Is A 90 Day "Mortgage Meltdown" Foreclosure Moratorium Imminent As The RoboSigning Scandal Goes Mainstream?

Tyler Durden's picture

The Massive Mortgage Mess as we affectionately call it seems to be getting new names with each passing day - the latest one is, quite appropriately, RoboSigning Scandal (funny how after the stock market, "robotic" technology will soon becoming equated with the biggest mortgage scam in history). During today's Kudlow segment, CNBC's Diana Ollick who is by and far the company's best (and only) investigative reporter, confirms various so far unfounded rumors, that the government is planning to institute a 90 day foreclosure moratorium as it deals with the realization of just how big and pervasive the mortgage problem is, and even worse, will soon be. It is so bad that even a typically ebullient Larry Kudlow is forced to note that this is the "housing equivalent of the credit financial meltdown" and that "this is going to go on for ever." The biggest issue that is now developing, as we noted last week, is the fact that title insurers (firms such as Fidelity National, First American, Stewart Info and Old Republic) are refusing to insure mortgages in foreclosure or otherwise, uncertain as to who actually owns the title. And for all those who believe this will merely keep prices artificially high, we have very bad news - the problem with the title insurers walking away on fears of lawsuits is that no lender will be willing to write a mortgage without title insurance, meaning that suddenly the up-front component of home purchases will either necessarily have to surge, or home prices will have to plunge by a like amount, as there is simply not enough equity (read money) to cover the resulting debt deficiency. Alas, this mess is just starting, and as people realize how bad it is, it very well may lead to a total collapse in the housing market.

For all those hoping on a quick resolution so that Americans can go back to watching Dancing with the Stars, you may wish to reconsider. Quote Kudlow: "We're not talking just a few weeks, or a few months. This sounds like a long, drawn-out, bureaucratic, robotic process with lawyers, and oh my gosh." Another implication: a veritable bonanza for both lawyers and defaulters, the former of whom will end up making billions in legal fees (collected from the same banks which are still sucking off the ridiculously low TLGP-funded, and thus taxpayer sponsored fees), while the latter will be able to live mortgage free for years, while continuing to buy useless trinkets instead of paying what is contractually their duty.

Another important topic discussed is the fact that due to decades of faulty securitizations, suddenly no bank knows who owns what. Courtesy of several trillion in now title-undefined mortgages, which in turn form the basis for thousands of CDOs, which in turn are split up into millions of tranches, and includes the complicity of Fannie, Freddie and private label, it is the banks and their clients that have shot themselves in the foot: as other have noted, very soon, the entire MBS process can and very may grind to a halt (if that happens, goodbye Pimco).

As mentioned earlier, Ollick confirms that according to rumors, the government is going to impose "some kind of 90 day foreclosure moratorium on the banks which would melt down the housing market." In fact Congressman Merkley already indicated he is for a foreclosure moratorium.

At the end of the day: the one true loser, is the law-abiding, conscientious, tax and mortgage paying middle class American, who is now preparing for TARP 2 as the banks will all almost definitely need to run to the bailout through because of this catastrophe.

Must watch 10 minute explanation for anyone who is still confused by any aspect in this massive story.


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Caviar Emptor's picture

It's only theoretical money anyway....

Boxed Merlot's picture

What institution would continue making reverse mortgage payments if physical deed transfer can't occur?  Who would continue keeping their deposits invested in such a security or institution?


This is fixin to get pretty amusing. imo

dogbreath's picture

time to do some independent research

sushi's picture

Time to go long retail. It is going to pop as folks take the mortgage money they no longer have to pay (hear that!! It's a moratorium!! Yeeha!!) and invest it in iPADs and TerryTubbies and Telegenic Toothpaste.

Greenshoots breaking out everywhere.

Only in America.

Geoff-UK's picture

And the banks get bailed out by our grandchildren, that we don't even have to explain ourselves to cuz we'll be dead before they figure it out!

Everybody wins!!!

Skeebo's picture

This is is just a flat out terrifying thought.  It is bad enough with just the properties just in foreclosure (I really think the full size of the problem hasn't set in yet, even here), but just about every mortgage entered into pre-summer 2008 was involved in the securities...


If it plays out that even the people who are current on their homes can't sell b/c of contract ownership questions... This isn't just a black swan, this is a herd of black swans.

Thomas's picture

In fact, one of the cornerstones of the US miracle was said to be the strong property law. (Just ask Hernando de Soto!) We have had centuries of unbroken ownership...until now.

hedgie's picture

I couldn't agree more.  As Hernando de Soto argued in the Mystery of Capital, without strong property rights, a central repository of title information, and an orderly process for the transfer of property ownership, you don't have capitalism.  We take strong property rights for granted, but they are a recent historical development and much of the world does not have them.  Without them, as Othello says, "chaos is come again."  In other words, "O, insupportable! O heavy hour! / Methinks it should be now a huge eclipse / Of sun and moon, and that the affrighted globe / Should yawn at alteration."

RichardP's picture

Love's not love that alters when it alteration finds.  Or:

Let me not to the marriage of true minds admit impediments to clear title.

Everyman's picture

Ding, Ding, Ding, we have a winner!  Bonus points for the "herd of Black Swans" comment!!!



(that would be the estimated number of houses in foreclosure that are affected by this mess.

Kali's picture

isn't that a "flock" of swans.  We sointinly are flocked.

AbbeBrel's picture

Oddly enough : google "bank of swans".

i-dog's picture

Just waiting for someone to use "flock of white elephants" :)

BTW, if nobody knows who owns the title, how does anyone know who they should be paying their mortgage payment to? (I'm a dumb fuck, so go easy with the explanation).

sushi's picture

Man, if only they could pull this same gig with taxes. Nobody knows who gets my money so I'm not paying!! Do it before November 2nd and really make the electorate happy!!

Quantum Nucleonics's picture

Pay your mortgage?  What an antiquated notion.

Kali's picture

FAct is stranger than fiction!


GoinFawr's picture

hmmm, because the swans are black, like crows, wouldn't it be a 'murder of swans'?


Hook Line and Sphincter's picture

A gaggle of Geese flying madly away from our bb guns a shootin', a murder of crows on the bbq, and a bulimic banquet of Swan-son TV dinners... that is what we are going to all be eating.

foofoojin's picture

unless they are a  rage tag collection of provincial militia. then it's flock of ducks. :)

iota's picture

I get a listing for a pub in Clapham?

Skeebo's picture

Actually, I looked it up before I used it.  The correct usage is "herd" or "lamentation", I gotta a "lamentation of black swans" sounds better for this situation.

jimijon's picture

Yesterday, a buddy of mine hipped me to Google Maps. I know, I know but wait... If you select "more options" and then select Real Estate and then click Foreclosure and then say search 60618 which is in Chicago... you would swear that a major case of measles has broken out in Chicago.

Call the CDC! Chicago is going down.

Geoff-UK's picture

+5 link

Good way to see if your own neighborhood is going down. 

JLee2027's picture

It we pay our house off, who will file the satisfaction? 

No answer for that one, hopefully you win by default. Banks will all go boom soon. Very soon. Don't see any chance of another bailout happening.

MrPalladium's picture

"if we pay our house off, who will file the satisfaction? "

If your mortage has been securitized and the mortgage has never been assigned nor an assignment recorded, you need to request a release of lien form from the last recorded assignee of the mortgage. They should provide you with a recordable release form if you prove you have paid off the mortgage.

Your only alternative is to file an action to quiet title (an action in equity, typically tried to a judge without a jury and based on proof of payment), and get a court order declaring that the mortgage has been paid and the lien released. The court order is then recorded in lieu of a release of lien form.

Messy, expensive!

Boxed Merlot's picture

This situation has been widely known for over a year. (at least on ZH) I have to imagine it was at the forefront of discussions that fateful night in August a year earlier when the reigns of power were passed from one rider to the next. (regardless of the first Tuesday in November)

Though messy and expensive, the fix has evidently been figured out enough to have the carnival barkers at CNBC make "public" comment on it now. imo




JW n FL's picture
by Nolsgrad
on Mon, 10/04/2010 - 20:02




If you just realize that there is no can... then... you can kick the can.

Squid-puppets a-go-go's picture

if an entire creditor system collapses in a forest and no one hears it, who gets the 'credit'?

Fox Moulder's picture

In Soviet America the can kicks you.

Pondmaster's picture

Bye Bye Pimpco = Bill & PTTRX are toilet paper  

praps's picture

Don't think duality.  You are the can.

boooyaaaah's picture

I remember this game from my youth

Buttony Buttony who's got the Button

They are discovering that the only obstacle is the law

If only we can do away with the law

and the rule of law

Just this once --- then every one will be happy again

We aren't bad people just in need of some law breaking


RECISION's picture

Yeah, absolutely.

The way this will play out, is the way this stuff always plays out.

If you don't like the rules, then change the rules.  What is the point of being in power if you can't change the rules to suit yourself? They are your rules afterall, made up to work for you.  Heads I win, tails you lose.

If they aren't working that way anymore, then it is time to change them for some others that will.

Whatever it takes, however outrageous they are...

It's called - Divine right! 


Bob's picture

FISA provided an impressive example in its retroactive immunity for telecoms that participated in criminal violations of privacy laws:

Le't hope for better in the present case.  And get to work on our elected representatives to make sure it doesn't happen.

Conrad Murray's picture

I posted this in another thread, please forgive, but it is relevant.  RICO against Citi, Ally, and MERS.

Spalding_Smailes's picture

As is this -

The Kentucky suit claims MERS and the banks violated the Racketeer Influenced and Corrupt Organizations Act, a law originally passed to pursue organized crime.

“RICO comes in because the fraud didn’t just happen piecemeal,” Heather Boone McKeever, a Lexington, Kentucky-based lawyer for the homeowners, said in a phone interview today. “This is organized crime by people in suits, but it is still organized crime. They created a very thorough plan.”

The suit, which includes claims of fraud, also names as defendants other banks, real-estate law firms and document- processing companies.

In the Phoenix litigation, U.S. District Judge James A. Teilborg found that the mortgage banks properly named MERS as the nominee for the original lenders and that the plaintiffs didn’t include enough detail in their allegations that the banks formed MERS to conspire to deprive homeowners of their property.

TuesdayBen's picture

Re: The re-election prospects of culprit #1, Barney Frank:

The money-quote: "It's much more of a race than it has been in prior years, but from our perspective, it would be a real loss to Massachusetts if Barney's not re-elected," said Daniel Forte, president of the Massachusetts Bankers Association

i-dog's picture

"it would be a real loss to Massachusetts' bankers if Barney's not re-elected"

There. Fixed it for him.

Careless Whisper's picture

@ Conrad

“RICO comes in because the fraud didn’t just happen piecemeal,” Heather Boone McKeever, a Lexington, Kentucky-based lawyer for the homeowners, said in a phone interview today. “This is organized crime by people in suits, but it is still organized crime. They created a very thorough plan.”

and Max Keiser has an opinion on rico bankers and the price of gold:


E pluribus unum's picture

won't this just make the banks' balance sheets look better? If they can't foreclose the real value of these "assets" remains hidden

willien1derland's picture

True as MTM has been 'suspended', however, the loan would still be in an NPL status  - not certain how they will handle it - moreover, the overt concern is the foreclosure transaction on one hand which will be 'suspended' in court for up to 24 months due to backlog on one side & the MBS trust on the other side trying to lay claim to the asset - a Lawyer's Payday & significantly bad news for the banks as they will need to defend both sides of the lawsuits - What would Matlock Do?

sushi's picture

however, the loan would still be in an NPL status  - not certain how they will handle it.



I should think it is abundantly clear that if the banks do not know who holds title to the property then they are free to play "pass the parcel" to determine who it is that holds the NPL loan and who is the unlucky fool who will be ultimately required to mark the loan to market.

"That's not my loan. Mine are good. That is in your tranche. You have to record the loss."

"You cannot prove that. You never assigned title to me. You still the hold the property."

"It is your property and your loss."

"That is not what my lawyers will argue."

It is absolutely certain that employment will tick up within the legal profession.

StychoKiller's picture

Ah, geez!  Da banks done broke their printing plates!  No more creating currency out of thin air!  "Golly beav, you're gonna get yelled at when Dad gets home!"

AGORACOM's picture

Technically, you're right but practically speaking, I don't think it will matter at this point.  Banks will crash on the uncertainty over what the hell they actually own.  Selling will begin gradually, then expect to see a sprint for the exits.

The Greek .... From Canada