We’ve said for some time that document fabrication is widespread in foreclosures. The reason is that the note, which is the borrower IOU, is the critical instrument to establishing the right to foreclose in 45 states (in those states, the mortgage, which is the lien on the property, is a mere “accessory” to the note).
The pooling and servicing agreement, which governs the creation of mortgage backed securities, called for the note to be endorsed (wet ink signatures) through the full chain of title. That means that the originator had to sign the note over to an intermediary party (there were usually at least two), who’d then have to endorse it over to the next intermediary party, and the final intermediary would have to endorse it over to the trustee on behalf of a specified trust (the entity that holds all the notes). This had to be done by closing; there were limited exceptions up to 90 days out; after that, no tickie, no laundry.
Evidence is mounting that for cost reasons, starting in the 2004-2005 time frame, originators like Countrywide simply quit conveying the note. We are told this practice was widespread, probably endemic. The notes are apparently are still in originator warehouses. That means the trust does not have them (the legalese is it is not the real party of interest), therefore it is not in a position to foreclose on behalf of the RMBS investors. So various ruses have been used to finesse this rather large problem.
I don’t know anything about real estate, but this seems bad.
But here’s the catch: what if the lender signing the original documents is not the party foreclosing on the property? Then it becomes a question of fact whether the foreclosing party has authority to proceed, and that makes it a judicial issue a question of fact for the courts. If the foreclosing party can show a clear chain of title an assignment or progression of assignments from the original lender to himself he is home free. But courts have increasingly been holding that MERS breaks the chain of title. Foreclosure expert Neil Garfield argues that even in non-judicial foreclosure states, that means the investors have to go to court to prove their case. And when they do, they will run up against the brick wall of MERS. He concludes:
There will be a head-slapping moment when title carriers, attorneys, judges and administrative agencies and clerks suddenly realize that the monster created on Wall Street has its equivalent in the public records of counties across the nation. I doubt if more than 6-7% of all the foreclosures in the past 10 years have resulted in clear title delivered to anyone. And the only corrective instrument can come from the original owner. That homeowner is sitting in the catbird seat and doesn’t know it. Millions of people who THINK they have lost their homes still own them and if anyone wants a signature from those people to clear title, they are going to be required to pay dearly, which is at it should be. Eventually the purse gets returned to the victim from whom it was snatched.
It means it will take even longer for the foreclosure inventory to clear out. We might see a temporary recovery as some foreclosures are taken off the market until this is resolved. It will jam up the courts. The lawyers will stay busy.
I am all for sticking it to the man and I am in no way an apologist for big businesses and especially Wall Street with the ruin they have visited upon our economy, but reading quotes such as “Millions of people who THINK they have lost their homes still own them and if anyone wants a signature from those people to clear title, they are going to be required to pay dearly, which is at it should be. Eventually the purse gets returned to the victim from whom it was snatched.” makes me shake my head.
Generally speaking, if you default on your loan, I fail to see how that makes you the victim. The lenders and investors didn’t think through the impacts of the processes they were implementing. And the problem they are describing doesn’t have any direct impact to the consumer - at least not in the sense that what occurred puts them at any disadvantage with regards to the loan they took out. This just smacks of a technical loophole to get out of paying what is owed.
Will the ruined title chain affect getting clear house titles even in regular transactions (no foreclosures)? Or is the good faith of all parties involved enough to overcome the sketchy or non-existent paper trail?
Things will get interesting if foreclosed homeowners can take possession back from people who bought the property at a foreclosure sale - or bought it from someone who bought it, etc etc.
Was that nakedcapitalism article translated to and from a variety of foreign languages a few times using google translate or something? Parts of it are so poorly written they are incomprehensible as to their true meaning. Fuck, I want to physically assault the author of that stupid fucking blog.
Bank of America Corp. is placing a moratorium on all foreclosure proceedings and sales across the U.S. amid political pressure on U.S. banks to examine foreclosure-documentation problems.
The nation’s largest bank by assets is the first financial institution to stop all foreclosure actions amid revelations that the banking industry had used “robo-signers,” people who sign hundreds of documents a day without reviewing their contents, when foreclosing on homes. Bank of America, J.P. Morgan Chase & Co. and Ally Financial Inc. last week postponed foreclosures in 23 states where a court’s approval is required to foreclosure on a home.
The decision by Bank of America to extend its postponement to all 50 states takes effect Saturday. The bank doesn’t intend to lift the moratorium until its assessment of all documentation is complete, a spokesman said.
Interestingly, this billwas passed through Congress by voice vote (no individual vote records kept) and one of the apparent effects would have been to apply retroactive protection to the banks for much of this mess. Obama has refused to sign it.
I’m no lawyer, banker, broker or anything similar but from what I’m reading I don’t think this gets people out of the loan, it just means whoever currently holds the mortgage doesn’t actually have a right to the property so they can’t repossess it. Though I could be way wrong about that.
If I wasn’t such a lazy bum, I’d be marching on the Capital building and demanding an explanation after hearing about it. As it is, that fills me with more loathing and disgust for many of our elected officials than I’ve felt in quite a while. Props to Obama for not signing.
What exactly is the problem with a bill that fixes what was essentially a massive set of clerical errors? If the bank really owns the mortgage and the person living in the home is really unable to pay, why would we want to let a technicality stop the foreclosure?
I can understand wanting to relieve troubled home owners and not reward banks for sloppy paperwork but a global stop to all foreclosures seems like it leaves the banks in a very precarious place no?
Maybe it will teach them not to defraud investors and homeowners by not only seeking and approving bad loans, and then pushing them off to rubes, but also being too fucking lazy to do the paperwork in their greedy rush.
It’s a matter of making sure that the foreclosures are actually proper and legal.
If you don’t pay your mortgage, you lose your home - while many if not all of us would feel terrible for a family going through this and would like to offer at least some emotional support, we all recognize that’s the expected end result of nonpayment.
However, what happens when there’s no or improper corroboration that 1) the bank owns the property and 2) that payments have indeed not been made? You can have people being put out on the street by the police through no fault of their own. That’s why you need to be able to not only challenge such actions that you deem incorrect but you also need to do soin a manner that would not take you out of your home state.
The bill ostensibly allows for the rubber-stamping by an in-house, out of state individual which by all reports makes inaccurate or improper foreclosures both more likely to occur and also extremely difficult for most victims of such circumstances to challenge them.
In short, Congress was trying to help the banks dodge a logistical nightmare (a good thing) by removing protection from homeowners (a bad thing).
Mind you, I’m not in the business nor have I ever been faced with foreclosure - I just read stuff and spew it on the forums like most people here, meaning it could be entirely incorrect.
Ahh, that makes more sense. I see pros and cons on both sides here. Obviously improper foreclosures are a problem, but leaving banks with a big load of bad loans they can’t foreclose to recover is a big problem. I take it the legislation only accounted for the latter without protections for the former?
That’s pretty much the gist of it as far as I can tell. I don’t know if there’s a better way to go about it, but right now it seems as if the at-fault banks will have to re-do many of their pending foreclosure proceedings and may be susceptible to possible legal action by the appropriate regulating bodies.
