Law and order types, sanctity of private property types vanish?
This Washington Post article by Brady Dennis and Ariana Eunjung Cha excerpt caught my eye about foreclosures, titles, and law and order types.
But after the MERS computer system went live in 1997, some county recording offices complained that the company was bypassing the legal process and raking in money charging fees that were lower than those charged by municipalities. They were largely ignored.
“It wasn’t like Congress or state legislators did anything,” said Christopher L. Peterson, a law professor at the University of Utah who has consulted in cases against MERS. “The mortgage industry just changed how the land title system worked without getting anyone’s okay.”
MERS has consistently claimed authority to act as a representative, or “nominee,” on behalf of banks and lenders.
But as millions of homes have fallen into foreclosure, Peterson said, “the MERS system doesn’t provide a substitute for all the recordkeeping” that never took place during the boom years. “MERS created the illusion of record keeping when it wasn’t really done.”
This could be a giant cluster mess and a lawyers’ wonderland.
What passes as “evidence” in foreclosure and collections cases has always been a joke, and robosigning is not new, just the scale has gone humoungous.
But the Federal Courts are always ready to defend the rights of the Rich and Powerful and MERS is no exception. We will soon find out that although it is impossible for someone whose right to vote or other citizenship rights have been abrogated by state courts to get the Federalist Judiciary to intervene, they consider the equal protection rights of mortgage servicers to be as important as those of GW Bush.
http://www.abanet.org/rpte/publications/ereport/2010/4/rp_articles.pdf
Whilst the lawyers and politicians are fanning populist outrage over “unjust” foreclosures, I think it is still wise to keep an eye on the big picture.
The truth of the matter is that about 96% of all new loan originations are now handled by F&F&FHA. They fund themselves by securitizing mortgages, and their ability to sell new MBS depends very, very much on how the old MBS in the market is doing.
Now that the curtain has been lifted, it is becoming apparent that it is illegal to securitize mortgages, or at least we can’t trust that anyone does it in a legal manner. And even if they do straighten that out on new loans, new buyers may be buying the property from a bank that didn’t own the property.
I think the whole mortgage system has just gone on ice. And think what that does to the housing market if now sellers need to either find a cash buyer for the Brooklyn Bridge, or hope that F&F&FHA can soldier on as before, securtize it and sell it to the Chinese or small towns in Iceland. I’ll pass. Wake me up when things get real again.
Of course I may be totally wrong and we find out that Treasury bonds are perfectly fungible IOU Instruments with MBS. Or the Federal Reserve Bank decides to do something useful for a change and starts originating loans in this country. Quantitative Pleasing or something like that. I’ve been wrong before.
Now that the curtain has been lifted, it is becoming apparent that it is illegal to securitize mortgages, or at least we can’t trust that anyone does it in a legal manner
No, it is a legitimate business for Fanny and Freddie. You just can’t do it like the cowboys from Wyoming (Dick Cheney) thinks you can.
The problems with mortgages can be traced to a handfull of so callled companies. The Wrongald Rayguns and George Bush administration, the same people who orchestrated the Savings and Loan “scandal” had an idea that they needed to ignite the Laffer revolution by freeing up money. Alan Greenspan wasn’t willing to reignite inflation so Wrongald’s henchman decided to change the laws and allow the S&L’s to write and guarantee government backing of the commerecial loans they made. Budah Bing, calamity. None of this was their idea, it was all their silent partners.
Fast forward to GWB, jr, with the same agressive people from the S&L crisis, Dick Cheney, Donald Rumsfeld, budah bing we have a free wheeling real estae market, supplying money to a corrupt economic ideolgy. Same outcome, but much, much worse.
Now we the foot soldiers of this corrupt regime threatening to reinstall the crap that got us here in the first place.
To answer the “Q”-what’s on my mind, is this and please bear with me here, I’m old, at least in years lived on this earth, I start my day fisrt sorting the spam, then readinf Angry Bear & the comments, which for the most part, are informational. I have to admit, that though I’m not as savey as the majority of those who write their take on the various subjects, I do pay attention, as long as they seem to make sense to this old man. I also admit that my blood pressure does rise occasionaly, which calls for me to administer my pill early. Now, this isn’t in any way saying I blame the authors, it’s just that I have 4 Grand children, one of whome gave up 5 tours in this so called War on Terror thing, 4 great Grand children, which causes me to shed a tear because this country’s leaders have allowed all this crap to take place. Is there no hope left, that things will get better? Where the hell are the good guys when we need them? Yes, I’m venting, because I can, along with being allowed to do so in this blog, which I’m forever grateful, even though I probably appear foolish when I do. That I’ll continue reading, occasionally adding a comment, goes without saying, perhaps to the consternation of the moderator, is a given, so I say thanks that I’m allowed this moment in time, hats off to all.
Actually, the whole system is in question. F&F&FHA do use private servicers. A problem with clouded title affects the whole system too.
Here’s a summary overview of the system, and where it’s been breaking down. This guy has summarized the numerous blogs Yves has been doing in real time as info became available.
It’s all just a legal problem, but you know how things like that can get blown out of proportion once and a while.
http://rortybomb.wordpress.com/2010/10/08/foreclosure-fraud-for-dummies-1-the-chains-and-the-stakes/
rdan,
It’s a pretty simple issue. When you get a mortgage, the lender gets title to the home. If you default the lender has the right to sell the home to repay the loan. It’s the bedrock of mortgage, and all secured, lending. It’s why secured rates are magnitudes lower than unsecured rates.
Outside of fraud or forgery, this has to remain the standard, otherwise you will destroy the financial system for the benefit of a few lawyers and deadbeats who are create a populist wave (it’s working on you) and get over on some technicality.
rdan,
It’s a pretty simple issue. When you get a mortgage, the lender gets title to the home. If you default the lender has the right to sell the home to repay the loan. It’s the bedrock of mortgage, and all secured, lending. It’s why secured rates are magnitudes lower than unsecured rates.
Outside of fraud or forgery, this has to remain the standard, otherwise you will destroy the financial system for the benefit of a few lawyers and deadbeats who are trying to create a populist wave (it’s working on you) and get over on some technicality.
Result if this goes further: everyone will stop paying their mortgage and live in their house for free, banks go under, world economy collapses. The End.
I want to pay the rightfull owner of my house…why should I pay someone who can’t prove they are the owner? How is that in my self-interest? Would you pay someone who does not own your property? Would you pay rent to someone who says they represent the landlord but you have no way to know?
The people I know have escrow accounts and pay in monthly, conscientiously…no deadbeats except the Mortgage Bankers Association company? No, free homes are not the goal for most I believe, just the goal of true ownership.
You will have to prove the populist wave theory…unless you can prove customers outwitted the banks again due to their expertise in titles. Wily customers! Of course it is an election year, so I am sure politics will play a role.
The outright fraud can and is being established…we will have to wait to see how big an issue it becomes during investigations.
Why you think I am advocating for free houses is beyond me. Calculated Risk thinks it will remain mainly a local issue and of no lasting import, and Yves Smith thinks it is a big deal and far worse than we imagine. I think people are tempted to bypass law when they think they won’t be caught, or carefully ignore things not in their job description.
I notice that you do avoid the part of a company leader moralizing about customer behavior and its own standard behavior of strategic default…tsk tsk, couldn’t they handle this in some real way?
Technicality has to be proven at this stage since enough fraud has been discovered. I agree titles to ownership are fundamental…why did companies ignore the rules if they also believed that?? Calculated Risk says these companies must bear the full cost of fixing this mess, but customers owe a mortgage. Sure. Prove you own the title according to the law of your locale.
“consternation of the moderator” But Norman, that is the reason for AB! We have experts and non-experts who address issues from different points of view.