiated hysteria’.

  68. Lariat1 says:

    Honeybadger and hammerandtong2001 : Why I wish this could be refined and go viral is all mortgage holders that are current do have a stake in this mess also. we can’t just say too bad for the people that are losing their homes ( whether they deserve to or not). I’m mad that the banks and mortgage originators started this whole mess. It is plain uncontrolled greed. It is the old divide and conquer routine. If I am pissed at the home owners who tried to scam the system ( no different than the banks) then I end up siding with the ” poor banks” who will need help again to get out of this mess. Imagine all current, good credit rated people sending the banking system a unified message in the month of November. GET YOUR HOUSE IN ORDER. We work too hard to keep our houses in order. They trust that we will faithfully pay our obligation each month and they depend on us that we will. So for one month we will behave like them. Reckless. Someone with far more talent than me should take and run with this.

  69. HEHEHE says:

    First thing the next session of Congress is going to do is pass new Federal legislation streamlining foreclosure and record keeping requirements and creating loopholes for the missing documentation; I am sure the financial industry has it already drawn up.

    It’ll speedily end up litigated all the way up to the US SCT (3-6 months, its been done before, all the Feds need is a sympathetic District Court judge, an interlocutory appeal, and a sympathetic Court of Appeals panel) who will say it is not a violation of states rights for them to usurp state foreclosure law. I am sure that Scalia and the rest of them hacks have their circuitously reasoned opinions being drawn up right now.

    In the interim the Fed and financial industry will promote more mortgage restructuring dog and pony show programs to try and make it appear they give a crap about joe six pack.

    If they do not do this it is another 2008 bank implosion all over again.

    Finally, while I don’t want anybody to lose their home, and there’s some people who are in this position through circumstances beyond their control that deserve sympathy, the majority of these people were in over their heads as soon as they signed the mortgage loan in the first place and were essentially gambling they’d be able to pass the house off on somebody else at a profit.

  70. bass says:

    I’m in the minority here, but banks are NOT kicking anyone out of their home who is PAYING THE BILLS.

    *SNIP*

    ~~~

    BR: That is the exact point THEY ARE. They even kicked people out who DID NOT HAVE A MORTGAGE in Texas and Florida and elsewhere.

    Stop being a bank tool and repeating idiot talking points.

  71. grego001 says:

    1. The banks are doing the right thing by getting the mortgages off their books, but doing it in the wrong way.
    2. Regulators are doing the right thing by investigating potential the wrong doing.

    For once, things are working as they should. Businesses executing in their best interest, regulators regulating.

    What happens next is where things typically fall apart. Questions such as: will anyone go to jail? will someone go out of business?

    Similar to @deanscamaro, I believe this issue arose from trying to do things “on the cheap”. However, I believe once again the cure will be worse than the disease, and this issue will be taken out to the field, beaten, and stomped on, until it is dead, dead, dead.

    Once again, never let a crisis go to waste.

  72. DeDude says:

    Our masters must be desperate since they would risk sneaking a “legal fix” of their problems into a bill passing less than 2 month before an election defined by anger about government fixing the big guy problems and letting the little guy drown in his. So judged by the size of their desperation, this problem must be pretty bad for them. Although probably there is more smoke than fire. But then in finance there is usually more damage from the panic than from the problem, so it could be bad (for them). The new GOP congress could be faced with a serious financial crisis as soon as they are seated – we shall see if they are up to the job or the country will get a lesson in how bad you get burned when you practice the “let it all burn” ideology.

  73. Ramstone says:

    Is cramdown such a non-starter? It never seems to get any traction either in the news cycle, legally, legislatively. What am I missing (sincere, non-rhetorical qx).

  74. rbh says:

    The real problem (if nobody has done the paperwork transfering the notes properly) is going to be all the entities (foreign banks/governments, pension funds, hedge funds ect.) that bought this RMBS is going to want their money back. I don’t think a paperwork glitch-patch is going to make them go away. The banks that failed to do the paperwork are going to have to return the money because the groups that bought this crap technically don’t own “anything” (the mortgae is just a lien/the note is the promise to pay). The banks that seciuritized the mortgages are the ones that have an equitable interest in the notes (assuming that they at least got proper assignment) and will be the ones who can collect if they can find the original note.

  75. AHodge says:

    this aint easy.
    because the basic structure of the paper is so flawed. BAD PAPER is wilbur ross’ label.
    fraud/ bad documentation of collateral are reasons #3 and #6 of my 16 reasons why mortgage paper is bad paper. Having ONLY the home claimable by the creditors in most states is reason #13.
    Exposing the documentation prob just ripped the scab off this,was always there.
    No one but a lifelong expert, a fool or someone relying on a fannie freddie guarantee shoudl be buying this stuff. Bad paper is still investible, and only with knowlege and much higher rates that justify the risk?

    Maybe we headed back to banks who know what they were doing, buying and holding for their own book. but i doubt that Fannie and freddie will eat what is guaranteed or held by them? many of these servicers are trying to close on their ulimate behalf? make that $ half trillion bill for fannie freddie several hundred billion higher?

    Honestly while nobody despises wall st more than i do, these borrowers did take the money, and there is a clear record of that. demonizing some poor paper shufflers trying to keep track of a dozen times passed securitization? it is seriously bad when it done wrongly, those people should go to jail,
    But when they did take the money.
    part tof the prob is the bank has no direct claim on them
    only this POS house, incredibly hard to document

  76. dsawy says:

    OK, there’s traction on the foreclosure fraud side.

    Now, what about the financial side? What will happen to the securities which now hold big bags full of what is either unsecured debt, or marginally secured debt? Will there be put-backs? How much? To whom? Can they absorb these put-backs, or are we looking at another goddamned bailout when the holders of securities start cramming compromised paper back down on the banks and originators?

  77. AHodge says:

    Ramstone
    cramdowns work or ought to cause the banks are in such a weak position. i favor cramdowns.
    they never happen where there are first and second mortgages. because the second mortagor, usually CITI or Wells or Bof A, who has practically no rights at all, and no collateral at all (unless he waits 5 years and the house price goes up 40%) still has the right to hold up the proceedings, for some extortion money. either that or they have left this unmarked on their books and just dont want to take any reported loss. second mortgages are a trillion $ prob, with at least a 1/2 trillion of unrecognised losses.

  78. ezrasfund says:

    This is all Shakespearean in its dimensions.

    The latest story of the “robosignings ” my be the downfall of the banks. Like Nixon and so many after him, it’s the cover-up that gets them in the end.

  79. Rich says:

    The Chain of Title is a risk to the Buyer of the foreclosed property not the one being foreclosed on.

    So if I’m reading some of these comments correctly the Banks, who provided money at the lowest interest rates in many years are at fault for the mortgagor not paying it back.

    A question, when was the last time any of these ones being foreclosed actually made a mortgage payment to the bank. And now with the thought of living free on a technicality for a few more months they are parading in the streets with save our homes signs.

    Only in American.