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Citigroup Call On Implications On Foreclosure Crisis: "Just The Tip Of The Iceberg"

Tyler Durden's picture


Yesterday, Citigroup's homebuilding team hosted a call with investors in which the guest speaker was Adam Levitin, an associate professor of law at Georgetown University. Far from providing the "all green" call participants had desired, Levitin said that what we have recently seen and heard in the news is “just the tip of the iceberg” and that the foreclosure halt may well cause a "systemic problem", as was suggested on Zero Hedge when the news of the Florida's court involvement was first made public (here and here) a month ago. And since by now everyone knows what the key tension points in this potentially massive development are, we will cut straight to Levitin's somewhat unpleasant conclusions: "Our speaker predicted that more and more lenders are likely to stop their foreclosure processes in both judicial and non-judicial states. He also expects more states’ attorney generals to get involved. At the federal level, it is possible than banking regulators might step in as there is legal and reputational risk for the banks involved. Ultimately, if these issues do in fact escalate, the Administration may try to broker some sort of settlement. If such deal brokering does take place, Levitin believes that “some payment” will be exacted from the lenders and servicers. The Administration could bargain for more mortgage principal write downs." In other words, the endgame will likely end up being the extraction of material concession from the banking syndicate, in the form of systemic mortgage writedowns, with Obama's blessing, which will likely put the 25% of homeowners who are underwater on equal footing with the other 75%. It may turn out that this was the plan all along. And people naively wonder why banks have hundreds of billions in cash stashed on the sidelines...

As for Citi's official take on Fraudclosure here are the key issues:

Issues Concerning Affidavits

When the aforementioned paperwork is lost, an agent of the mortgage servicer can sign an affidavit swearing that he or she has personal knowledge that, although now lost, the trustee was once in possession of the necessary documents. The affidavit is considered to have the same weight as sworn testimony in a court of law.

Two problems have emerged with regards to affidavits. First, several news stories have reported that the people signing these affidavits had no knowledge of the matters in question despite the fact that there were legally testifying that they did. Many of these people have since been labeled “robo-signers” given the tremendous volumes of affidavits which they signed in relatively short periods of time. Second, the affidavits may be irrelevant because the issue is not that the mortgage documents were lost but they were never properly transferred at each step of the aforementioned securitization process.

Issues Concerning Tax and Trust Laws

Beyond the affidavit issues, our speaker highlighted potential problems concerning the trusts which hold the securitized mortgages. Most mortgage trusts were set up as REMICs (Real Estate Mortgage Investment Conduits) which are special purpose vehicles used to pool mortgages. Under the IRS code, REMIC confers a special tax status in which the cash flows to the trust are not taxed. Investors in the trust pay taxes. The tax exempt nature is important. If the trusts were in fact to be taxed, the taxes would distort the yields required by investors.

To qualify as a REMIC under the IRS code and enjoy the beneficial tax treatment, the trust (1) must be passive and (2) cannot acquire any new assets 90 days following the trust’s creation.

If, as described above, mortgage documents were never correctly passed through to the trust when it was established, then the trust may not actually own the underlying mortgages it purports to own. Although it is possible that this issue could be remedied by some legal maneuvering, doing so could violate the REMIC status since the trust would be acquiring assets long after the aforementioned 90 day period has expired. Such a violation in turn could trigger a sizeable tax burden for investors. Our speaker indicated that there are a handful of open questions on this front and that this is a legal gray area.

Issues Concerning Title Insurers

Levitin noted that all of the above issues may impact how title insurance companies act. If a scenario emerges in which title companies are unwilling to issue title insurance, in those scenarios lenders may cease lending.

When a home with a mortgage on it is sold, the mortgage must be released at closing by the current mortgage owner before a new mortgage with title insurance is issued. If it is not known with certainty who owns the mortgage in question, it cannot be released. If the title company is not satisfied that there is a good release on the old mortgage, it will refuse to insure the new mortgage.

None of these issues affect mortgages for newly constructed homes. Our speaker expects the mortgage market for new homes to continue to function without any material hindrances.

Issues Concerning MERS

MERS (Mortgage Electronic Registration Systems) functions as a centralized electronic registry of mortgages and tracks ownership of mortgages. MERS allows mortgage ownership to change hands efficiently and relatively quickly since it is electronic and allows all parties to forgo making a filing in local land records. Indeed, MERS was designed to function as a substitute for local land records.

Although MERS was designed to enhance efficiency in the mortgage assignment process, Levitin argued it may not conform with the law. “Slowly but surely” courts are issuing decisions which “cast validity on the MERS process.” Although ~60% of mortgages list MERS as the “nominee” which owns the mortgage, a handful of recent court cases have ruled that MERS has no standing in foreclosure actions either because (1) physical paperwork must be transferred when a mortgage is assigned by one party to another or (2) MERS has no true economic interest in the mortgage in question since it collects no payments from the borrowers.

Of course, all this is irrelevant without an appreciation of the endgame. And that may very well be what the Fed is pursuing all along - the elimination of trillions of private debt, however instead of Uncle Sam eating it all this time (via the GSEs), the banks would end up sharing some if not all of the pain. Of course, if this is indeed the case, it will be a very dangerous tight rope act, as many may just refuse to pay their mortgages outright going forward, and cause major additional pain for the TBTFs, and/or result in other traditionally unpredictable outcomes.

Full citi report, with thanks to Village Whisperer :



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Tue, 10/12/2010 - 18:19 | 644600 MsCreant
MsCreant's picture

Just let it DIIIIIIE!

Tue, 10/12/2010 - 20:26 | 644864 barkingbill
barkingbill's picture

its like watching the roman empire on life support and getting massive transfusions of poison and shock treatment to keeps its poor corrupted heart still beating...

Tue, 10/12/2010 - 22:27 | 645135 Turd Ferguson
Turd Ferguson's picture

Has anyone heard Meredith Whitney comment on all of this yet?

Tue, 10/12/2010 - 22:41 | 645160 reading
reading's picture

Not yet...

Tue, 10/12/2010 - 22:46 | 645172 Turd Ferguson
Turd Ferguson's picture

I certainly look forward to hearing her point of view ;)

Wed, 10/13/2010 - 01:54 | 645432 i-dog
i-dog's picture

Well, my point of view is:

Premise 1: The current state (Congress, POTUS, SCOTUS) is NOT on the side of the homeowners/mortgagors.

Premise 2: As I pointed out in another thread, under both communism and fascism, the state (ie. the controlling oligarchs) owns all property. The oligarchs live outside the borders.

Under communism the state ownership is express: One gets to "enjoy" a home ... plus (if one is a behaving party elite) "enjoy" access to the summer dascha by the sea and the winter dascha on the ski slopes ... but only so long as one is in the party's (and the oligarchs') good books, else it's off to the gulag for you.

Under fascism the state ownership is implied: One gets to "enjoy" one's bought-and-paid-for home and beach shack and ski chalet only so long as one is in the party's (and the oligarchs') good books ... else they get confiscated and you are put on the train.

Premise 3: Tracking good title back through decades for [tens of] millions of properties will likely lead to a dead end or an entangled mess.

My Conclusion: The solution to the Fractional Property Reserve System will ultimately involve the state nationalising (taking ownership of) all properties and allowing the current residents to "enjoy" some limited squatter rights.

Just one of a number of possibilities ......... hedge accordingly.

Wed, 10/13/2010 - 03:50 | 645507 Zerohedge fan
Zerohedge fan's picture

However, the only thing I miss from communism is:


Maybe, it's worth the upgrade?!?


Capitalism-system built on/around usury. Capitalism is not a free market.

Wed, 10/13/2010 - 04:22 | 645518 Dave
Dave's picture

Nothing is free. But I agree with you about the women.

Tue, 10/12/2010 - 22:56 | 645188 whatsinaname
whatsinaname's picture

NO way they are using their own capital to cover for projected losses. Dont know why TD thinks that will happen...

Tue, 10/12/2010 - 20:48 | 644911 Millivanilli
Millivanilli's picture

Fannie, Freddie, The Federal Reserve, and Public and Private pension funds have purchased MBS/CDOs pooled under strict representations and warranties. Currently the banks are disallowing any information regarding the TRILLIONS of fraudulent mortgages pooled into MBS- ARE THEY ABOVE THE LAW? These banks are responsible for perfecting the securities- like throwing out JUNK. They didn't do that though, they passed it along to middle class America! This is NOT an issue of just notary fraud, though that is a big issue as well. They don't have the money to buy back all the fraud they sold! Too big to Fail is Too Big to Jail? Sayonara bank stocks. 


Buy physical assets like gold and silver and prepare for a possible bank holiday.

Tue, 10/12/2010 - 22:31 | 645139 DaveyJones
DaveyJones's picture

"are they above the law?"

Yes, and we're beneath it

Tue, 10/12/2010 - 23:12 | 645215 sushi
sushi's picture

Fraudulent MBS is a securitization issue. Surely this is the area of expertise of the SEC? Maybe if they just changed the name to PornoWatchingComission then America would not have these problems.

Wed, 10/13/2010 - 05:23 | 645546 StychoKiller
StychoKiller's picture

Second, the affidavits may be irrelevant because the issue is not that the mortgage documents were lost but they were never properly transferred at each step of the aforementioned securitization process.


Can anyone here visualize these "whiz-kid" financial geniuses sparing no expense to make sure that the required paperwork was done properly?  Me Neither :((

Tue, 10/12/2010 - 21:13 | 644971 New_Meat
New_Meat's picture

Life sucks, then you go to ZH, then you don't get to die.

- Ned

Tue, 10/12/2010 - 21:52 | 645019 Mako
Mako's picture


"material concession from the banking syndicate, in the form of systemic mortgage writedowns"

Hahaha, write downs, who would want a write down on their mortgage when there is NO party that is a holder in due course able to start a foreclosure action.  Let me see, do you want a $1000 monthly payment or a $0 monthly payment?  The statutory limitation starts the after the last payment is made 

The problem is not robo-signers, nor is it missing Notes.  The problem is there is no party with proper "standing" to start a foreclosure action.  Only the holder in due course can start a foreclosure action. 

"the elimination of trillions of private debt, however instead of Uncle Sam eating it all this time (via the GSEs), the banks would end up sharing some if not all of the pain."

All are going to feel the pain this time, the banks are not going to save you.  The system will eventually just foldup.

For the homeowner, the solution stands by standing the wrongs of the loan servicer, which by default voids the foreclosure action, which subsequently moots the unlawful detainer action.

A debt collector may not use any false, deceptive, or misleading representation or means in connection with the collection of any debt...  say like claiming it is a substitute for trustee in a judicial foreclosure action.

Boy ole boy, the fun should start as soon as the bloodsucking tick who claims to be an Attorney enters a court to start foreclosure action or collect a "debt".

"Upon our review of the record, we hold that a consumer debt collector's initiation of a lawsuit in state court seeking recovery of unpaid consumer debts is an "initial communication" within the meaning of the FDCPA"

OH shit, you mean all these lawyers are bloodsucking ticks? Sure looks like it Bob.

"This house is clean." - Pet Detective


Tue, 10/12/2010 - 22:36 | 645146 DaveyJones
DaveyJones's picture

assuming of course, within this dying beast, the due process clause still has more teeth than say, the fourth amendment

Tue, 10/12/2010 - 22:56 | 645167 Mako
Mako's picture

I find there are more then one way to skin a cat.  Litigation is more like forcing your will.

If you face a foreclosure action in a BFE county court where the judges really don't know what the F they are doing, you can simple move the force of Law by quickly petitioning a BK court for an automatic stay of the foreclosure, whether the bloodsuckers will once again be in a position to have to prove "standing".   Or even a federal question in USDC as to the status of the debt collector to move in an action into USDC. 

If you do some research, you should even be able to find cases in BK litigation now that are now stopping the debt collectors by having them prove "standing".   Of course, you can always sue the Debt collectors under the FDCPA as well.

What I find most, is a bunch of incorrect information and a lot of people selling worthless crap to people.  There is remedy, you must find it.

Tue, 10/12/2010 - 23:41 | 645280 johngaltfla
johngaltfla's picture

<----Insert mushroom cloud here.


Once the lawsuits fly it's game over. And the CRE is up to the same bullcrap.

Wed, 10/13/2010 - 04:24 | 645520 Dave
Dave's picture


Wed, 10/13/2010 - 05:42 | 645556 Popo
Popo's picture

Until I see SRS break north (and stop trending down), extend and pretend is still the name of the game...

Tue, 10/12/2010 - 18:15 | 644601 CashCowEquity
CashCowEquity's picture

SPX to 2000 and Gold to 4000

Tue, 10/12/2010 - 18:36 | 644661 alien-IQ
alien-IQ's picture

and gas to $10 per gallon and bread to $7.50 per loaf. happiness for all:-(

Tue, 10/12/2010 - 18:51 | 644678 VegasBD
VegasBD's picture

only unhappy if you keep your money in dollars. gas wont go up at all priced in gold/silver. either will food. soon it will be not fiscally responsible for me to go to work unless they pay me in silver. =)


like jayz/obama said:  i got 99 paychecks and a job aint one.

Tue, 10/12/2010 - 20:18 | 644841 Slash
Slash's picture

why would the fed want to get rid of trillions in private debt? wouldn't that cause huge inflation? (or did I just answer my own question). Since all money is loaned into existence and debt repayment is deflationary while defaulting on debt is inflationary (b/c the newly loaned dollars still exist in the form of deposits in other banks, but the original lender then has to write off his loan which, if paid back, would take USD out of circulation).

Tue, 10/12/2010 - 20:49 | 644917 jmcaule4
jmcaule4's picture

"defaulting on debt is inflationary"


Umm. I dont think so. You might want to rethink that one.


"would take USD out of circulation"


Exactly. Therby causing deflation as there are less dollars chasing the same amount of goods.

Tue, 10/12/2010 - 20:55 | 644932 Slash
Slash's picture

well my reasoning is X amount is loaned into existence from bank A then deposited into bank B (or A maybe), over time, X is taken out when the loan is paid off. If the loan is defaulted on and written off, X is still out in circulation b/c the equal amount of X has not been paid back and thus taken out of circulation.


Wed, 10/13/2010 - 03:50 | 645506 socalbeach
socalbeach's picture

When the loan defaults, the originating bank takes a hit to its capital, so even though X amt will be in bank B, it's offset by -X in bank A. 

So defaulting loans have the same effect as loans being paid off, you're back to the initial state before the loan was made, and less money than when the loan was made.

Wed, 10/13/2010 - 05:38 | 645552 Popo
Popo's picture

Actually it's worse: When a loan defaults the originating bank takes a reverse-leveraged hit to its capital, so even though X amount will be taken by bank B, it's offset by (-X * L) in bank A, where L is the leverage ratio.


Make no mistake, the response to this deflationary armageddon will be that our central bank TRIES to create massive inflation -- which will create misery on an epic scale. 

"There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as the result of a voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved." Ludwig von Mises



Wed, 10/13/2010 - 05:29 | 645549 StychoKiller
StychoKiller's picture

Pay no attention to that enormous sucking sound, it's just a black hole called deflation!  What's everyone gonna do once their ISP goes belly up?  Good thing I have an old Commodore 64 to play games on! :>D

Tue, 10/12/2010 - 20:18 | 644842 Zerohedge fan
Zerohedge fan's picture

and you know, Joker is 100% silver, as well

"..this game is easy"

Tue, 10/12/2010 - 20:20 | 644844 alien-IQ
alien-IQ's picture

you know where else they only take gold as currency?

come see the paradise.

try to look at the bigger picture. the one where you are not the only person in the world.

Tue, 10/12/2010 - 20:49 | 644913 tmosley
tmosley's picture

That's like saying that it is bad to diet and eat right because fat people that are about to die of diabetes do that.

Using gold as currency is the first step toward recovery.  Of course, Zimbabwe has reverted to fiat currency, though they are using foreign fiats.

Tue, 10/12/2010 - 21:13 | 644969 FreedomGuy
FreedomGuy's picture

At least Zimbabwe has U.S. dollars that are used as a reserve currency. There isn't one in the U.S.

Tue, 10/12/2010 - 22:21 | 645120 FEDbuster
FEDbuster's picture

Silver will be for spending, gold for wealth preservation and big transactions.

Tue, 10/12/2010 - 22:31 | 645138 alien-IQ
alien-IQ's picture

can you name one country in modern history that has had to resort to precious metals as the accepted currency that DIDN'T spiral into complete anarchy and chaos with immense suffering by the majority?

if we here in America ever reach the point where we must conduct all transactions with silver or will see hell on earth up close and personal. Bank on that.

Wed, 10/13/2010 - 00:19 | 645348 technovelist
technovelist's picture

can you name one country in modern history that has had to resort to precious metals as the accepted currency that DIDN'T spiral into complete anarchy and chaos with immense suffering by the majority?

Yes: Every major country in the world from 1815 to 1913.


Wed, 10/13/2010 - 06:35 | 645579 TheJudge2012
TheJudge2012's picture

Was not the FIAT currency in Zimbabwe hyperinflated BEFORE merchants demanded payment in gold? Was not Zimbabwe war torn by a US installed puppet?

Tue, 10/12/2010 - 20:44 | 644904 Blankman
Tue, 10/12/2010 - 22:13 | 645103 nwskii
nwskii's picture

Think you meant spx 200 and gold 4000. I agree with the Gold call but how is this gonna lift the SPX if the banking sector gets crushed

Tue, 10/12/2010 - 18:16 | 644602 bugs_
bugs_'s picture

No laughing on this call i bet.

Tue, 10/12/2010 - 18:17 | 644605 yipcarl
yipcarl's picture

Is this really going to happen?  Have we just found ourselves in the United States of Socialism?

What the fuck is going on?

Tue, 10/12/2010 - 18:21 | 644618 JLee2027
JLee2027's picture

No. The coming reset will prevent that conversion. 

Tue, 10/12/2010 - 18:30 | 644648 knukles
knukles's picture

Yeah, like whattabout some of us who'd paid down or paid off their mortgages, acting prudently in the best of good faith, highest moral and ethical standards, deleveraging our portfolios, fortifying our pesonal balance sheets.  We're the one's pay for all this crap.  We get a rebate? 

Moral Hazard and Disincentive Run Riot.

And as I read this article, my mind harks back to a news piece yesterday where one of our Congressmen, I believe it was, spent time introducing a Concussion Poster into a local high school because so many football players had been getting head injuries.  Yes, you read that correctly.  Introducing a "Concussion Poster".  Undoubtedly, of seminal importance.

And these folk wonder why the public is disenchanted.  Remind me, when is it we get to vote again?

Tue, 10/12/2010 - 19:07 | 644716 minus dog
minus dog's picture

"whattabout some of us who'd paid down or paid off their mortgages, acting prudently in the best of good faith"

I hate to say it, but I think the correct technical term here would be "sucker"

The general theme is is wealth - past, present, and future - leaving your pockets and entering the bankers' and politicians' through dozens of different mechanisms.  

Now they're going to do it some more, and they're going to get a bunch of people to cheer it on by framing it as a handout to those people.  I don't doubt for a minute that at least some group with connections will be getting something out of this.

Tue, 10/12/2010 - 19:50 | 644784 mtomato2
mtomato2's picture

No, Knuk.  You're not a sucker (if you're the person you're talking about.)  You are one of the good guys, and only the good die young.

This site used to be relatively anonymous, but over the past year or so, it has become more like a (dis)functional family to me.  Nobody knows who the "real" me is, but everybody here knows who the "ZH" me is.  Despite all that, I'm gonna come clean with the fam.

We're in a house we built sixteen years ago with our own hands.  It's cypress log.  We're on 10 acres in the mountains somewhere.  My first kid was born in this house, and we planted a maple tree that week.  The tree is huge now.  It's his tree.  We brought two kids home with us from Colombia, S.A. about eight years ago.  This homestead was the first, of the miracle we called America, they ever saw.

One of them said the other day:  "My favorite thing is the way the house smells when we come home from a vacation..."  Sheesh.

Now, after all this time, we are maybe going to have to leave.  My wife and I have been self-employed, mostly successfully, for over twenty years.  We never got rich, but we always had enough.  Until now.

When you-all are making fun of food stamp recipients, you're making fun of us, now.  Don't feel bad.  I used to do it, too.

When you mock those who aren't making their mortgage payments, you're mocking us, now.  Don't feel bad.  I used to do it, too. 


I don't usually uncover my dirty laundry to an online community.  In fact, I've never done it before.  But the fact is, I'm deep in (ahem) Cognitive Dissonance.  I think people should pay their bills.  I think people should stay out of debt.  I think people shouldn't buy stuff they don't have ANY hope of paying for.

And here I am, shoe tightly tied on the other foot.  We're not dead beats.  We work real, real, hard.  My oldest son is an Eagle Scout.  But... this is happening to us.  We're fighting all the way, but how can I justify fighting the bank when the bank's right?

Cognitive Dissonance.  If only more people knew what that really meant.  And how bad it can hurt.

As long as I have a laptop, though, I'll still come to my ZH sanctuary.  It may not be tame, but it's very important to me none the less.

Peace out.


Tue, 10/12/2010 - 20:04 | 644814 DocLogo
DocLogo's picture

keep your head up, buddy. this too shall pass

Tue, 10/12/2010 - 20:38 | 644889 Rusty_Shackleford
Rusty_Shackleford's picture

"only the good die young"


The problem is that most of us are morally ambiguous,...

which explains our random dieing patterns.

Tue, 10/12/2010 - 20:53 | 644923 Cognitive Dissonance
Cognitive Dissonance's picture

Cognitive Dissonance.  If only more people knew what that really meant.  And how bad it can hurt.

Reality is when it's happening to you.

Cognitive Dissonance is when you never thought it would and you still aren't exactly sure why it is.

My condolences on a hard fought battle that was nearly won........until it was lost.

Tue, 10/12/2010 - 21:24 | 644993 reading
reading's picture

I think you'd find yourself in good company...some people lash out to distract themselves from their own situation.

your situation seems to be happening so much more than I would have ever imagined.  I hope you navigate a way through this.

Best thoughts...


Tue, 10/12/2010 - 21:24 | 644995 Pining for the ...
Pining for the Fjords's picture

Dammit, Mt2...  I am not a particularly religious man but I'm saying a heartfelt prayer for you and your family tonight.  And it makes me  deeply angry that good, hardworking people have to go through what you are going through.  Do whatever you have to.   And survive. 

Tue, 10/12/2010 - 21:53 | 645066 centerline
centerline's picture

Hang in there tomato.  Don't mind or be bothered by the generalizations.  There is a whole new demographic here that has slipped into trouble without anything but the best intentions.  In fact, I would wager to say that most of us are at best described as being in various stages of the same predicament.


Thanks for sharing your story.   See you around ZH.

Tue, 10/12/2010 - 22:29 | 645136 Invisible Hand
Invisible Hand's picture


No, the bad die young also, but no one notices or cares.  The good are missed and mourned.  Just do your best and whatever happens, people that know you will notice, will care, and may try to help.  Let them.

This country is dying as we watch.  I care, many other people care, we just aren't sure how best to help...yet.  The time is coming when we will know what to do and it will be up to us to do what is necessary.

As RR said: "If not us, who?  If not now, when?"

Tue, 10/12/2010 - 22:40 | 645158 Spastica Rex
Spastica Rex's picture

Best wishes. I'm right there w/you.

Tue, 10/12/2010 - 23:03 | 645201 MsCreant
MsCreant's picture

You guys sound like an awesome family. I'm really happy for you. A little jealous. Yeah you are losing it (the house with acres), but you had it!

I have been up and down-- dirt poor and where I am right now, which is pretty secure. My best trick has been to figure out how to downsize when I need to AND HAVE FUN DOING IT. My ex had a company go bankrupt. I had fun selling the furniture in our three bedroom town house, and getting smaller, more functional furniture in it's place, finding the smaller apartment, making other decisions like this that needed to be made. MY ex was so angry, but he had always had parents that covered stuff, he didn't understand me at all. Because I have been poor, and EXPECT that I can be poor again, the situation just is. I honestly don't suffer. It just is. 

This is not "chin up." It's more like Zen.

If I could wave my fairy wand and give you a gift, it would be this thing I know. 

Could be the Shiraz talking, but you are getting love your way. 

Tue, 10/12/2010 - 23:14 | 645225 Vernon Wormer
Vernon Wormer's picture

We don't have much, but it's yours if you need it. Keep fighting the good fight.

Tue, 10/12/2010 - 23:50 | 645303 Red Neck Repugnicant
Red Neck Repugnicant's picture


Some weeks ago, we had a huge storm roll through with winds so strong that trees were knocked over in my neighborhood. The next morning, I noticed that a bird's nest had been blown out of the tree and was scattered all over my patio.  A few eggs had been broken, as well.

A single bird was hopping around, trying to figure out what the fuck had happened to her nest and her eggs.  I don't know much about birds, but she seemed distressed - she just kept hopping around, but not accomplishing anything.  I would be willing to guess that she wasn't waiting for an Aflac representative to stop by.

Maybe I'm a bit too soft and sentimental, but I actually felt sorry for the damn thing.  Her entire life is nothing but a nest and eggs, and both had been totally decimated (through no fault of her own, I might add).

Anyway, a few days ago, I'm sitting outside eating breakfast and happen to watch a bird fly straight into a small crevice near my roof. I walk over, and notice that it's the same damn bird.  Remarkably, not only did she rebuild her nest, she had moved under my roof.   

She's looking right at me and standing perfectly still.  I stare back, marvelling at the perseverance of that little critter. I'm not quite certain that I would be able to rebuild my life in a similar situation. She was just a little bird, trying to survive after mother nature rips her life apart. Somehow, she found the fortitude to put the pieces of her life back together - and stronger, no less.  I'm fairly sure she doesn't speak English, but look right at her and say, "You have my respects, little one."

I wish you all the best as you, too, persevere through these amazingly difficult times. God certainly made life unfair, but there is beauty everywhere. It sounds like you have a very loving and close family, which is far more important than a credit score or a mortgage document. 

My warmest wishes...    



Wed, 10/13/2010 - 09:05 | 645710 Bob
Bob's picture


Wed, 10/13/2010 - 22:55 | 648215 mtomato2
mtomato2's picture

Without question, the best well-wishing I have ever heard.  Thanks, Faux.  You made my day.

Wed, 10/13/2010 - 00:27 | 645359 Miles Kendig
Miles Kendig's picture

The courage to simply be is the deal fellow zh'er after having gone through similar.  Please remember that the levee is breakin' all over and you are not alone in having to deal with this rolling shit soup sandwich.  Moment by moment when all else fails pal.  Best -

h/t MsC

Wed, 10/13/2010 - 04:55 | 645529 merehuman
merehuman's picture

"to simply BE"  +1000 Miles Kendig.  It aint that easy, gotta go truh a lot to get to that point. Balancing ones self and the crazy world is quite the trick.

Most of us dont know how fucked up we are stuck in our belief systems.

Wed, 10/13/2010 - 22:29 | 647538 Miles Kendig
Miles Kendig's picture

History teaches us that men and nations behave wisely once they have exhausted all other alternatives

- Abba Eban  h/t  Satyajit Das

Wed, 10/13/2010 - 03:44 | 645493 Careless Whisper
Careless Whisper's picture

@ soft tomato

but how can I justify fighting the bank when the bank's right?

ur a pussy. strap on a pair of balls. the bank doesn't care about you and ur family. u must enforce ur legal rights. a mortgage provides for a default. the remedy is for the bank to foreclose, but they must follow the law. make them. do u think all those wall street bankers got $50 million a year in bonuses because they are legit businessmen? be serious. ur dealing with criminals. u need to man-up. educate urself. start here: and here: and here: 

u said u used to make fun of people on food stamps. u derided people who didn't make the monthly mortgage payment. well i guess what goes around comes around.

maybe this will get u to stop feeling sorry for urself:



Wed, 10/13/2010 - 05:21 | 645545 Fred C Dobbs
Fred C Dobbs's picture

I hate to say it but it seems that there is no right or wrong any more, only what you can get away with. 

Good luck Soft Tomato.   

Wed, 10/13/2010 - 09:06 | 645713 mtomato2
mtomato2's picture

Try, try, TRY not to be so obtuse. This isn't a pussy/notapussy, care/don't care issue. It's a question of whether or not someone owes money or not, and the resultant emotions that emerge from the inability to pay. Banks being criminal doesn't give me license to be equally as bad. My dilemma, which obviously everyone but you understands, is the mental and emotional cognitive dissonance (look it up) that comes from wanting to keep something you hold dear, yet realizing you're not morally entitled to. Morally. You might want to look that one up, too.

Wed, 10/13/2010 - 12:11 | 646381 Careless Whisper
Careless Whisper's picture

while the criminal bankers inflated and crashed the housing market, while the central bankers crash the dollar, while the politicians give false hope while they ruin our country in favor of a world government, while the price of gold soars... you are sitting on your psychiatrists couch.

you think because you have a mortgage, it should never be renegotiated!!!??? it is not a moral issue! circumstances change, as you well know. do you know that a bankruptcy judge has the legal authority to modify a commercial mortgage? that judge can also modify a mortgage on a second, or third home --- like the ones most criminal bankers have in the hamptons or palm beach. the only type of mortgage that can't be modified in bankruptcy court is a single family owner-occupied home. do you think that's fair? that was supposed to change, but you can thank all the corrupt politicians for not voting the way they said they would.

your reversal of fortune doesn't have to be permanent. don't let "the man" keep you down. lawyer up and look for new opportunities to make money. you've done it before, you can do ti again. peace dewd.




Wed, 10/13/2010 - 09:32 | 645718 Bob
Bob's picture

Ah, tough love.  Gotta second you on self pity being a luxury the poor cannot afford. 

This is not to discount your real and perfectly respectable pain, tomato.  Apparently this position is completely new to you.  It's time for you to move past CD and move on to what must be done about it ASAP.  For the sake of your family.

Have a good long, cleansing crying session, tomato . . . then turn your sights to kicking some bankster ass! 


Wed, 10/13/2010 - 08:01 | 645628 Coder
Coder's picture

Thanks for the story. I am secure (for now) and raising a family as well. I went on the WIC and EBT sites the other day to see what I would need to qualify if something should happen to my job. Hope it never comes to that.

Just said a prayer for your family. You will get through it, fight the good fight!

Tue, 10/12/2010 - 22:16 | 645108 Bringin It
Bringin It's picture

I don't get it.

Eveyone will stop paying out of resentment at being screwed and without fear of a forclosure.

Property markets will halt.  Prices will collapse.

With no income, how do banks win this? 

Maybe this is the part where the nightclub a.k.a the banks get torched by Joe Piscopo and the other guy - Henry??  The nothing left to steal moment arrives ahead of schedule?

Tue, 10/12/2010 - 20:25 | 644861 Zerohedge fan
Zerohedge fan's picture

my condolences Knukles, but we can give this job:

I am sure you get even, one day.

Tue, 10/12/2010 - 21:16 | 644977 FreedomGuy
FreedomGuy's picture

That's becaue it's easier to go to schools and read to first graders and take up health causes than to do their real work and fix the serious business and economics problems that exist. I bet that he/she will get more votes from being at the school than making hard fiscal choices, too.

Wed, 10/13/2010 - 05:40 | 645555 Popo
Popo's picture

What's going on is that soon we're all going to *wish* that we had bought McMansions and "foreclosed" on them...

Tue, 10/12/2010 - 18:20 | 644613 Terminal Frost
Terminal Frost's picture

And you think appraisals were fraudulent on the way up?

Tue, 10/12/2010 - 18:20 | 644616 JLee2027
JLee2027's picture

They can't overcome the MERS problem.

Tue, 10/12/2010 - 18:50 | 644674 LeBalance
LeBalance's picture

They created the MERS problem.

So for them the MERS "problem" is a saving grace and a feature.

Tue, 10/12/2010 - 18:20 | 644617 belogical
belogical's picture

I've been amazed at how calm everything is, given the fact that our real estate market just gave up it's last breath. 

I we American's really that stupid or is it just that no one is in any of these markets anymore?

Tue, 10/12/2010 - 18:25 | 644629 JLee2027
JLee2027's picture

Disinformation, shock and denial. Here in Maryland Gov O'Malley, 10 MD Congressman, and the AG want all foreclosures halted, period. They asked Maryland's highest court to shut everything for 60 days. The Court of Appeals spokesman came out today and wondered if they have the authority! I'm still laughing at that one - maybe those jerkoffs are in pocket of the banks too.

Hell, they have a duty to stop fraud, no authority needed fuckers.

Tue, 10/12/2010 - 18:50 | 644675 Bearster
Bearster's picture

The Founding Fathers decided not to have a doctrine of Prior Restraint.  Therefore, the courts are not allowed to block all legitemate foreclosures to "prevent fraud" or any other such high-handed high-sounding goal.

Tue, 10/12/2010 - 20:09 | 644822 JLee2027
JLee2027's picture

Prior restraint is a legal term related to censorship in the United States referring to government actions that prevent communications from reaching the public. Its main use is to keep materials from being published. Censorship that requires a person to seek governmental permission in the form of a license or imprimatur before publishing anything constitutes prior restraint every time permission is denied. Prior restraint has often taken the form of an injunction or other governmental order prohibiting the publication of a specific document or subject. 



Tue, 10/12/2010 - 22:14 | 645107 MachoMan
MachoMan's picture

The states cannot make laws that prohibit all foreclosures...  that type of law would paint too broad of a brush.  The court is correct to tell the legislature it will shoot them down should they try...

What the AGs are going to find is the same thing the SEC should find...  all of the laws necessary to properly police these actions are already on the books...  hence, someone was asleep at the wheel.  This is why policing these types of instruments does not work, rather you have to simply incentivize people to behave differently and then they will police themselves.  Of course, if they admit that, then they would concede the issue of being asleep...

Tue, 10/12/2010 - 22:39 | 645155 DaveyJones
DaveyJones's picture

being asleep or being corrupt?

Wed, 10/13/2010 - 03:22 | 645492 MachoMan
MachoMan's picture

Inept, asleep, and largely ceremonial positions...  corruption, in the truest sense of the word, has largely been avoided by TPTB through design of the system...  whose individual actors are unwittingly aiding in the ultimate corruption...  and who really take nothing more than table scraps at best of the spoils...  (salary, benefits, etc.)

Wed, 10/13/2010 - 17:25 | 647407 DaveyJones
DaveyJones's picture

well said

Wed, 10/13/2010 - 09:13 | 645721 hardmedicine
hardmedicine's picture

JLee :  My sincerest appreciation for the education.   You have my respect

Tue, 10/12/2010 - 20:57 | 644936 Effectuate
Effectuate's picture

In America, might makes right.

Tue, 10/12/2010 - 21:09 | 644958 JLee2027
JLee2027's picture

Is that what Europe thinks?

Tue, 10/12/2010 - 21:20 | 644987 New_Meat
New_Meat's picture

o thinks

Tue, 10/12/2010 - 19:28 | 644749 Bob
Bob's picture

All these grandstanding AG jerk-offs need to do is actually bring some fucking cases to Court--that's what Courts are for.  The industry would instantly get the message. 

This is all a bunch of bullshit--or the AG's couldn't pass a Bar Exam.  I'm inclined to think they are not that stupid. 

It's all PR.

Tue, 10/12/2010 - 20:26 | 644865 JLee2027
JLee2027's picture

A couple indictments for fraud might work even better.

Tue, 10/12/2010 - 20:50 | 644898 Bob
Bob's picture

That's what I'm talking about--AG's are pretty much limited to bringing criminal cases, as I understand it.  What a crock. 

Tue, 10/12/2010 - 22:53 | 645183 Ms. Erable
Ms. Erable's picture

Maybe someone should remind the Attorneys General about RICO statutes.

Tue, 10/12/2010 - 18:45 | 644669 IrrationalMan
IrrationalMan's picture

Dont you get it.  With all of these forclosures getting yanked off the market, the supply will decrease.  From economics this will clearly lead to an increase in home prices.  Also there will be an increase in price as the forclosed have a bias to the lower end so the average price will rise.  Dont you see there is no reason no to buy into this market.  Prices will have to go up. 

Tue, 10/12/2010 - 18:51 | 644677 Bearster
Bearster's picture

Is this the same economics that teaches that one can borrow and spend one's way to prosperity?

If you think this will cause home prices to rise, you should borrow up and buy as many as you can!

Tue, 10/12/2010 - 18:53 | 644684 LeBalance
LeBalance's picture

Don't you get it.  This kills any chance of any transactions going forward.

Who would buy in this environment of distrust: "first you MERS it, no ya don't."

Prices will go up?

Your name speaks for thee.

Tue, 10/12/2010 - 19:17 | 644731 ghostfaceinvestah
ghostfaceinvestah's picture

Agreed, you would have to be a fool to buy any house today, even a non-foreclosure, unless you know for sure there were no title defects in the past.  The title companies are talking about getting waivers from the banks on these issues, so if you buy a place and the title is defecting, you are shit out of luck.

Also, you would be foolish to refinance any pre-2010 existing mortgage - those may be ripped up, but you can be sure your new refinance will be crystal clean.  You just refinanced yourself out of a lottery ticket.

Tue, 10/12/2010 - 19:45 | 644774 Citxmech
Citxmech's picture

I'm not so sure about that...  If the title were defective on your original mortgage - how is a re-fi going to clear those existing defects? 

Tue, 10/12/2010 - 20:43 | 644903 ghostfaceinvestah
ghostfaceinvestah's picture

The ownership of your original note is most likely in question if the note was originated during the bubble era.  It has been bought and sold multiple times; the existing paper work is long gone, or hiding in an Iron Mountain warehouse somewhere with no tracking number.

You refi, you create a new note, which you can be sure won't be misplaced.

Tue, 10/12/2010 - 21:31 | 645015 reading
reading's picture

That explains all the refi offers coming in the mail and the commercials that were running on TV...they were really hoping everyone would take the bait!

Tue, 10/12/2010 - 22:20 | 645118 MachoMan
MachoMan's picture

Or, alternatively, there is less demand for debt and the banks make money on transactional fees...  thus creating the magical "cash" on the books.  (and general deleveraging).

FWIW, refied in 2009 and I'm nearly certain the mortgage was never recorded.  Purchased by BoA and then by Fannie, still serviced by BoA.

If you want to clear title, all you have to do is fire the "shotgun" and name every damn transferee of the mortgage instrument...  get a court determination as to the true owner and you're going to nearly be indefeasibly vested.  This is a double edged sword, as you'll give the foreclosed homeowner another shot at the kitty...  but, it should help you sleep better at night...

Wed, 10/13/2010 - 00:15 | 645341 tallystick
tallystick's picture

If the mortgage has already been seperated from the deed of trust in the securitization process, then how does a refi reattach the new mortgage to the deed of trust.  Furthermore, how can a new refi take place without the deed of trust, if the mortgage note by definition doesn't exist without the deed of trust?

If the bank doing the refi changed the terms of the mortgage in a  "refi" without possession or assignment of the deed of trust, doesn't that simply mean the bank changed the terms of a non-existant contract and charged you for it?

Wed, 10/13/2010 - 00:17 | 645347 Mako
Mako's picture

Now we finally have someone with some brains around here. 

Tue, 10/12/2010 - 21:25 | 644996 New_Meat
New_Meat's picture

dang-"Big Short" redux?  Guess so.

Michael Lewis sure can spin a yarn.  ' cept it is all good/real.

- Ned

Wed, 10/13/2010 - 05:46 | 645559 StychoKiller
StychoKiller's picture

Guess he'll have to call the next book: "The Big Blank"

Tue, 10/12/2010 - 19:26 | 644748 SheepDog-One
SheepDog-One's picture

Yep LeBalance your comment says it all. 'Prices go up'? What kind of idiot would chase up some home prices today, with what money? Man, some people see an impending bubble while looking in a trash cans contents I think.

Tue, 10/12/2010 - 21:52 | 645064 Blano
Blano's picture

I'm thinking y'all might want to turn your sarcasm meters on.

Tue, 10/12/2010 - 20:00 | 644804 eatthebanksters
eatthebanksters's picture

Home prices will not go up in the short term and I would doubt that they would go up in the long term, pending a final outcome of the situation.  Why would anyone pay more for a house now while the shadow inventory grow larger every day.  If the banks win this deal price may drop to an all time low, so your purchase looks real stupid.  People are wary...they are going to wait on the sidelines and see how this plays out...unless of course they are stupid. 

Tue, 10/12/2010 - 23:01 | 645196 MachoMan
MachoMan's picture

Clearly, if the effective purchase price for a property is zero (it cost less money to buy it than rent it or an equivalent), then this will dramatically impact the threshold sellers are willing to part with their mcmasterpieces.

Tue, 10/12/2010 - 20:20 | 644840 Lucius Corneliu...
Lucius Cornelius Sulla's picture

25% of all sales are investors buying distressed properties.  By halting foreclosures you put these buyers on the sidelines.  How does that help the market?  All it will do is drop the number of transactions.  That is not good for housing.

Tue, 10/12/2010 - 21:07 | 644952 Wilderman
Wilderman's picture

Front page of my local paper today (not the lead story, but above the fold):

Housing prices at 10 yr lows

Over 70% of properties sold last year were forclosures or short sales....

Average price is at 81,700, down from 179,000 in 2007.


I can't imagine a foreclosure freeze will do anything to help the wreck of a market we're seeing here.

Tue, 10/12/2010 - 21:12 | 644963 JLee2027
JLee2027's picture

News Flash: The housing market is already a wreck, a walking zombie. It needs to be killed dead, so it can be re-born.

Tue, 10/12/2010 - 21:43 | 645045 Lucius Corneliu...
Lucius Cornelius Sulla's picture

Let me guess.  Phoenix or Las Vegas?

Wed, 10/13/2010 - 03:28 | 645495 Careless Whisper
Careless Whisper's picture

@ wilderman

good news dewd. the foreclosure moratorium will help the housing market. it will take distressed bank owned properties off the market. that means less supply of houses for sale. less supply means better prices.


Wed, 10/13/2010 - 03:50 | 645505 laughing_swordfish
laughing_swordfish's picture

Probably not Vegas - we're at about 110K and holding.

But I'm being badgered by Mrs. Swordfish as to the standing of our mortgage, which happens to be at (redacted) Bank, a local bank, who still sends us the statement every month for our $712.94, including taxes and insurance.

We bought in 2005 in a middle-of-the-road neighborhood, putting down our net profit form our former residence in Long Beach. As near as I can tell from, we are about $35K underwater at present.

A phone call to the bank evidenced that they are still holding our mortgage as in was not an FHA/GSE deal but a 20yr. deal with above normal downstroke and both of us with good credit (da Missus's score is about 80 points better than mine but we'll let that go for right now).

But while I am at DKM every day she goes online and has started reading ZH so she got alarmed. So I followed up.

Bad news - in that we are under water, we are just renting right now. Good news - market rents for our type of home (and there are five rentals currently being advertised in our 'hood) are about $250 a month more than what we are paying.

Bottom line - in that our monthly "nut" consists of mtge+utilities+food+gasoline and car insurance (installment credit and credit card balances are Verboten here), we can get by comfortably on a fraction of what I make trading. Her pay goes to purchases of Ag and Au bullion ( we just bought about 10K worth of each).

Makes monthly investment check easy - open safe, take out bullion from jeweler's cloth, count the 1oz. bars, return to safe, initial and date form that "investments have been checked". Couldn't be easier.

Usually I do it in conjunction with inventory/serviceability check of the home armory.

And the safe itself is both hidden and boobytrapped - trying to dislodge the safe without disarming the trap would take out the house and everyone in it. Besides, just getting to the safe requires two keys and two people - just like the nukes on a "boomer".

We might be living in a dangerous area - if it all goes to shit things will get exciting around here. But we'll take out a whole bunch of the rampaging mobs with the ammunition and the land mines in the yard and getting to the gold will literally kill the rest of them...


KrvtKpt laughing swordfish

DKM trading division 








Tue, 10/12/2010 - 21:29 | 645004 reading
reading's picture

Come back after you've read all 5 in the series...this is not about freezing out REO's and therefore "limiting" supply and making prices go up, it is about challenging clear title on any property (and especially any that sold in the Prime years)...

Wed, 10/13/2010 - 05:43 | 645558 StychoKiller
StychoKiller's picture

Lessee, buy a property while NO ONE knows who has title or liens, yep, you are indeed an IrrationalMan!

Tue, 10/12/2010 - 22:51 | 645177 reading
reading's picture

Things were pretty calm in the summer of 07 when "container" holding the subprime toxic sludge started to leak...then one by one the wheels started coming off.

Tue, 10/12/2010 - 23:30 | 645260 sushi
sushi's picture

It took what, 12, 14 months before the brown stuff really hit the fan and the markets tanked?

Given that more folks are likely paying attention (Note that there has beenminimal coverage of this in the NYT) we could shorten that period to 6 to 7 months.

So this finally has impact in April 2011?


Tue, 10/12/2010 - 18:21 | 644619 buzzsaw99
buzzsaw99's picture

It's time to go buy the moist expensive house I can get a loan for. Free houses bitchez!

Tue, 10/12/2010 - 19:01 | 644701 scatterbrains
scatterbrains's picture

ahh so that's what paulson meant  hmmm  I get it now

Tue, 10/12/2010 - 20:38 | 644890 Zerohedge fan
Zerohedge fan's picture

that's what I did in Florida. Nice 20 000sf2.

It will take 4 years to foreclose, so I will pay it off with silver to be sold @ $400/oz

Long life comrade Obama!!!!

Tue, 10/12/2010 - 18:23 | 644625 buzzsaw99
buzzsaw99's picture

I want my mulligan too bitchez!

Tue, 10/12/2010 - 18:24 | 644627 kengland
kengland's picture



Once I read that I stoped reading...Yawwnnnnn. Market....I mean Fed... could care less

Tue, 10/12/2010 - 18:31 | 644637 anonnn
anonnn's picture

Important to note that Fannie and Freddie gave explicit instructions to MERS and servicers on how to handle assignment matters...even directing hat MERS not be identified on Foreclosure complaints.

Since Fannie/Freddieboth are founders/Board members of MERS,  that puts the US Gov into the mix, as   Fannie/Freddie  are GSEs and backstopped by USG.

The US Gov was party to the deliberate non-transparency that is the enabler of all it seems.

Tue, 10/12/2010 - 18:36 | 644655 knukles
knukles's picture

"The US Gov was party to the deliberate non-transparency that is the enabler of all fraud."


Like water, it flows down said drain of ignominy!  God help us all, for man has failed himself.  Is there anything not broken anymore?

Tue, 10/12/2010 - 20:05 | 644816 eatthebanksters
eatthebanksters's picture

Gotta love Barney!

Wed, 10/13/2010 - 00:39 | 645383 tallystick
tallystick's picture
Please thank Paul for his service! PAUL E. MULLINGS Senior Vice President
Single-Family Sourcing

Paul E. Mullings

Paul E. Mullings was named senior vice president for Single-Family Sourcing in June 2005. In this position, Mullings is responsible for business sourcing and managing relations with Freddie Mac's more than 2,000 lender customers.

Mullings joined Freddie Mac from JP Morgan Chase where he was senior vice president, manager Mortgage Finance, and Fair Lending executive at Chase Home Finance, the nation's fourth largest residential mortgage lender. Mullings had direct responsibility for a number of broad mortgage finance initiatives, including the strengthening of Chase Home Finance’s emerging markets business model and its private-label mortgage-backed securities program.

Prior to joining Chase Home Finance in 1997, Mullings was president and CEO of Mortgage Electronic Registration Systems, Inc. (MERS). He led MERS during the organization's launch and successful capitalization, and was instrumental in the development of the first set of industry standards that are leading the mortgage market to a paperless process.

Mullings has also been the president and CEO of the residential mortgage division of First Interstate Bank, Los Angeles, and held a series of increasingly responsible senior management positions at Glendale Federal Bank, Glendale, CA.

Mullings is a Graduate of The Institute of Accounting Staff, London, England.

Freddie Mac was established by Congress in 1970 to provide liquidity, stability and affordability to the nation's residential mortgage markets. Freddie Mac supports communities across the nation by providing mortgage capital to lenders. Over the years, Freddie Mac has made home possible for one in six homebuyers and more than five million renters.

Wed, 10/13/2010 - 08:28 | 645660 tip e. canoe
tip e. canoe's picture

"Mullings is a Graduate of The Institute of Accounting Staff, London, England."

now called AAT - the Association of Accounting Technicians

headquartered in the City of London, (Inc.)

now you may ask, how does one who is educated and trained in accounting standards in the UK get a job setting up and running a company that is the vortex of mortgage registration for the entire US?

must be just another co-inki-dink.

Tue, 10/12/2010 - 18:36 | 644660 Chippewa Partners
Chippewa Partners's picture

Banker bonus's will be bigger next year.

Too early for the House of Cards to come apart.


Tue, 10/12/2010 - 22:06 | 645093 Widowmaker
Widowmaker's picture

Don't forget about the open-ended bailout on Christmas day when bonuses now and the future were delivered on a silver platter.   

It will be near come-apart time when one sees a poser in front of a mission accomplished banner wearing a flight suit.   ...wait.

Tue, 10/12/2010 - 22:18 | 645113 Bringin It
Bringin It's picture

Good one ))

Tue, 10/12/2010 - 18:42 | 644663 Fox Moulder
Fox Moulder's picture

Moral Hazard, Bitchez.



(sorry about that)

Tue, 10/12/2010 - 18:45 | 644668 Gary Busey
Gary Busey's picture

Awesome!  The banks will give us our money back!  wait a sec ... remind me again how much the dollar has depreciated in the past year?

...god dammit

Tue, 10/12/2010 - 18:55 | 644689 Cdad
Cdad's picture

I am literally laughing out loud, in a manic sense.

And like the rest of you, I cannot seem to find even one thing not yet destroyed.

In the words of the Great Magambo, "We are all Freakin Doomed."

Tue, 10/12/2010 - 18:49 | 644673 bob_dabolina
bob_dabolina's picture

the banks would end up sharing some if not all of the pain.


Wrong. TARP2 coming to a pile near you.

Tue, 10/12/2010 - 19:09 | 644697 Conrad Murray
Conrad Murray's picture

All markets finished deep into the red today, the first day after the Republican sweep of Congress, because the FOMC meeting left investors fearing they had the wool pulled over their eyes regarding QEII.  President Obama added, "You guys voted in the same bad drivers, now you can live in the ditch again.  I told you it was Bush's fault".

Tue, 10/12/2010 - 19:42 | 644768 fxrxexexdxoxmx
fxrxexexdxoxmx's picture

Obama blames Bush for everything.  I bet he asked Michelle if the kids were fathered by Bush.


Tue, 10/12/2010 - 21:18 | 644983 FreedomGuy
FreedomGuy's picture

LMAO! I hear Bush uncorked the BP well and was steering hurricanes, too.

Tue, 10/12/2010 - 18:53 | 644683 Fed Supporter
Fed Supporter's picture

Foreclosure, Subprime Mortgage Lending, and the Mortgage Electronic Registration System

Christopher Lewis Peterson 
University of Utah - S.J. Quinney College of Law

University of Cincinnati Law Review, Vol. 78, No. 4, 2010 

At the roots of the worst recession since the Great Depression were unaffordable home mortgages packaged into securities, sold to investors, and used as capital assets by financial institutions. The process of securitization, as well as financial institution over-leveraging associated with it, has been well documented and explored. However, there is one company that was a party to more questionable loans and foreclosures than any other and yet has received virtually no attention in the academic literature. Mortgage Electronic Registration Systems, Inc., commonly referred to as “MERS,” is the recorded owner of over half of the nation’s residential mortgages. MERS operates a computer database designed to track servicing and ownership rights of mortgage loans anywhere in the United States. But, it also acts as a proxy for the real parties in interest in county land title records. Most importantly, MERS is also filing foreclosure lawsuits on behalf of financiers against hundreds of thousands of American families. This Article explores the legal and public policy foundations of this odd, but extremely powerful, company that is so attached to America’s financial destiny. It begins with a brief explanation of the origins of the county real property recording systems and the law governing real property liens. Then, it explains how MERS works, why mortgage bankers created the company, and what MERS has done to transform the underlying assumptions of state real property recording law. Next, it explores controversial doctrinal issues confronting MERS and the companies that have relied on it, including (1) whether MERS actually has standing to bring foreclosure actions; (2) whether MERS should be considered a debt collector under the federal Fair Debt Collection Practices Act; and (3) whether loans recorded in MERS’ name should have priority in various collateral competitions under state law and the federal bankruptcy code. The article culminates in a discussion of MERS’ culpability in fostering the mortgage foreclosure crisis and what the long term effects of privatized land title records will have on our public information infrastructure. The Article concludes by considers whether the mortgage banking industry, in creating and embracing MERS, has subverted the democratic governance of the nation’s real property recording system.


Keywords: Mortgage, Electronic Registration, Recording, Priority, MERS, Predatory Lending, Foreclosure, debt collection, Fair Debt Collection Practices Act, standing

JEL Classifications: K11, D18, G21

Accepted Paper Series

Tue, 10/12/2010 - 21:04 | 644948 fxrxexexdxoxmx
fxrxexexdxoxmx's picture

+100 for the excellent link. Recommend this paper by Peterson to everyone.

Long read but great.



Tue, 10/12/2010 - 21:33 | 645017 Fed Supporter
Fed Supporter's picture

Two Faces: Demystifying the Mortgage Electronic Registration System's Land Title Theory

Christopher Lewis Peterson 
University of Utah - S.J. Quinney College of Law

Real Property, Probate and Trust Law Journal, Forthcoming 

Hundreds of thousands of home foreclosure lawsuits have focused judicial scrutiny on the Mortgage Electronic Registration System (“MERS”). This Article updates and expands upon an earlier piece by exploring the implications of state Supreme Court decisions holding that MERS is not a mortgagee in security agreements that list it as such. In particular this Article looks at: (1) the consequences on land title records of recording mortgages in the name of a purported mortgagee that is not actually mortgagee as a matter of law; (2) whether a security agreement that fails to name an actual mortgagee can successfully convey a property interest; and (3) whether county governments may be entitled to reimbursement of recording fees avoided through the use of false statements associated with the MERS system. This Article concludes with a discussion of steps needed to rebuild trustworthy real property ownership records.

Keywords: MERS, foreclosure, mortgage, deed of trust, title, land, lien, securitization, mortgage electronic registration system

JEL Classifications: D18, G18, G28, G21, K11

Accepted Paper Series

Date posted: October 01, 2010

Tue, 10/12/2010 - 22:25 | 645128 Bringin It
Bringin It's picture

Nice post, but what's with the handle??  I almost junked you on GPs [General Principles].

Really, 'Fed Supporter' is that like a jock strap?

Wed, 10/13/2010 - 00:27 | 645361 Fed Supporter
Fed Supporter's picture

The Fed supports the price of gold, so I support them.

Wed, 10/13/2010 - 05:07 | 645537 merehuman
merehuman's picture

FS  now thats funny!

Tue, 10/12/2010 - 18:55 | 644687 Conrad Murray
Conrad Murray's picture

The guest speaker from this call has a decent blog:

Tue, 10/12/2010 - 18:56 | 644688 Ripped Chunk
Ripped Chunk's picture

Bridge of the Titanic: 

Lt Wilde: "Icebergs dead ahead sir, I suggest we steer south"

Commander Smith: "Full speed ahead, there will be no changing of course"

Tue, 10/12/2010 - 19:02 | 644690 hidingfromhelis
hidingfromhelis's picture

When the aforementioned paperwork is lost, an agent of the mortgage servicer can sign an affidavit swearing that he or she has personal knowledge that, although now lost, the trustee was once in possession of the necessary documents. The affidavit is considered to have the same weight as sworn testimony in a court of law. 

This would suggest that a false statement is perjury, wouldn't it?  Or, do they get to have it both ways based on convenience?  Obviously, since the whole process skipped all sorts of required documentation, how can anybody swear they have personal knowledge?  How many "mistakes" should each robo-signer be allowed before being charged with fraud, or their sworn affadavit is considered perjury? How many "mistakes" should be allowed before it rises to RICO-level fraud?  Disregarding the whole issue of not properly documenting transfers, how can it be reasonably expected that any one person or even group can review and re-assemble the broken chain of title?

Second, the affidavits may be irrelevant because the issue is not that the mortgage documents were lost but they were never properly transferred at each step of the aforementioned securitization process. 

Ah, this seems to get more to the crux of the real issue.  How can this be fixed without wiping out all sorts of centuries-old property law?  I see the propaganda touting this whole thing as a matter of just straightening out the paperwork as the lead-in to some form of legislation that does away with any inconvenient record-keeping documentation requirements.  Of course, as with TARP, it will be spun as some emergency issue that if not taken care of will cause systemic shutdown of everything and mass killing of cute puppies.  With the shareholder list of the non-entity MERS, and their contributions to both demopublicans and republicrats, does anyone else forsee some imminent legislation that allows an easy out for the fraudsters?

What really sucks, is we'll probably see some retroactive legislation that provides a get-out-of-jail-free card to all the players...well, except the taxpayer.  Even falsely created, backdated, fraudulently signed documents will be allowed.  Nope, no fraud here! 

Not only is it a get-out-of-jail-free card, it's a DO-pass-GO and DO-collect $2 effin trillion card!

Tue, 10/12/2010 - 21:38 | 645032 reading
reading's picture

Ah, this seems to get more to the crux of the real issue.  How can this be fixed without wiping out all sorts of centuries-old property law?  I see the propaganda touting this whole thing as a matter of just straightening out the paperwork as the lead-in to some form of legislation that does away with any inconvenient record-keeping documentation requirements.  Of course, as with TARP, it will be spun as some emergency issue that if not taken care of will cause systemic shutdown of everything and mass killing of cute puppies.  With the shareholder list of the non-entity MERS, and their contributions to both demopublicans and republicrats, does anyone else forsee some imminent legislation that allows an easy out for the fraudsters?

While you could certainly be right, pulling a TARP re-dux while wiping out property law precedent is not going to be as easy as everyone seems to think.  Yes, I believe there is no doubt they'll all try but they've really painted themselves in a very small corner at the moment.  

Tue, 10/12/2010 - 23:13 | 645218 MachoMan
MachoMan's picture

It will be settled through agreements between all the transferees of the mortgage instruments...  the last of the line, the FED or GSEs (worst of the worst), will be happy to rubber stamp approvals for X company to serve as the proper party to file on their behalf...  since, of course, the whole point was to bail out the banks in the first place...  who cares if the banks actually kept up with formalities.

Prospectively, all plaintiffs to foreclosure actions have to do is include all potential "proper" parties to bring the foreclosure suit and ask the court to make a determination as to the proper party to bring it...  no fraud there...  and the outcome is the same...  dismiss irrelevant parties...  or the plaintiffs can agree amongst themselves who is to bring the suit and then enter into binding precedent...  settling the matter once and for all...

retrospectively, they're about to get f'd in the b

Wed, 10/13/2010 - 00:17 | 645346 hidingfromhelis
hidingfromhelis's picture

I agree with you completely that it isn't going to be easy, but I think the propaganda machine is already trying to float it into our thoughts.  We're being eased into it with the whole "robosigner" issue currently making it into the news, as if that's the real issue.  Later, a solution to that will be proposed, and it will backdoor in the really offensive provisions.  For the banks and our "representatives," they will find it expedient to override property law precedent.  Remember FISA and retroactive immunity for the telecoms?  As you said, they have painted themselves into a corner, and it will be the only way out that they are willing to take. 

Wed, 10/13/2010 - 00:31 | 645365 Ned Zeppelin
Ned Zeppelin's picture

Dead on, sir. If you check back through my earlier posts on this issue, I said we'll need national legislation, under the Commerce Clause, to allow new models of foreclosure actions to proceed, blessing MERS as plaintiff, and also allowing retroactive documentation in a manner that does not disturb the tax status of the REMIC trusts that were to have, but failed to acquire the "paperwork." 

Unless of course a few million Americans very vocally say otherwise.  But even then, we voters couldn't hold off TARP, and  the only people we rescue from dire financial circumstances with fresh cash-blood from taxpayers are TBTFs, not the small, underwater homeowner.  I mean who are we running this place for? The biggest banks and corporations, right? Right? 

Tue, 10/12/2010 - 19:02 | 644699 Racer
Racer's picture

The slowness of it all is just like watching aged stars colliding into death throws into a supernova.

The only thing they do is slow down the inevitability for a fraction of a second

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