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Citigroup Call On Implications On Foreclosure Crisis: "Just The Tip Of The Iceberg"
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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Glad ZH is on top of this. But ... all banks are intrinsically insolvent. Any principal reductions will be the taxpayer's problem when too big to fail is ultimately invoked. Regardless, the size of the problem likely dwarfs the banks. If foreclosures are a problem on the back end due to workload you can expect they're big on the front end when they were furiously closing them in 2006. FNMA and FRE dwarf the banking system. The 'contingency' is likely just to big to be swallowed by anyone other than Uncle Sam.
But yes, Imam Obam will likely extort a slush fund for his administration ala BP. Just a lot bigger.
Yes! we get a big national fund sponsored by the bank--analogous to the BP fund--and then the federal government manages the fund (siphoning off say 35% in management costs) and the balance goes to the poor who vote democrat in order to help them, creating yet more moral hazard. When Obama was elected there was a quote from a young black woman who said Obama is going to pay my mortgage and my car payment...it seems we may be heading in that direction. Very sad, and it will end badly.
http://www.youtube.com/watch?v=P36x8rTb3jI
http://www.youtube.com/watch?v=fOZ-Etb0k0Q
This issue affects me personally. Lost job 12/06. Hung on as long as possible. But when push came to shove, missed a few payments.
Tried repeatedly to rework the loan with BAC, not knowing the loan had been securitized. BAC wouldn't redo the loan in a way that worked.
BAC started foreclosure May 2010. June 2010, notice of default cancelled. June 2010 Note and Trust Deed assigned to Bank of New York Mellon as trustee for a loan pool by MERS. New NOD, foreclosure sale scheduled for late October. Oh, NOD says monthly payments in the amount of $0.00 is reason for NOD. Sloppy.
Assignor for MERS also signed docs for BAC Home Loan Servicing recorded the same day. Yep, Robosignor. Concurrent signator for the loan servicer, which signed the substitution of trustee for the trustee of the security pool, the trustee of the security pool, and for MERS. All in one service.
In my state, MERS has been deemed to hold authority to assign notes and trust deeds.
So, the June 2010 assignment of the note to the security pool, which was time barred as of May 1, 2007, was three years late. The tax REMIC status was blown up on a $465 million securitization pool by that late June 2010 assignment.
Since MERS won several local lawsuits by arguing it had authority to assign the notes and trust deeds, it is estopped from now saying the assignment was a nullity.
Oh, and since the transfer was not made timely, the note and trust deed are unregistered securities under local state law since the note and trust deed were not transferred per the registration statement. One of the remedies for unregistered securities is that the note and trust deed are unenforceable by parties who should have known of the facts by which the security is not legal. That would include all of the parties to the securitization.
I sued to get dec relief to merely cure the defective NOD and resume paying. Since I am having to go to all this trouble, might as well assert all of the theories and see if something sticks to the wall. The judge assigned to the case is a bloke before whom I litigated and won 33 lawsuits back in the day when I was practicing law.
What's the saying? A good lawyer knows the law. A great lawyer knows the judge.
Silly BAC. All I wanted to do was roll the late payments into the principal and resume payments.
Looks like you're back in the game.
Good luck!
good for you man. Please document the whole process for all to see.
Best of luck to you. Cut their fuckin throats wide open.
I have a buddy in his mid late 50's, a pit bull of a lawyer who has never lost a case. He has been out of work for two years and was trying to get a government job...he is a Christian Conservative so you can guess how that went. I told him last week I thought there would be a lot of hiring in the private sector as a result of the mortgage mess. He was hired today. I think the glut of lawyers is about to be substantially reduced.
he'll be better after the first Tuesday after the first Monay next November. If he's competent, or ...
- Ned
Now, keep buying silver. You will pay off your house 5c/$1
Moneychangers are suckers! Historically proven.
Once you battle your case, you can probably work for the rest of your life on many others.
Give 'em a good, hard grudge fuck.
"GMAC has halted foreclosures in 23 states.
Taxpayers own well more than half of the company. The Treasury Department first propped up GMAC Mortgage parent Ally Financial as part of the auto industry bailouts. The money might not be returned."
http://www.google.com/hostednews/ap/article/ALeqM5j8LhjGGcgU5Ftc4RBZgKWx6ammuAD9IQBU000?docId=D9IQBU000
LOL!
Wait! Didn't Whitacre say on a national TV ad that GM had paid off all of its government debts?
GMAC- All 50 states:
http://online.wsj.com/article/SB10001424052748703440004575548393691124552.html?mod=googlenews_wsj
I know many guys who have already been wiped out being in 2x and 3x bear ETFs
And averaging down in a losing position. You could be right on a crash and make nothing
by the time it happens. Some have pretty much wiped out their trading capital by fighting the trend. Proof that it is impossible to pick tops by being early, and lots of macro funds are getting wiped out at the worst possible time approaching FYE.
Eventually these guys are going to start throwing Hail Mary passes and start gunning a lot of junker stocks to save their jobs.
aye, check out HEME .. fucking LOL.
there's pump and dump and drug trafficking and NY longshore men.
like WTF?
So, you don't think that FAZ is a good idea at current situation?
Robo, what does this comment have to do with any of the discussion going on here?
Robo has morphed into a troll. That's why he doesn't do girlie pictures any more. That's the only part of his posts that ppl liked, so he stopped putting them up.
Did he get abducted by aliens? I hope they take him back to the homeland soon.
If nothing else, I hope they confiscate his insert graphic key so he is no longer able to post meaningless charts.
You buy the rumor and sell the confirmation.... I've had a 7/24 itch to hit my sell button with a hammer... NO CAN DO... NOT YET...... The market can be wrong longer than you can stay solvent..... I learnt that the hard way back in the 80s.....
Same for the 10s and 30s....
Don't get distracted by this whole mortgage bull shit.... It's bad, but it's an emotional distraction.... Stay long gold, silver, sugar, corn, wheat.... Stay away from the currencies, they're going to start moving like a 500hp, eight cylinder... The more they shake, the more that treasury balloon will inflate. Not yet, not yet.... Patience...
'cha
So what? Borrow more money and do it until you win. If you lose just default. Not a big deal. Just bad timing.
What ever happened to "The Trend is your Friend?"
I happen to head up the "swing" (trend and band) equities trading division where I work and even the greenest and most novice trader Knows that leveraged downside ETF's are a loser because the compounding works against you in a trend reversal.
Didn't any of these people have to pass a Series 7?
Oh- excuse me. I live in Las Vegas not NYC and I'm part of a tiny professional trading company with a total head count of 14 including off-premise affiliates.
Guess I just don't know my shit - but I preach a plain vanilla, no frills support vs. resistance model which almost anyone can learn IF they will dedicate themselves to it.
Personally? I'm up 96% just since March with no options, no derivatives, no gimmicks.
The other secret? I preach frugality to all and sundry. I believe that if your profession is that of speculator, you must be content to live as far below your means as possible and the first bill to be paid every month is the addition to your trading account.
just sayin...
No doubt this is the plan.
As I have said all along, if you are underwater on your mortgage, STOP PAYING!!!
Everyone should stop paying all and any kind of debt.
It's mutiny time.
What are they gonna do? The endgame is fascism or communism or a new form of bullshit anyway.
There's no fix unless a complete change happens.
sound like a plan:
http://www.youtube.com/watch?v=_vKxhqSJvPk
That change is taxing corporations, and enforcing it (closing loopholes).
No representation without taxation, no bullshit.
We are finally getting the transparency we were promised. This shit is getting so obvious that it is like looking through glass. Nothing fucking matters anymore, they are just puppets and are following their agenda layed out by the oligarchs. It's that simple...They don't give a shit that the country will be bankrupt because they are going to do away with the dollar anyway. It doesn't fucking matter...they are grabbing everything and covering their tracks with more tracks. They are nothing but serial killers looking for their next victim. The stock market is their market. The Corporations don't give a rat's ass about Main St. all they care about is moving forward and bigger profits. The total takeover is now transparent and it will lead us into either world war 3 or the next American Revolution. Don't you get it? none of this shit matters to them, all the prostitutes care about is what the pimp's next move is.
So we have been correctly drilling down into this mess. And now the banksters are letting the truth escape.
Surprise, surprise, surprise.
What are Barry and PlaceHolder gonna do now?
What the hell happened to my country?
Seriously...what a piece of shit government, piece of shit mortgage brokers, piece of shit banks, piece of shit Fed. I can't believe the idiocy, greed, power-mongering, robbery, fraud, incompetence, stupidity, and malfeasance.
What shoe is gonna drop next?
Yep, and most people are just content to say 'Oh well, guess this is just the way it all is now'. Piece of shit Indian reservation is what we live in now.
I hear J Lo is now a judge on American Idol!
Can any one here verify that?
I certainly hope not.
Not worth responding to him.
He cannot even spell Jello correctly.
lol, sushi
This is the consequence of an all powerful government that centrally plans and controls everything. Socialism is fundamentally a corrupt system that enables and breeds corruption. Large businesses and trade groups feed the beast or they get a regulatory brick through their window. For the money they get influence but never control. In return, they get bailed out (with your money) and occasionally favorable treatment. Fascism by it's nature is privatizing profits and socialising losses. Would that not precisely describe the bailouts?
The Constitution has no lasting power to stop this because the Supreme Court say its written in hieroglyphics and only they can interpret it. And a 5 to 4 majority say it says that the U.S. government can do anything it wants. So, when there are no enforceable rules there is only power.
MERS shows the government largely controls property rights. (Course you know what happens if you don't pay your property taxes, but that's beside the point.) The rule of law is slipping through our fingers. The oligarchy is getting less benign and more desperate by the day.
Absolute power corrupts absolutely.
Hey ZH'ers! On a spectrum of Jeffersonian-type republic on the one hand, and Soviet-style command-and-control socialism on the other, which end are we closer too presently?
...when there are no enforceable rules there is only power...
...Absolute power corrupts absolutely...
How about this: "Knowledge is a deadly friend when no one writes the rules." ?
I was taught a long time ago God's finger wrote the rules. He even showed how to live it several centuries later. Personally, I long for the day when we return to the rule of law and adhere to it voluntarily.
One more currently appropriate scripture: "Hope that is seen is no hope at all".
+490-ft. bomb. You smacked that one right out of the park.
Grand Slam. Comment of the Month, maybe the Year.
The one on your neck.
Depending on how this starts off, nothing will get done between now and the Nov election, Thanksgiving, Christmas and a week after New Year's. Everyone will be on vacation or something until mid January 2011. Will the shadow inventory continue to eek out, or is there too much hesitation on the title side to continue to market OREOs? Are home prices going to rise during this flustercuck? More importantly, rents on the lower side will inch up along with food. Oops. Not a good recovery and this after millions are subsisting after losing their jobs and missing a year's worth of mortgage payments. Well the "good" news is Google (United States of Google) will be providing real time inflation and economic data going forward. So no more reliance upon the BLS and the Fed. Say hello to your new Corporate Borg Masters.
The Borg were cool. They were sort of the commie collectivists of the future. No individual identy or will. They are Mao, Stalin and maybe even most Western leaders' dream populace.
I dunno about your timing. I see this as a perfect opportunity for Lame Duck action.
Tyler, the reality is your not extracting anything from them because their broke and what they have is from us.
Pardon?
QE2 is coming. Fed said so. They're not going to disclose how much and how long but they said they'll be buying more paper. It's the story of the day and markets are going to hyperventilate accordingly. Who cares about balance sheets, foreclosures and anything with "real" in it?
I trust Zero Hedge for the facts, but who else can we trust?
http://incogman.net/10/2010/excellent-video-says-what-i-try-to-say/
Ah yes, so there's a write down for those with mortgages and the biggest losers are the biggest winners. But what about those now bigger losers who forewent extravagant indulgences and paid down/paid off their mortgages instead or those even bigger losers who realized they couldn't afford to buy so saved their pennies and hoped to buy a decent place while the big winners were scooping them up. Capitalism is truly dead.
Capitalism is alive and well....in places where it lives. This would be your garden variety crony capitalism here in the U.S. Been that way for thirty years now.
Wow. The financial industry really IS innovative! Well done financial industry. You've done your momma proud! Now let's see how you innovate yourselves out of this one! Should be just as suspenseful as a sudden death hockey match!
Tyler with all due respect..and you know me to be of sound mind and manners. but these Motherfuckers!!!
Remember just how the last crash started, with everyone rosy as can be in DOW 14,000 bull market america...then a lone senator questioned 1 banks sub prime mortgages....the rest is history and after $27 trillion pumped to foreign banks, domestic banks, stock market pumping, and bond buying, we're now looking at a banking mess that dwarfs anything sub prime ever was.
I am in the process right now of letting my friends know that very thing, right now. This is about the entire MBS market, not a paltry few hundred billion.
At this point, a 10 kilometer meteor could hit and the market would rally. Why?
Because the Fed would create more liquidity/currency to "help" fix the problem.
In fact, I would recommend that the Fed purchase a satellite and load it up with all their electronic currency machines. That way, the Fed could have a backup just in case everyone dies. If it is not contacted by earth each week, it will just create trillions until it gets a repsonse. After all, we all know that creating currency can fix everything.
I am just wondering...since they said the purpose of QEII was to drive down lending rates again (cause that really worked last time...), but now that no one will be buying a house anytime soon perhaps even they might notice they are pushing on a string.
There are four possibilities as to who will get stuck with the losses from all these underwater mortgages:
1. The originators (e.g. the bank or mortgage broker who originated the loan).
2. The securitizers who bought the mortgages and converted them into securities.
3. The purchasers of the mortgage backed securities.
4. The home buyers (provided that they decide not to default).
If all the paperwork had been done correctly, the MBS purchasers and home buyers would have been on the hook for the losses. But now, it appears that perhaps the securitizers and originators may now be at risk. Who were the securitizers? Are any still in business?
Sure Goldman, Merrill, BofA, Bear (JPM), Lehman (officially dead, but Barclays). Maybe this will be a perverse payback for the back door bailouts through AIG and of course the front door TARP...now if we just find out AIG underwrote all the title insurance we'll have come full circle.
Wouldn't it be nice to see Goldman stuck with some of this? I'm probably just dreaming...
Payback? Who do you think will end up holding the bag? Who here thinks that CONgress and the Huckster in Chief will let the TBTF go under?
I think they will have to sacrifice one of them to quell a popular revolt. My guess is Citi. They are the poster child for moral hazard.
Will one pacify the masses? Will they accept Citi as a sacrifice as JPM and GS get off? Who knows they might. I don't know what they do, but I don't think they are to worried about the American public. Whats the worst thing they expect us to do, vote the reds back into power? But this is the kind of thing that could get slide though a lame duck session, plenty of reds will pony up to a TARP2, assuming they even do it above board. Nothing says the Fed can't gorge itself on these toxic assets if it so chooses.
EDIT: Thought about and don't think they would let Citi go. Think about how they talk about letting Lehman go as a mistake. All the banks are to inter connected. Big boy like Citi goes and that throws up even more pressure. The joys of the world of infinite moral hazard.
As big a hog as the FED is, there is a limit to even how much it can gorge. China, Japan and the oil Kingdoms are not going to just sit idly by as their Treasury hoards are robbed out from under them. The amount of un-servicable debt is staggering. If the FED plugs it with $1.5T it will not make that big of a dent. Much more than that (?) the T-bill holders are going to start to get nervous and the risk premium will cause a spike in rates. The USG cannot afford to pay more for its debt. If interest rates rise even 100 basis points, the debt servicing will be much more expensive. IMO, the one thing you can count on is the USG protecting their bureaucracy over the needs of their subjects.
there once was a dream that was Citi...
Whose balance sheet wasn't too pretty. We've got the start of a good limerick going here.
Accountants played tricks,
Thinking "blame never sticks,"
But in the end it would all turn out shitty.
Bravo!
I didn't mean "payback" in actual money -- sorry. I meant payback in the sense of watchin them convulse through another '08 extravaganza. Yeah, sure we'll probably get another giant bill but at least we can dream that they'll be tortured through the process.
Bob, er, Rob, you left one class off your list: Taxpayers.
Being a taxpayer is like being a victim of identity theft. There is this seedy character named Uncle Sam who keeps running up all sorts debts in my name. Seriously, someone should catch this guy!
ok, that was good.
Taxpayers or subjects?
From Citi doc, above
"...real estate law is arcane and requires the physical transfer of documents when ownership change hands. ...known as "assignment"... ".
Arcane? What's arcane about workable,200-year old, established practice? That part of R E law was not arcane.
It so strongly guaranteed the owner had traceable title that cheap Title Insurance was available.
Only since MERS and Fannie/Freddie began making-up their own, secret [as in private- company affairs] rules has it become arcane, deliberately non-transparent...so that exposure of the fraud would create enough chaos that participants would be forgiven, i.e., TBTF. Non-transparency is he enabler of all fraud...like TARP, etc.
Obama et al will have their shazzzam moment and begin ruling by proclamation. Executive Orders are so yesterday.
Heralds wanted. Apply at US.GOV.
It is of course Arcane when you can't manipulate it the way you want.
Gallup poll finds 46% of Americans think the Federal government poses a threat to America, up from 30% who thought so in 2003.
http://www.chicagotribune.com/classified/realestate/ct-biz-1013-gail-col...
The administration better not broker any deals in this mess. We want criminal prosecutions!!
Since everything is but an apparition, Perfect in being what it is, Having nothing to do with good or bad, Acceptance or rejection
You might as well burst out laughing!
LONGCHENPA
Please let normal market forces and our legal system dictate the outcome. If Obama broker's the deal (he's never brokered a win-win deal in his life) banks win, people lose...then I will oil up the blue steel!
lets not get silly. There is no debate here. These people are getting foreclosed on due to non paying for months. It will delay the process but not end the foreclosure. It will increase the costs to foreclose but will not change the outcome.
You seem to be unable to grasp the point, this is about title issues not the foreclosure process. It was uncovered during the process of attempting to foreclose on people who probably did not pay, but the process of foreclosure is not the problem. The problem is that it is now not clear who has the ownership rights to reclaim the property. That has occurred because the securitizers failed to properly ensure the paperwork was filed in accordance with the existing LAW. That law protects the ownership of my house and your house, which I assume may or may not have a mortgage and are not in foreclosure. This has much less to do "with people who have not paid" then you might like to believe.
PS: Don't be offended by this sites name it is an excellent, simple description of the issues at hand:
http://rortybomb.wordpress.com/2010/10/08/foreclosure-fraud-for-dummies-...
Existing LAW?!!! What does existing law have to do withg anything. This is now a country that is ruled by MONEY, not LAW. And the money says, "we're going to forclose on these properties". Screw the law.
The deeper issue is the culture of corruption in the TBTF banks. It started with originating subprime and it continues with the fraud today. Someone has to send a meaningful message to the crooks at the top.
Foreclosed on by this claimant to title or that one....this RMBS Trust entity or the previous one, or the one before that? Foreclosed on how many times? As in, almost foreclosed but, just in time re-financed by another bank....except paid out the wrong party...so, no clear title and other parties claiming to be paid....
Do you now see there are more levels to this than the "dead-beat mortgagor" that the BIG banks would like us all to blame...
Do you also see that all those European banks that bought the RMBS can see this is their get out of jail free card...faulty mortgage backed securities so send the original money back please...
Or, you want to buy it but you cannot get title insurance...
No one is getting silly. What we are seeing is beyond silly, way beyond the law silly.
And folks still seem confused as to why the fed spent over a trillion to bring the agency paper back home.
No worries though. The government will have the banks put some into a new bureaucracy that will supposedly apportion all of the money and then the fed will reimburse the banks for their trouble. At interest. One more non QE QE.
Re: "In other words, the endgame will likely end up being the extraction of material concession from the banking syndicate."
You must be joking. How much time have you spent in Wallstreeton, DC anyway? You're forgetting who owns this place.
This is a tempest in a teacup. Any legalities here will be swept under the carpet with the fastest legislation you've seen come out of congress since TARP. There is absolutely no way Wall Street is going to let some pipsqueak Senators stick them with this mess.
Yup this is more hopium. In other words keep making those mortgage payments and you will be rewarded with a mortgage you can afford.
Bullshit. How many times has this flag been hoisted?
I can recall 3 stories on ZH in the last 6 months about mortgages being reset to lower rates etc.
B
What we are witnessing is moral hazard at its most rampant pinnacle. So by running around saying this will cause a "systemic problem", they are hoping that TPTB will side with them for fear of another collapse, and will enact appropriate legislation. Nice, it doesn't even cost them a dime in lobbying.
Just think how quickly we could have recovered had we not saved these slimy fucks. Hell, we would have discovered the fraud in 2008 had we not bailed them out.
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%
Yeah, sure this is going to happen...when pigs fly.
The hits just keep on coming! And speaking of your house…relax and don’t worry—the hit will only affect the “rich,” even if you’re only “rich” the one year you sell your home… Ha! Ha!
The National Association of Realtors explains the new Federal sales tax of 3.8% on homes in Obama’s healthcare bill :
“The new Medicare tax would apply only to a home sale gain realized in excess of the $250K/$500K that pushes the filer’s AGI over the $200K/$250K income limits.”
Says NAR: “The health care bill included a provision that imposes a new 3.8 percent Medicare tax for some high-income households that have “net investment income.” Any revenue collected by the tax is dedicated to the Medicare hospital insurance program. This new tax applies only to households with Adjusted Gross Income (AGI) of more than $200,000 for individuals or more than $250,000 for married couples.
"Because capital gains are included in the definition of net investment income, an additional tax obligation might result from the sale of real property. Even if the AGI limits are met, the new tax would not be applied to capital gains that result from the sale of a home, because the existing home sale capital gains exclusion rule still applies – $250,000 (individual)/$500,000 (couple). So if the gain from the sale of the primary residence is below that amount, then NO Medicare tax will have to be paid on the gain."
A new federal sales tax, folks. The camel's nose is under the VAT tent.
Reference: http://www.themarreport.com/state/federal-sales-tax-on-homes-to-pay-for-...
and guess what's not indexed for inflation?
Politicians you are all going to voted out of office as we know you are going to continue to loot from the savers. This new mortgage mess, the haircuts should be between the homeowner and the bank and that's it. Leave me and all the other tax payers out of their mutual problem.
Politicians - get ready for new jobs in about a month, looters get out of the way of progress you are fired !!!
"Politicians you are all going to voted out of office"
in which election? Nov 2, 2010?
BWAHAHAHAHAHAHAHA!!!!!!!!
Just vote to raze the office.
If the incumbents elect to stay, well that's the reason they invented bulldozers.
As I said all along, it will not hurt banks at all and will benefit them in the long run. There's your Tarp2 for you with no need for Joe Public to even care to understand.
MINE RESCUE UNDERWAY LIVE! THEY ARE COMING OUT RIGHT NOW! FUCK THESE BANKERS! THEY NO LONGER DESERVE OUR ATTENTION.
Grab a great glass of wine from Chile, turn on some real salsa. Celebrate please. The whole country joined behind the miners. We don't even do that.
Our West Va. and Tenn. boys were critical, as well as NASA - the govt. part. And the military. But it was all Chile! Viva Chile tonight!
amen, let's be hoping for the best
Harry is right. There is no way the underwater and non-paying mortgage holders are going to benefit from this. More delay yes, but you will be booted out of the bank's house, the laws will be worked around
Rewind to 2008. Peggy Joseph was right - Obama is a man of his word, no wonder he didn't sign the bill.
http://www.youtube.com/watch?v=P36x8rTb3jI
I wonder if Peggy Joseph works with Urban Roman...
This can't be fixed on the Federal level. Property law belongs to the States.
This should cheer everyone up: "
Report: Trader Puts $4.25 Million Bet On SPY’s Fall"
The deals, notes the piece, effectively adds up to a $4.25 million bet that the market’s most liquid ETF will drop by at least 4.6% in the next month.
If that guy is a Goldman client...
He might as well kiss his trading account goodbye....
LOL....
Some figures:
President of the US: $400,000/yr.
Senators, Representatives: $160,000/yr (2006)
Wall Street Bonuses: $140,000,000,000 this year
Tell me again who's going to pay for the robosigning mess?
That's hardly fair, your not listing their bribes and kickbacks. It's no secret that most are able to accumulate a healthy fortune in office so I wouldn't worry about them missing out on the plunder. The Federal Governement, the best golvernment money can buy!
Have to disagree here, Shameful. You might recall a passage from one of Bill Gross' letters to his investors where he said, "I cannot believe how inexpensive it is to buy a legislature". These clowns, aka our duly elected officials, will give you the world for a frozen shrimp cocktail lunch and a glass of cheap champagne, especially if you toss a couple of coins into their re-election box.
You might be Shameful, but they are Shameless.
Many still leave rich, but I suppose keeping that election fund at "retirement" tax free helps. I am saddened they are that cheap. I mean I knew the ROI was probably this side of utterly retarded but that is even all the more depressing.
Maybe we should start a campaign to raise the bid price. "Congressional prostitutes! Please charge more for your services. We know the pillage will continue but we can't stand Gross and the boys laughing at how cheaply you sell us into slavery". I think would be better if we could just put their votes on e-bay. Track the bids have a buy it now, hell could make a reality show around it to.
I don't see how they can do a major across the board mortgage mod without being sued by the pension funds etc that hold the mortgage backed securities.
I have heard about 6 weeks ago of a plan to auto-refinance all residential mortgages to 3%.
At the time, the current foreclosure mess had not exploded.
I may have gotten the 2nd piece of news without knowing what was transpiring with the first.
no one wants to take a haircut, neither the bank, bond holder, or underwater person in the banks' house. The only willing party is our government using the "savers/taxpayers" money to pay for other peoples' debts.
Houses are the largest dollar purchase that Americans make; it’s wrapped up in their hopes of employment to pay for their dream house and the savings that they put together for a down payment and to continue servicing the mortgage.
To target this largest preserve of private property in the country for exploitation is to finally destroy the last shred of confidence Americans have in support from the government for building and maintaining their property and for protecting their property rights.
If you destroy savers’ and taxpayers’ interest in striving for a home, they’ll just say there’s no money in saving for a house; it’s being destroyed, and now the government is undermining the integrity of the housing equation by giving houses to people who can’t pay for or won’t pay for what the majority of Americans have already committed.
Young and old alike will turn their faces to the wind and say: Keep your stupid, lying "American Dream." There is a world of vacations, automobiles, and single malt scotch whisky: who needs a house.
"...it's called the 'American Dream' because you have to be asleep to believe it."
http://www.ebaumsworld.com/video/watch/1044358/
Notice how everybody wanting a reset assumes prices are done dropping?
After it is all 'fixed' and prices go down more we are back to square one.
Below is copied from Harvey Organ's site. Would seem a very good summary of this predicament.
However the big story remains the mortgage mess.
Ellen Brown has given the definitive paper on the mortgage mess. She details why mortgage title was not passed from the investor to the trust or MERS.
She states that it could have been for two reasons:
1. the original documentation was lost due to the poor credit of the home owners and the bankers just did not want to disclose this to the investors.
2. the various tranches set up and the placings of the foreclosed into different tranches would cause problems with the IRS
Regardless of the situation, title never passed from the investor to MERS. This trust has no employees and no assets and thus it cannot foreclose on anything.
This is why the phony documentation to try and make believe that they did have title.
If thiere is a moratorium greater than 90 days, the entire banking sector fails as they have no collateral. Then the derivatives burst and we have a huge catastrophe on our hands.
I am now going to send to you the Ellen Brown paper and this is followed bya Washington.com blog commentary. It refers to Ellen Brown's paper:
Please read slowly and understand the gravity of the situation:
ForeclosureGate and Obama’s “Pocket Veto”
Ellen Brown
October 7, 2010
www.webofdebt.com/articles
Amid a snowballing foreclosure fraud crisis <http://livinglies.wordpress.com/2010/10/06/federal-notary-bill-attempts-to-grant-full-pardon-to-lender-notaries-witnesses/> , President Obama today blocked legislation that critics say could have made it more difficult for homeowners to challenge foreclosure proceedings against them.
The bill, titled The Interstate Recognition of Notarizations Act of 2009, passed the Senate with unanimous consent and with no scrutiny by the DC media. In a maneuver known as a "pocket veto," President Obama indirectly vetoed the legislation by declining to sign the bill passed by Congress while legislators are on recess.
The swift passage and the President's subsequent veto of this bill come on the heels of an announcement that Wall Street banks are voluntarily suspending foreclosure proceedings in 23 states.
By most reports, it would appear that the voluntary suspension of foreclosures is underway to review simple, careless procedural errors. Errors which the conscientious banks are hastening to correct. Even Gretchen Morgenson in the New York Times characterizes the problem as “flawed paperwork <http://www.nytimes.com/2010/10/04/business/04mortgage.html> .”
But those errors go far deeper than mere sloppiness. They are concealing a massive fraud.
They cannot be corrected with legitimate paperwork, and that was the reason the servicers had to hire “foreclosure mills” to fabricate the documents.
These errors involve perjury and forgery -- fabricating documents that never existed and swearing to the accuracy of facts not known.
Karl Denninger at MarketTicker is calling it “Foreclosuregate <http://market-ticker.org/akcs-www?post=168218> .”
Diana Ollick of CNBC calls it “the RoboSigning Scandal <http://www.prisonplanet.com/is-a-90-day-mortgage-meltdown-foreclosure-moratorium-imminent-as-the-robosigning-scandal-goes-mainstream.html> .” On Monday, Ollick reported rumors that the government is planning a 90-day foreclosure moratorium to deal with the problem.
Three large mortgage issuers – JPMorgan Chase, Bank of America and GMAC -- have voluntarily suspended thousands of foreclosures <http://www.webofdebt.com/articles/shock_therapy.php> , and a number of calls have been made for investigations.
Ohio Attorney General Richard Cordray <http://www.cnsnews.com/news/article/ohio-attorney-general-file-suit-against> announced on Wednesday that he is filing suit against Ally Financial and GMAC for civil penalties up to $25,000 per violation for fraud in hundreds of foreclosure suits.
These problems cannot be swept under the rug as mere technicalities. They go to the heart of the securitization process itself. The snowball has just started to roll.
You Can’t Recover What Doesn’t Exist
Yves Smith of Naked Capitalism has uncovered a price list <http://www.nakedcapitalism.com/2010/10/4closurefraud-posts-docx-mortgage-document-fabrication-price-sheet.html> from a company called DocX that specializes in “document recovery solutions.” DocX is the technology platform used by Lender Processing Services to manage a national network of foreclosure mills. The price list includes such things as “Create Missing Intervening Assignment,” $35; “Cure Defective Assignment,” $12.95; “Recreate Entire Collateral File,” $95. Notes Smith:
[C]reating . . . means fabricating documents out of whole cloth, and look at the extent of the offerings. The collateral file is ALL the documents the trustee (or the custodian as an agent of the trustee) needs to have pursuant to its obligations under the pooling and servicing agreement on behalf of the mortgage backed security holder. This means most importantly the original of the note (the borrower IOU), copies of the mortgage (the lien on the property), the securitization agreement, and title insurance.
How do you recreate the original note if you don’t have it? And all for a flat fee, regardless of the particular facts or the supposed difficulty of digging them up.
All of the mortgages in question were “securitized” – turned into Mortgage Backed Securities (MBS) and sold off to investors. MBS are typically pooled through a type of “special purpose vehicle” called a Real Estate Mortgage Investment Conduit or “REMIC”, which has strict requirements defined under the U.S. Internal Revenue Code (the Tax Reform Act of 1986). The REMIC holds the mortgages in trust and issues securities representing an undivided interest in them.
Denninger explains that mortgages are pooled into REMIC Trusts as a tax avoidance measure, and that to qualify, the properties must be properly conveyed to the trustee of the REMIC in the year the MBS is set up, with all the paperwork necessary to show a complete chain of title. For some reason, however, that was not done; and there is no legitimate way to create those conveyances now, because the time limit allowed under the Tax Code has passed.
The question is, why weren’t they done properly in the first place? Was it just haste and sloppiness as alleged? Or was there some reason that these mortgages could NOT be assigned when the MBS were formed?
Denninger argues that it would not have been difficult to do it right from the beginning. His theory is that documents were “lost” to avoid an audit, which would have revealed to investors that they had been sold a bill of goods -- a package of toxic subprime loans very prone to default.
The Tranche Problem
Here is another possible explanation, constructed from an illuminating CNBC clip dated June 29, 2007. In it, Steve Liesman describes how Wall Street turned bundles of subprime mortgages into triple-A investments, using the device called “tranches.” It’s easier to follow if you watch the clip (here <http://www.youtube.com/watch?v=0YNyn1XGyWg> ), but this is an excerpt:
How do you create a subprime derivative? . . . You take a bunch of mortgages . . . and put them into one big thing. We call it a Mortgage Backed Security. Say it’s $50 million worth. . . . Now you take a bunch of these Mortgage Backed Securities and you put them into one very big thing. . . . The one thing about all these guys here [in the one very big thing] is that they’re all subprime borrowers, their credit is bad or there’s something about them that doesn’t make it prime. . . .
Watch, we’re going to make some triple A paper out of this. . . Now we have a $1 billion vehicle here. We’re going to slice it up into five different pieces. Call them tranches. . . . The key is, they’re not divided by “Jane’s is here” and “Joe’s is here.”Jane is actually in all five pieces here. Because what we’re doing is, the BBB tranche, they’re going to take the first losses for whoever is in the pool, all the way up to about 8% of the losses. What we’re saying is, you’ve got losses in the thing, I’m going to take them and in return you’re going to pay me a relatively high interest rate. . . . All the way up to triple A, where 24% of the losses are below that. Twenty-four percent have to go bad before they see any losses. Here’s the magic as far as Wall Street’s concerned. We have taken subprime paper and created GE quality paper out of it. We have a triple A tranche here.
The top tranche is triple A because it includes the mortgages that did NOT default; but no one could know which those were until the defaults occurred, when the defaulting mortgages got assigned to the lower tranches and foreclosure went forward. That could explain why the mortgages could not be assigned to the proper group of investors immediately: the homes only fell into their designated tranches when they went into default. The clever designers of these vehicles tried to have it both ways by conveying the properties to an electronic dummy conduit called MERS (an acronym for Mortgage Electronic Registration Systems), which would hold them in the meantime. MERS would then assign them to the proper tranche as the defaults occurred. But the rating agencies required that the conduit be “bankruptcy remote,” which meant it could hold title to nothing; and courts have started to take notice of this defect. They are concluding that if MERS owns nothing, it can assign nothing, and the chain of title has been irretrievably broken <http://www.webofdebt.com/articles/homeowners.php> . As foreclosure expert Neil Garfield <http://livinglies.wordpress.com/2009/10/13/why-the-spv-trust-is-not-the-lender-using-mers-against-the-pretender-lenders/> traces these developments:
First they said it was MERS who was the lender. That clearly didn’t work because MERS lent nothing, collected nothing and never had anything to do with the cash involved in the transaction. Then they started with the servicers who essentially met with the same problem. Then they got cute and produced either the actual note, a copy of the note or a forged note, or an assignment or a fabricated assignment from a party who at best had dubious rights to ownership of the loan to another party who had equally dubious rights, neither of whom parted with any cash to fund either the loan or the transfer of the obligation. . . . Now the pretender lenders have come up with the idea that the “Trust” is the owner of the loan . . . even though it is just a nominee (just like MERS) . . . . They can’t have it both ways.
My answer is really simple. The lender/creditor is the one who advanced cash to the borrower. . . . The use of nominees or straw men doesn’t mean they can be considered principals in the transaction any more than your depository bank is a principal to a transaction in which you buy and pay for something with a check.
So What’s to Be Done?
Garfield’s proposed solution is for the borrowers to track down the real lenders -- the investors. He says:
[I] f you meet your Lender (investor), you can restructure the loan yourselves and then jointly go after the pretender lenders for all the money they received and didn’t disclose as “agent.”
Karl Denninger <http://beforeitsnews.com/story/184/354/Karl_Denninger,_How_To_Resolve_The_Foreclosure_Mess.html> concurs. He writes:
Those who bought MBS from institutions that improperly securitized this paper can and should sue the securitizers to well beyond the orbit of Mars. . . . [I]f this bankrupts one or more large banking institutions, so be it. We now have "resolution authority", let's see it used.
The resolution authority Denninger is referring to is in the new Banking Reform Bill <http://www.google.com/#sclient=psy&num=10&hl=en&q=reform+bill+%26+pose+a+grave+risk+%26+huffington+post+%26+kanjorski&btnG=Google+Search&aq=&aqi=&aql=&oq=reform+bill+%26+pose+a+grave+risk+%26+huffington+post+%26+kanjorski&gs_rfai=&psj=1&fp=d0ac9ec56b61efa1> , which gives federal regulators the power and responsibility to break up big banks when they pose a “grave risk” to the financial system – which is what we have here. CNBC’s Larry Kudlow <http://www.prisonplanet.com/is-a-90-day-mortgage-meltdown-foreclosure-moratorium-imminent-as-the-robosigning-scandal-goes-mainstream.html> calls it “the housing equivalent of the credit financial meltdown,” something he says could “go on forever.”
Financial analyst Marshall Auerback <http://www.rooseveltinstitute.org/people/fellows/marshall-auerback> suggests calling a bank holiday. He writes:
Most major banks are insolvent and cannot (and should not) be saved. The best approach is something like a banking holiday for the largest 19 banks and shadow banks in which institutions are closed for a relatively brief period. Supervisors move in to assess problems. It is essential that all big banks be examined during the “holiday” to uncover claims on one another. It is highly likely that supervisors will find that several trillions of dollars of bad assets will turn out to be claims big financial institutions have on one another (that is exactly what was found when AIG was examined—which is why the government bail-out of AIG led to side payments to the big banks and shadow banks). . . . By taking over and resolving the biggest 19 banks and netting claims, the collateral damage in the form of losses for other banks and shadow banks will be relatively small.
What we need to avoid at all costs is “TARP II” – another bank bailout by the taxpayers. No bank is too big to fail. The giant banks can be broken up and replaced with a network of publicly-owned banks <http://www.webofdebt.com/articles/growing_movement.php> and community banks, which could do a substantially better job of serving consumers and businesses than Wall Street is doing now.
Ellen Brown is an attorney and the author of eleven books. In Web of Debt: The Shocking Truth About Our Money System and How We Can Break Free <http://www.powells.com/partner/23116/biblio/9780979560811> , she shows how the Federal Reserve and "the money trust" have usurped the power to create money from the people themselves, and how we the people can get it back. Her websites are webofdebt.com <http://www.webofdebt.com/> ,ellenbrown.com <http://www.ellenbrown.com/> , and public-banking.com <http://www.public-banking.com/> .
end.
Harvey Organ is a smart guy.
+ 1 Quadrillion
suggests calling a bank holiday.
First Bank of Sealy open 24/7
The top tranche is triple A because it includes the mortgages that did NOT default; but no one could know which those were until the defaults occurred, when the defaulting mortgages got assigned to the lower tranches and foreclosure went forward. That could explain why the mortgages could not be assigned to the proper group of investors immediately:
The above excerpt is incorrect. You cannot reassign the mortgages after the the REMIC is created or you void the tax advantages.
There is no need to reassign mortgages. You just take a collection of loans and assign them to a single pool and then sell the cashflow from that pool. If there are defaults within the pool then the lowest rated tranche gets knocked out first and takes the hit; the senior tranches are protected.
The lowest rated tranche was the equity tranche and that typically was held by the sponsor bank.
Holders of tranches which have lost their investment (there were sufficent defaults within the pool so that they were knocked out and lost their investment) now have a remedy. They can file suit claiming that what was sold did not adhere to the Pooling and Servciing Agreement (PSA) and under the terms of that agreement the vendor of the security must reimburse them.
Since those tranches may be available on the market for pennies on the dollar I suspect someone will buy them up for the sole purpose of filing suit and recovering the original investment. Go long litigation firms.
I love everything Ellen Brown. She's wa-a-ay ahead of the curve.
And she spells it out so nicely.
But you said you'd "send to you the Ellen Brown paper and this is followed by a Washington.com blog commentary. It refers to Ellen Brown's paper."
I don't find the Washington.com blog commentary posted here.
Do you have a direct link?
Welcome to the Bologna Recovery Institute.
The Class War has been going on longer than Afghanistan. It's just that only one side has been fighting.
Write a bad loan, take a bonus.
Securitize a pool of bad mortgages, take a bonus.
Write a CDS against the bad security you just dumped on some unsuspecting schmuck, take a bonus.
Create a synthetic CDO based on the piece of shit you already know is bad, take a bonus.
Write a CDS against the synthetic CDO based on the piece of shit MBS' already turning rancid, take a bonus.
Broker the sale of the entire mess to the Fed for way above market price, take a bonus.
Stick the entire mess into the hands of the taxpayer, enjoy the estate your bonuses bought.
Why you angry at me Joe Six Pack?
Time to repossess some bonuses.
Well said. I've long said that there should be individual liability within corporations. Companies and investors go under while the wrongdoers generally get off scott free and retire wealthy. The people who profited from the fraud should be the ones who take the hit. Won't happen, though. They just open a line of credit in the name of the taxpayers and cover the losses. With anyone but the government this would be considered identity fraud.
Seems I have attracted a secret admirer ticking off my posts.
Assassin! Come show your face!
Sorry folks...
No, I didn't turn into a "troll"....
I lost my job back in July 2009, and lived like a trust fund kid for a year until the severance started running low.
Then I had to start trading for a living instead of a hobby.
I had no choice but to follow the tape and be on the right side of the market.
Otherwise, I would have gone FLAT BROKE within 6 months.
So far, I've been doing well and I'm up big so far in 2010.
So sorry if I have offended anyone here.
For lots of you guys, its about "principle"..
For me, it's about SURVIVAL...
LOL....
No hate here. Ride that motherfucker til the wheels fall off.
Keep the faith, Robo. Just don't let it all ride at once.
Robo,
I would guess the number of folks considering you to be a troll is rather small, and that might be a function of their own trading record. Of course it could also be withdrawal symptoms if you fail to post some of your more (carnal) thought provoking graphs for a few days. I read you here and on the Bear page, and it is clear that you merely try to trade what the market gives you, which I believe to be the point of trading. I was never under the impression that you were prepped and ready to take the seat next to Erin and Sue and Becky and play Little Marie Sunshine. The seat next to Amanda, okay, but you could be forgiven for that.
As I remember, Robo was a bit put off by 'Mandy (or perhaps it was his way of showing affection...).
Good to have you around, Robo -- I for one had missed your comments (as well as the illustrations) lately.
I miss your daily columns. The stampeding herd and crocs was classic! I don't think a lot of people are against the making money in this market, if you can rock on. Most of us aren't cunning enough and we sit on our metals and watch the world grind forward. Think the unreality of current events is starting to get to people.
fag
Survival?
Oh, yeah, it's a cold dark night out there. Do whatever it takes to avoid getting a job. It's a common enough endeavor. Some folks catch a lot of scorn for such a lifestyle, but that seems unfair to me.
Vaya con dios, compadre.
+2 C cups
It works until it doesn't Robo. When you give it up, you'll find much greater fullfillment doing something productive with your talents. Go build something!
There is money to be made if you understand the situation. Problem is, most of the folks I know have their head in the sand and trust the system, and are still buy and hold long term investors. They don't even come close to understand the risks in their portfolios.
I knew there would be a role for Bill Clinton in all of this. We are going to need gobs og Bubba shit to make this problem miraculously disappear...
Lost Note Affidavits:
This is what used to be done when there were physical stock certificates used on the street. This was really an aberration.
Now these are being used every 5 seconds. Someone please tell me what the difference is between providing an affidavit without know the facts and outright lying?
Tax and Trust Laws
This is what really sets the stage for checkmate. You cannot reverse your moves without creating all kinds of bigger problems with the IRS.
It is also the reason they are back dating and fabricating missing documents.
Title Insurers
The title companies are never going to come to seeing the bank's way. Why would Uncle Joe (movin kinda slow) risk his ass for those slickstas in Armani?
MERS
MERS is what is commonly referred to as a complete fucking sham. People are acting for MERS who apparently never met anyone from MERS and have no idea whether it actually exists save for email correspondence.
This is before you even get to the legal issues relating to the title nominee structure.
CITI
Have they suspended fraudclosure yet? I am not aware that they have. I notice they suspended use of that fraudclosure baron in Florida.
The thing to note here is that whatever CITI does they are discussing with the US gov't first. Mommy, is it OK if I do this?
Bottom Line
The show is barely starting.
I think Bill would be better served watching Hillary solve the Middle East problem before Christmas.
KaBOOOOOOOOM
Josh Rosner: “Could Violations of PSA’s Dwarf Lehman Weekend?”Josh Rosner, a well respected bank analyst (he describes himself as “a recovering GSE analyst”) is circulating a client note and it takes the foreclosure crisis very seriously.
The critical part is his discussion of the conveyance chain. As we indicated before, the minimum chain for a recent mortgage securitization is is A (originator) => B (sponsor) => C (custodian) => D (trust). Older deals might only have three parties, but recent vintage typically had at least four, and some as many as seven or eight.
The reason for doing this is bankruptcy remoteness. You as the buyer of a mortgage backed security want certainty in what you purchased. If an originator goes bust (as ironically many did), you don’t want the creditors to say, “They were already toast by the time they set up that MBS, so the sale of the loans was a fraudulent conveyance, we are gonna take the loans back.”
The way to prevent that was to introduce intermediary parties between the originator and the trust. Each party had to be independent (which meant fit the legal definition of independence; the intermediary parties and even many originators were dependent on financing called warehouse lines from the investment bank packager/distributors). The note (the borrower IOU) had to be endorsed (like a check) to the next party in the chain, who then endorsed it over to the party after that, with the last party being the trust.
Rosner’s remarks are consistent with our prior posts, and he adds a couple of important additional observations:
We have a larger and more significant concern, which, if proved out, could call into
question the validity of nearly all securitizations and raise material questions about
whether “true sale” was achieved.
Yves here. Let’s deal with this in reverse order. The attorneys are probably not liable; lawyers who have looked at typical opinions have advised us that the legal opinions provided on these deals were highly qualified (they took the form “if you took the steps you said you are going to, you have a true sale”).
However, the significant part of Rosner’s comment is his belief (and Rosner typically has very good contacts) that the notes were endorsed in blank. That means they were presumably endorsed only by the originator. This means, effectively, that none of the intermediary transfers took place. This is independent of verification of what we’ve been told. Per a post from late September:
Yves here. The next question is “what does this mean for MBS investors?” If you are a Fannie and Freddie investor, there will probably be no obvious consequences, even thought there ought to be. The government is not going to want to raise doubts about the integrity of such an important market. Servicers will continue to pay advances on delinquent accounts.
The bigger implications will be for the servicers and trusts of securitizations for so-called non-conforming mortgages, aka private label or non GSE paper. If Rosner is correct and no one endorsed the notes correctly, at best this is now effectively unsecured paper. I’ve had securitization lawyers argue that even though the trusts may have impaired rights to foreclose, a lower standard of rights applies to ongoing payment, so the trust may be OK as far as non -defaulted borrowers is concerned. But the New York trust experts (and all the trusts are governed by New York law, this was the standard choice for these deals) say if no notes got to the trust by closing, it was unfunded and does not exist.
Regardless, this mess looks likely to be an attorney full employment act. Stay tuned.
http://www.nakedcapitalism.com/2010/10/josh-rosner-could-violations-of-p...
I'm getting sick of this shit...
Here's the deal... when a homeowner is fraudulently foreclosed upon, and word is out that the foreclosure is likely a nullity/fraud upon the court, then the foreclosure benefits the defaulting homeowner. Let me say that again, it might not have sunk in, THE FORECLOSURE BENEFITS THE DEFAULTING HOMEOWNER. The only way to rid yourself of a mortgage is to have the court essentially impose a penalty invalidating the possibility of another being filed. In order to do so, the bank has to be the plaintiff... and it probably helps a lot if you default on the action...
So, why does every AG come out of the woodwork to save homeowners who stand to benefit substantially from lottery tickets? Simple, TO PROTECT THE BANKS... Wait, they said they were protecting the homeowners... from what? If BoA wants to come foreclose on me and make a fraud upon the court doing so, I'll gladly default in the lawsuit... see you bitches after the judgment is filed. This would be a lottery ticket of epic proportions... I'm envious of those who may be able to get a house scott free.
Further, why are foreclosure moratoria being implemented? TO PROTECT THE FIRST PRIORITY LIENS. Presently, while all the turmoil is underway, the firsts do not have their shit together... the second and third lienholders of the world would benefit from foreclosing at this point and attempting to divest the firsts of priority... the moratoria, as presented, are attempting a blanket ban of all foreclosures, even those by the rightful parties with honest paperwork... again, THIS IS TO PROTECT THE FIRSTS.
Not that complicated...
...again, THIS IS TO PROTECT THE FIRSTS...
This would be easier to beleive it the firsts were union members.
Uh, CALPERS, CALSTERS, etc., etc., on second thought, I think you're on to something there.
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
Abstract:
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.
Note the last sentence! "Subverted the democratic governance of the nation's real property recording system." Sounds like it really helps the dead beat. Doesn't it just create an unsecured loan?
If the democratic process had been subverted, then how did MERS legally originate and proliferate? Are you arguing that the entire concept of MERS' business model is patently illegal? If not, then it was exactly our democratic process that birthed MERS... and please do not fill me of some ideallic version of democracy if that's what this is rooted in...
Yes, it does just create an unsecured loan. However, that is not the topic of my discussion. The problem is trying to foreclose with an unsecured loan before getting a judgment... if you do, then you may void the purported mortgage instrument...
There aren't going to be any "FREE" houses! Lets get real.........
There already have been... if the AGs would get the fuck out of the way, there would have been more... at least they can play monday quarterback and make a good showing for the retrospective application of mortgage fraud...
And there I was wondering what possible use could there be in QE2. At least now we know from which funds the financial sector will 'pay' the 'concessions'. And just for kicks they might put out a few low-level employees to be waddell-and-reed'ed.
Some of you believe the Feds will not be able to touch this issue because it is a matter of state law, not federal law. Well, the last time I checked, contracts were strictly a matter of state law not federal law --- yet Rooselvelt outlawed gold clauses and overnight cancelled the private deal that prudent Americans thought they had wisely negotiated with other Americans.
Here are just two ways the Feds can eliminate the above "problem": 1) issue new IRS regs to allow REMICS to accept new assets if the purpose is to conform their assets to the "intention of the parties" at the time the REMIC was formed; or 2) use the Commerce Clause to pass a national law that creates a foreclosable lien on all properties to secure any loan that was issued or guaranteed by Fannie, Freddie, FHA or that might impact AIG counterparty obligations.
To get these sweeping changes through Congress, expect either an emergency session of Congress before the midterms or one immediately after the election. If a new Republican majority refuses to act, watch Wall Street and the Fed tank the markets until the Republicans capitulate.
If the banks would just gather the names of all the persons/entities that potentially have an interest in the mortgage instrument and use them as co-plaintiffs in the foreclosure action, then there wouldn't be an issue... you could also file a lawsuit to determine the real party to proceed/foreclose (preferable first step)... after that precedent (would be in fed court), the state court would be prohibited from retrying the issue of whether X party is the proper party to bring the foreclosure action...
Setting up a federal clearinghouse to handle these would also be very easy... it just makes a determination as to the proper party to foreclose and whammo, you got an unknockoutable precedent to head over to state court and get ahold of the property.
This has got to be Citi's attempt at emulating Goldman's dudo-reverse psychology. Either that or they actually do have Great Walls of China between their trading desks
Rep. Robert Aderholt, R-AL
Since 2005, this man has been trying to pass HR3808 or some version like it. The crooks all knew what was coming. Follow this man's words and know the opposite is true.
Keep watching Ellen Brown's blog at webofdebt.com, especially the articles section.
And here is a possible free market solution to this real estate mess.
If you are perceptive (delusional as I am???) this may also be a way to
subvert the federal reserve and create a commodity based currency.
www.dnusbaum.com/fix.html