Cantor: Leave Foreclosing Banks Alone!


Asked about a solution, [GOP House Minority Whip Eric] Cantor replied: "People have to take responsibility for themselves. We need to get the housing industry going again. We don't need government intervening in every step."

(Emphasis supplied.) Assuming that's true, do you think Cantor will favor requiring the banks to follow the law of foreclosure, which in most states requires that the foreclosing party prove that it does in fact have standing to foreclose? See, there's the problem for Cantor and the bank defenders - if the Feds do not intervene on behalf of the banks, many banks are finding they can't foreclose, because they can't prove they own the mortgages they want to foreclose on. If Cantor believes what he is saying, then he should oppose any breaks being given to banks in the foreclosure process. But we all know Cantor is full of it.

Speaking for me only

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    rep. cantor (5.00 / 2) (#1)
    by cpinva on Sun Oct 10, 2010 at 03:51:02 PM EST
    sincerely believes whatever he says, at any given moment in time. it's a gift, and a curse.

    Not just GOP'S Cantor (5.00 / 2) (#2)
    by NYShooter on Sun Oct 10, 2010 at 04:05:13 PM EST
    Axelrod, not to be left out of bludgeoning non-millionaires, said that while there's some paperwork problems, there are foreclosures that "probably should go forward."

    Actually, he's right (5.00 / 1) (#15)
    by gyrfalcon on Sun Oct 10, 2010 at 07:52:13 PM EST
    The vast, vast majority of people whose paperwork is screwed up are actually legitimately in default of their mortgages.  Whether they should be somehow financially rescued is another story.  But when the dust clears from this rob-signature crapola, a few people will emerge triumphant from fraudulent or mistaken foreclosures, but the vast majority will lose their homes.

    Large numbers of people will be able to postpone the day of reckoning because of the phony papers or lack of clarity about what institution actually now owns the home, and maybe some fraction of them will be back on their feet financially by the time that happens.

    But for now, in reality, many of those folks are getting free housing while this is settled.

    That's fine with me because the banks don't even want all those foreclosed properties and have no idea what to do with them in this economic environment.

    Which is all the more reason there really ought to be something like HOLC to give relief to both the erstwhile home owners and the banks themselves.  You'd think at some point, the banks with all these useless, unsellable foreclosed houses would wake up and realize they're NEVER going to get all their money back on these loans.


    When BrokeAxel talks like this (none / 0) (#4)
    by Militarytracy on Sun Oct 10, 2010 at 04:11:14 PM EST
    We know that some stuff is going down in the backrooms, because he completely stays away from the fact that this also has to do with MBS fraud...the crap that we have bailed out how many times now and it is still there, it hasn't gone any place and all that money went into the pockets of CEOs and the smart money on Wall Street.  None of it went to any of us, and we will pay again.....at least one more time after this payout if these phuckers don't shape up now.  Time to take the banks over and time for HOLC, that is all that can be done but they won't do it until we crater again.....and we will.

    I just heard Obama tell everyone (5.00 / 2) (#5)
    by Militarytracy on Sun Oct 10, 2010 at 04:12:42 PM EST
    we avoided Depression.  No We Didn't

    Yeah, actually, we did (none / 0) (#16)
    by gyrfalcon on Sun Oct 10, 2010 at 07:53:33 PM EST
    This is bad, but it's not even close to the Great Depression and what would have happened to us if the Obama admin. (and the Bush admin.) hadn't done what they did, inadquate as it was.

    With what is still happening (none / 0) (#23)
    by Militarytracy on Sun Oct 10, 2010 at 08:38:35 PM EST
    I am not convinced that we are not going to crash again.

    And if you read the WaPo today, (5.00 / 2) (#11)
    by Anne on Sun Oct 10, 2010 at 05:35:01 PM EST
    your head might really explode...

    1. Obama administration officials said they were aware of "flaws" in how the mortgage industry was pursuing foreclosures, but...they could only take limited action because they wanted the lenders' help in carrying out the federal mortgage modification program - you know, HAMP - the program that wasn't actually helping a whole lot of people, but was, most certainly, helping out the lenders while simultaneously ruining people's credit - people who were managing to keep up, but would have benefited from modification.

    2. The article's author says that it "wasn't clear" whether government officials were aware that the grinding up of mortgages into hamburger that everyone could make money off of was raising questions about (a) who owned the loans and (b) had the legal right to foreclose (apparently, there are US government officials trapped in a mine in Chile, if it's really "not clear" this would be a problem).

    Please note that "government" officials are not the same people as "administration" officials, at least as far as the article is concerned - or maybe they are the same - it's hard to tell, actually - it's a really bad article.

    3. "Administration" officials knew, along with the consumer advocates and lawyers that the servicer industry was not "helping" slow the foreclosure process, but rather, was accelerating it.  But the sum and substance of the administration's "action" in getting things under control, was - I kid you not - a sternly-worded letter to servicers urging them to "behave better."  

    Meanwhile, Steven Pearlstein, on the opposite page, has an article reminding us that we shouldn't let all this "fraud" in the foreclosure process distract us from the reality that millions of Americans took out mortages their income could not support on houses they couldn't afford - and shoddy practices or no, these people still owe the money.

    It reminds me a little of, "well, we know you committed the crime, so why should we let a little prosecutorial or police failure to uphold your rights get in the way of putting you in prison?"

    I am convinced that what's going to happen is a little lip service to "the rules," followed by a version of "too big to fail" using the rationale that the magnitude of the problem is one that could easily send the economy plunging - and we wouldn't want that, would we?

    SO, I think the fix is once again in, and I would be shocked if there was any significant price paid by servicers actively engaging in frauds upon the courts - in much the same way there was little price paid by the banksters that two years ago.

    Deja vu all over again.


    I had not read any of this until just now (5.00 / 2) (#13)
    by Militarytracy on Sun Oct 10, 2010 at 06:36:13 PM EST
    By God.....this administration SUCKS!  And even if they allow everyone to be foreclosed on like wild, they accomplish nothing overall.  Who are they going to sell these house to?  Who has the credit anymore to buy them or the jobs to buy them?  The mortgage backed securities market still craters too.  Investors are now aware of all the fraud, so even when dumb money is available to invest it isn't that dumb anymore.  What a bunch of idiots.  Fine, go for it, bring it on and knock theyselves out....Obama is 100% on the road to one term and when he gets there he will utterly deserve it.

    Well, you sorta would have to prove (none / 0) (#17)
    by gyrfalcon on Sun Oct 10, 2010 at 08:03:43 PM EST
    actual fraud, and further that the actual fraud actually harmed anybody.  Far as I've been able to tell, the fraud is on the part of the servicing companies the banks hired to deal with all this, and it's the banks upon whom the fraud has been perpetrated.

    No doubt a few people have been foreclosed on by mistake as a result of this who don't owe anybody a cent.  But otherwise, seems to me most folks are getting a break, staving off actual foreclosure for however many months it takes to straighten this out and do it right.

    Do you disagree?  I'm just trying to figure out who we're mad at here and why.  It's the fraud and pigmess that got us into this to begin with I'm p***ed as hell about, not the pigmess of this screwed-up foreclosure mess itself.

    From your quotes from the article, seems to me it's not clear whether it's admin. or government officials who aren't "clear" or the reporter him/herself who isn't clear.

    As you say, you'd have to have been at the bottom of a Chilean mine for the last two years not to know that sorting out who actually owns these loans is a major problem.  We knew that back when all this got nutty before Obama even took office.


    The fraud that is the scariest (5.00 / 2) (#24)
    by Militarytracy on Sun Oct 10, 2010 at 08:47:45 PM EST
    is the fraud that occurred when the mortgages were supposed to be conveyed to the Mortgage Backed Securities.  The creation of securities is supposed to be monitored, and well monitored, the loans had to be rated.....but the paperwork doesn't even exist.  We have heard that the rating agencies were rating things AAA that were risky as hell but none of us understood how.  This is part of the how.  We have also come to understand that more securities were created than we have mortgages for and there appears to be instances of a mortgage that was refinanced that it was not pulled out of the first mortgage backed security that it was in, but the new mortgage was sold into a new security.  Do you see where the not conveying of title was part of an enormous fraud?  Deep investigations into this will also crash the MBS market, but something needs to happen here other than the Fed and other government sources continuing to prop up false markets as the Fed is doing right now.  And whenever the Fed buys up any of this stuff that is threatening the market that means you own it.  Do you see now how you own nothing but someone has made off with your money?  They committed fraud to steal money, and now they will make off with all the homes too or they will shoot the dog they say.  We are already screwed though, the only thing the market is living on right now is denial and the monies the Fed keeps pouring into it.

    What is scary for people like us (none / 0) (#25)
    by Militarytracy on Sun Oct 10, 2010 at 09:02:46 PM EST
    who aren't having any of these problems is that clear title has been destroyed in the fraud.  They have resold homes now that there was not clear title to as well and the people who bought them did not read the fine print and don't know that clear title to the biggest purchase in their life doesn't exist.  And what guarantee is there for us that once we have paid our mortgage that we will then have clear title to our home?  Do you see how horrible this is?  But those who won't deal with the totality of this are only going to stick to a very minute talking point.

    As I understand it, the fraud is (5.00 / 2) (#27)
    by Anne on Sun Oct 10, 2010 at 09:33:03 PM EST
    being perpetrated upon the courts, not the banks (and in some cases, also upon people who should not have been foreclosed on) - the servicers were acting on behalf of the banks, not in opposition to them, so how have banks been harmed by the falsification of foreclosure documents being presented to the courts?

    I don't think they are, on the face of it, unless it is the banks who are ultimately held responsible for the actions of their servicers - and when's the last time a bank was held accountable for anything?

    As someone with a mortgage, which gets paid without fail every two weeks, and as someone who has, over the years, had difficult times when, even if it meant scrimping on something else, we somehow managed to honor that obligation, it irks me that no one's ever going to offer me a principal modification, or lower my interest rate; I guess sometimes there's just no reward for being able to be responsible, other than being able to sleep at night.

    But, apart from what I think it a huge underlying time bomb resulting from how these mortgages were ground like hamburger and everyone and his grandma has some kind of investment interest in them, I don't see why mortgage servicers and banks get to lie on court documents.  We have a process for foreclosures, and the banks don't get to put their thumbs on the scales of justice just because they're holding all the cards, or they don't want to wait to collect, or whatever their eminently reasonble reason is.

    Do I think it's fair that just because no one can figure out who actually owns the loans on a particular property that the people who borrowed the money get to skate on that obligation?  Hell, no, I don't.

    But why didn't anyone consider this when the BSD's on Wall Street were dreaming up yet another way to make a killing in the market?  Where were the people who were supposed to be looking out for us?  Were they really so sure the boom would never end, or did they just not care as long as they were cashing 6-figure bonuses?

    I wonder.

    And, glory be, I guess what we have to look forward to are more puffed-up, self-important pols pounding on tables and shaking their fists and calling for hearings and investigations about something they surely all knew about, even as they looked the other way, taking contributions from Wall Street and the banks the whole damn time.


    Hey Anne (none / 0) (#29)
    by Militarytracy on Sun Oct 10, 2010 at 09:54:08 PM EST
    Those who pay and pay on time and are responsible no longer have a reason to have any confidence that on the day we make our last mortgage payment, that we will be able to hold in our hand clear title to our homes.

    Or what about trying to sell even before mortgage (5.00 / 2) (#37)
    by jawbone on Sun Oct 10, 2010 at 10:56:40 PM EST
    is paid? Where is the note? Will title companies write title insurance on houses for which clear title can't be produced?

    I've been thinking about that lately.  When I turn 65 I can get on Medicare and no longer will have to stay in NJ to be sure I have coverage for my preexisting cancer....

    Will I be able to sell and move away?


    Our mortgage is with the (5.00 / 1) (#39)
    by Anne on Mon Oct 11, 2010 at 06:58:40 AM EST
    credit union, which doesn't sell its mortgages; that isn't where we had it originally, but it's been long enough - at least 15 years, I think - that I'm not worried about clear title.

    It was, quite honestly, one of the things we liked about the credit union - and they also offered biweekly payments with no additional charge, so we've been making 13 months' worth of payments every year, shortening the life of the loan.

    And, while they no longer do this, about 10 years ago, all we had to do to get a lower rate was ask for it - minimal paperwork, no fees, done.

    I like having my money in a local, strong credit union - even more so now that the mega-banks have more or less become vampires, sucking the blood and the life out of everything they touch.


    Anne, I'm trying to find the article you reference (none / 0) (#33)
    by jawbone on Sun Oct 10, 2010 at 10:34:33 PM EST
    The WaPo site lists a title which seems to fit it, but when I click it I can't find anything similar to what's on the home page of their site under Business.


    Do you have a link? Or exact wording I could try to google?


    Dynamite stuff in your comment.


    Anne, found a link thru HuffPo -- (none / 0) (#36)
    by jawbone on Sun Oct 10, 2010 at 10:53:11 PM EST
    I read that too (none / 0) (#35)
    by Madeline on Sun Oct 10, 2010 at 10:48:07 PM EST
    late last night.  I thought OMG! then snickered. On Friday, in a post stating that Obama was not going to sign the bill, someone posted that they were not going to get too excited as they were used to waiting for the flip flop.

    Maybe Obama won't sign.  Foreclosed homeowners vote too.


    Oh, yes (none / 0) (#12)
    by Zorba on Sun Oct 10, 2010 at 06:06:21 PM EST
    And if anyone wants the link, here it is.  Tell me again why we voted for the Democrats?

    I don't think (5.00 / 3) (#10)
    by NYShooter on Sun Oct 10, 2010 at 04:49:12 PM EST
    The public realizes how big this mortgage debacle really is. If you added up all the mortgages written in the past decade the sum total would be only a fraction of the total liability hanging out there.

    The question is often put forth, "why doesn't the Government just give all the homeowners the money to pay off their mortgages?" That would keep the homeowners out of foreclosure, the banks would be paid in full, and it would be cheaper than all the programs the Government concocted to solve this problem.

    The answer is that defaulting mortgages are the smallest piece of this puzzle. Once the Merlins on Wall St. invented derivative instruments (CDO`s) and insurance guaranteeing payment of these phony mutations (CDS's) mathematically an infinite amount of risk exposure was born.

    Banks like Goldman Sachs were screaming at their brokers that they weren't selling enough crap mortgages. You see, GS (and the others) packaged the garbage, sold the resulting derivatives, then also sold the derivatives that were comprised of the entry derivatives. They then bought credit default swaps guaranteeing them payment if the mortgages failed. (they designed the CDO's to fail.)

    Pretty good deal: It's called "burning both ends of the candle." They made a ton of money when the market was rising, but they made even more when the collapse they engineered came to pass.

    And no one went to jail, let alone been investigated. We taxpayers were so grateful to them that we even gave them the billions to pay themselves gargantuan bonuses. (we're talking billions of dollars in bonuses, baby)

    And you're right, MT, it's far, far from over.

    Who Benefits? (5.00 / 2) (#14)
    by Michael Masinter on Sun Oct 10, 2010 at 07:28:21 PM EST
    Here are two hypothetical homeowners facing judicial foreclosure in Florida:

    The first bought a starter home with a subprime mortgage, had a health care emergency, and fell behind in payments.  The house was once worth $150,000 and is now probably worth $75,000.  The homeowner owes $100,000.

    The second bought a 7,500 square foot home for $1.5 million, and fell behind in payments when investment income crashed.  The house is now worth $700,000.  The homeowner owes $1.4 million.

    Both homeowners stopped making mortgage payments. Both banks sued to foreclose.  One of the homeowners hired a lawyer who discovered that the foreclosing bank could not prove that it was a holder of the note and was the assignee of the mortgage, and as a consequence, has been able to stay in the home without making any payments for two years.  Care to guess which homeowner?

    Affluent homeowners benefit by the banks' sloppy recordkeeping; sufficiently poor homeowners eligible for the legal services lawyers who were the first to discover the recordkeeping problem also benefit.  The vast majority of middle class and lower middle class homeowners get screwed.  

    And let's not forget the folks who want to buy a house, who refused to be suckered into the subprime market, who are now ready to buy with fixed rate mortgages at the lower prices that now prevail, but who can't because the banks can't foreclose.  They also get screwed.

    If you were trying to design a system to work worse than what we currently have, it would be hard to do.  The one certainty is that at the end of the day, the banks will still win, the rich will still win, and the rest of us will pay.

    Bingo (5.00 / 1) (#21)
    by gyrfalcon on Sun Oct 10, 2010 at 08:17:19 PM EST
    Well said.

    I'm not looking to move, but I paid cash for my house and have no mortgage. I'm VERY grateful for the small inheritance that allowed me to do that. But boy, if the gummint or anybody else starts bailing out mortgage-holders while I sit here having shot my wad on my house and have to just cough up the taxes I can barely afford to pay because of this crappy economy and get no relief whatsoever, I'm not going to be a very happy camper.

    I have zero solutions to offer that would be fair to everyone, either.  But lefty though I am, I do strain against the idea that because I was super-prudent and bought a small property for no more than the money I actually had at the time, I'm left to fend for myself in this mess.


    I have zero fair solutions either (none / 0) (#42)
    by Militarytracy on Mon Oct 11, 2010 at 09:42:41 AM EST
    at this point.  This is such a mess and a giant ripoff.  I just watched this on the Daily Show, and it won't make you feel any better either and it is supposed to be comedy based.

    Let's see.... (5.00 / 1) (#28)
    by NYShooter on Sun Oct 10, 2010 at 09:43:06 PM EST
    home values plummeted because a criminal conspiracy designed and implemented by the "The Masters" collapsed. It collapsed because the voracious greed "The Masters" worshipped grew to a level that could only be defined as insanity. During the decades this criminal enterprise operated "The Masters" accumulated income and wealth of a magnitude that belies comprehension.

    During this "Age of Avarice," however, the middle class families were moving in the opposite direction. Their incomes were stagnant, and their job security was becoming more and more shaky.

    But, also during this time, Everyone: The Banks, The Government, The Media, their own Eyes and Ears, and all the Financial & Economic Advisors were telling the middle class that home ownership was the long term, smart, secure, and intelligent road to financial security. And so, after observing year after year that this path was truly the way to America's dream, the middle class entered the realm of home ownership in ever greater numbers.

    But now, after the music has stopped, after the Ponzi Scheme has imploded, and after the middle class was left holding only the shrapnel of the economic bomb they were exhorted to buy, we find it our hearts to degrade and humiliate those who thought they were doing the right thing.

    I'm all for foreclosing on those who can't make their mortgage payments AFTER we repatriate the trillions The Masters swindled from their victims, and AFTER  the investigations, indictments, convictions, and penalties have run their course.

    Just a question of priorities.

    Agree 100% (5.00 / 1) (#40)
    by ruffian on Mon Oct 11, 2010 at 08:34:21 AM EST
    The housing bubble was inflated by these corrupt schemes. Now the homeowners are holding the bag on their deflated assets. I'll use myself as an example. I happened to move to the wrong place at the wrong time. I bought a house at a little above the median price in Orlando - prices that were pumped up by a mortgage system out of control. I was conscientious, put money down, and did not buy more house than I could afford. So far I have lost over 150k in asset value, and prices are still dropping. I will never be able to sell this house, and believe me, living in Orlando was not my life plan.

    As far as I'm concerned millions of us were swindled by banks and the rest of the real estate industry that knew exactly what they were doing.


    All this came about (none / 0) (#3)
    by Militarytracy on Sun Oct 10, 2010 at 04:05:45 PM EST
    because lenders couldn't wait to create mortgage backed securities.  Mortgages weren't properly conveyed to the Mortgage Backed Securities because of the extent of fraud involved in creating the mortgages.  Where is all the paperwork that hides the fraud and the ninja loans?  Who knows, but if the banks aren't allowed to voraciously eat us alive again they are going to threaten to shoot the dog.  What are we going to do?  Will they finally restructure the banks?  Or will the peasants be forced to eat this for the investors too?

    What? (none / 0) (#18)
    by gyrfalcon on Sun Oct 10, 2010 at 08:05:00 PM EST
    No clear title to the mortgages (none / 0) (#30)
    by Militarytracy on Sun Oct 10, 2010 at 09:58:54 PM EST
    The banks that created these loans don't have the title anymore, they sold these loans into securitized trusts.  When that happens though at least four wet ink signatures are required to legally convey.  Around 2004 that stopped happening, and the loans were not being investigated and loans that were doomed were given AAA ratings.  That is why all the paperwork is missing, that is why it is being forged and a mill-like atmosphere has attempted to be created.  Clear title no longer exists on properties though.

    Not all loans, right? (none / 0) (#32)
    by Cream City on Sun Oct 10, 2010 at 10:21:13 PM EST
    Not our refinanced loan with our very reputable local bank, rated one of the strongest and longest in business here . . . I hope.

    Where are you seeing that all mortgage loans since 2004 are problematic?  Or by "these loans," you just mean some loans?  Which loans?  

    I am not finding "how-to" information that tells us which of us ought to worry. . . .


    I have had a very hard time (none / 0) (#34)
    by Militarytracy on Sun Oct 10, 2010 at 10:47:15 PM EST
    trying to determine if we are affected.  We are now with one of the servicers that have been trying to mill.  Not a good indicator for us.  They ground up so much into the MBS hamburger though I don't who was included and who could be affected.  I don't even know if we are, but things are not looking good for us when I have discovered where we ended up.  We did not refinance so I don't see our mortgage ending up in two initial securities and I don't know if that was something that puts you at greater risk for an unclear title.  I think we at the very beginning of understanding how all this ground up securitized mortgage fraud is going to affect all of us.

    Ohhh. Keep me/us posted (none / 0) (#38)
    by Cream City on Sun Oct 10, 2010 at 11:17:39 PM EST
    as you are just the one to keep going at this until there are answers.  If there are answers. . . .

    I almost can't wait (none / 0) (#6)
    by andgarden on Sun Oct 10, 2010 at 04:16:29 PM EST
    until the Republican Congress has to deal with this. Do you think they'll be willing to "let them fail" when it's every bank--again?

    Maybe Sheila Bair will have to seize the big banks after all, but this time it could be much more painful.

    I have no clue what can happen (none / 0) (#7)
    by Militarytracy on Sun Oct 10, 2010 at 04:19:22 PM EST
    I can't say that I have much faith in anything right now because we are going to crash, we are going to munch even harder.  The Republicans aren't going to encourage or fight for any sort of real accountability.  But the Democrats don't really either.

    Doubt it (none / 0) (#19)
    by gyrfalcon on Sun Oct 10, 2010 at 08:07:56 PM EST
    Most of this will get straightened out, and the banks will have to eat the cost of it because they're the ones who hired the cruddy servicers to do the paperwork on the foreclosures.

    Or maybe I'm not understanding you right.

    The banks weren't going to get any windfall from these foreclosures.  I rather think they're not altogether unhappy to have them get screwed up and postponed.  They can't sell these properties for anything like the loan amounts, so what's the benefit to them?

    There are endless stories about foreclosed and empty properties just sitting and moldering away.


    The banks should eat the cost (none / 0) (#22)
    by andgarden on Sun Oct 10, 2010 at 08:33:21 PM EST
    The problem is that they may not be able to eat the cost, because we could be talking about a huge percentage of the mortgages in the U.S., including the ones not for foreclosure. What do you think will happen when Ma and Pa find out that their bank might not be able to hold them to the mortgage?

    Yup, and what will happen when the (none / 0) (#31)
    by Militarytracy on Sun Oct 10, 2010 at 10:01:40 PM EST
    responsible realize that clear titles to our mortgages don't exist either?

    It'll all be ok (none / 0) (#8)
    by Edger on Sun Oct 10, 2010 at 04:45:40 PM EST
    if they torture the spirit and wording of the law to cover their asses, won't it?

    Maybe Obama could have Holder to ask Bybee to write a Foreclosure Memo?

    Yoo ain't seen noting yet?

    erm... "have Holder ask" (none / 0) (#9)
    by Edger on Sun Oct 10, 2010 at 04:46:48 PM EST
    Oh please..... (none / 0) (#20)
    by jimakaPPJ on Sun Oct 10, 2010 at 08:09:26 PM EST
    Look, some enity is, or was, collecting the payments under the terms of the sale.

    If the payments are not being made then the house should be seized and sold.....

    ...after it is proven the buyer has defaulted, which should be an easy thing to do.

    And if you want to string up the brokers and bankers, et al, I will be glad to help pick out a tree.

    But bad peresonal decisions doesn't mean you get a free ride.

    And yet (5.00 / 2) (#41)
    by CST on Mon Oct 11, 2010 at 08:54:35 AM EST
    you assign no "bad personal decisions" to the people who sold fraudulent titles, or the bankers who gave loans that could never be repaid.  Should they be able to circumvent the law?

    Personal responsibility only exists for the little guy I guess.

    Seized and sold by whom?  To whom?  That's the problem.  There is no clear owner to the property.   And frankly, there's nobody left to buy it either.

    I don't understand why they won't reduce the principal left on mortgages to the actual value of the house.  I know it's not "fair".  But the banks aren't gonna make more than that on a forclosure anyway, they're gonna eat that cost no matter what.  At least then the houses aren't sitting there empty, and banks will actually get the forclosed value back in the form of mortgage payments.  Seems like a no-brainer, but what do I know...


    Reducing the principal on the mortgages (none / 0) (#43)
    by Anne on Mon Oct 11, 2010 at 09:44:55 AM EST
    to more accurately reflect the value of the property might help keep more people in their homes and paying their mortgages, but, it still doesn't' address what some - like Yves Smith - the bigger problem:

    Although the data points we have seen so far could be considered anecdotal, 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.

    As Yves so accurately points out, the banks are making this all out to be "just" a paperwork problem, but one of Yves' commenters posted the following, to put the affidavit "improprieties" in their proper perspective:

    An affidavit is a legal document which can substitute for live witness testimony in court. All testimony in court is governed by the rules of evidence or by statute. All testimony requires that the witness swears to tell the truth, is competent and has personal knowledge of the facts they are testifying about. An affidavit is no different, in most if not all jurisdictions; the affiant swears to tell the truth by being placed under oath by the notary, the affiant states in the affidavit that they were sworn, are competent and that they have personal knowledge of the facts in the affidavit. The notary attests to the oath of the affiant and that the affiant is who he claims to be.

    If a witness lies in court or in an affidavit then they could be charged with perjury. Perjury is lying to the court.

    The affidavit issue is being portrayed in the MSM at a paperwork problem. Lying to the court is not a paperwork problem. Attorneys are prohibited from making a material misrepresentation to the court of fact or law. Further, attorneys in most jurisdictions have an affirmative duty to report known perjury by their clients to the court.

    The problem with the affidavits is perjury on behalf of the affiants and possibly the notaries depending on the notaries' knowledge that the affiants had not reviewed the files, the promissory notes, the mortgages, or the records of default.

    Further, you can reasonably argue that the entities pursuing foreclosure (banks or servicers) have perpetrated a fraud on the court by submitting perjured affidavits. If the attorneys representing the entities have knowledge of the fraud or are preparing questionable documents then they may also be involved and subject to penalties.

    At the heart of any trial or hearing is the determination of the truth of the matter. It is the very purpose of the rules of evidence and what law and fact is presented to the court. If the affiants lied, as it appears, then the truth of whether they owned the note and held the mortgage and the borrower was in default is at issue. Courts, Attorneys General, and bar associations need to serious consider actions that will assure compliance with the rule of law.

    This country cannot stand as a democracy if there is one set of law for the banks, corps, elites and another set of law for the rest of us. Perjury and fraud on the court is very serious matter. It is not a mere paperwork problem.

    I, personally, think they're going to get away with it; the message coming out of the WH is that they don't think there should be a national moratorium, and that the fragility of the housing market is too important to risk tipping it in the wrong direction by getting bogged down in "paperwork."  


    Re:Housing (none / 0) (#26)
    by Harry Saxon on Sun Oct 10, 2010 at 09:16:20 PM EST
    Look, some enity is, or was, collecting the payments under the terms of the sale.

    Yes, and part of the problem is that there are mistakes or defects in the paperwork, then the interests of said entity are at risk.

    If the payments are not being made then the house should be seized and sold.....

    That's only possible if the title is clear in the first place.

    I don't think you really understand the problem at hand.

    Megan McArdle, for once in a blue moon, makes some sense on the problems involved, from theatlantic(dot)com:

    On the latter point, I can't say I agree.  I don't even think the banks want to get people out faster, because they can't sell the damn houses anyway.  And while yes, many of the people who are now being foreclosed upon got themselves into this mess with a combination of stupidity and greed, who's it hurting if they get to live rent free for a few more months while their credit report is being trashed?  A lot of other people being foreclosed on are normal folks who bought a home in an overvalued market, and then lost their jobs.  In places like Michigan, Las Vegas, and California, it is entirely possible to have seen a prudent 20% downpayment wiped out, leaving you underwater.  To be fair, that's in large part because so many of your neighbors took out crazy loans . . . but I'm still glad that those people are getting a rent-free hiatus to get their shattered fiscal lives together.

    On the former point, however, I think he is 100% correct.  We are witnessing the confluence of two problems:  our antiquated titling system, and a massive move to securitization without adequate systems for tracking the chain of custody on these mortgages.  The result is that it is now unclear who has title to these houses.

    I know some of my readers will be tempted to cheer at the thought of the little guy getting one over on the bank, but what about the people who bought foreclosed houses?  They just bought into a whole world of legal problems.  

    As Hernando de Soto has chronicled, good land titling is important. It is also emergent.  When there are changes in the marketplace, we need new legal mechanisms for dealing with any resulting irregularities.  I don't know if the the bill that Obama just pocket vetoed would have done more good than harm.  But I sure hope he isn't planning to just let this mess continue for fear of being seen to do anything that "helps the banks"--or in hopes that some lucky voters will get to default and keep the house.

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