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Gonzalo Lira On The Second Leg Down Of America's Death Spiral

Tyler Durden's picture


Submitted by Gonzalo Lira

The Second Leg Down of America’s Death Spiral

I swear to God Almighty: Mortgage Backed Securities are America’s Herpes—the gift that keeps on oozing.
Last Friday, Bank of America announced that it was suspending all foreclosure proceedings, presumably until further notice. Other banks have already suspended foreclosures in a whole truckload of states. A nationwide moratorium on foreclosures might soon happen—which would be a big deal: Global Financial Crisis, Part II—Longer, Wider and Uncut.

But the mainstream media—surprise-surprise—has downplayed the whole shebang. They’re throwing terms out there into the ether, but devoid of context or explanation: “Robo-signings”, “foreclosure mills”, forged signatures, “double booking”, MERS—it’s confusing as all get-out.
So the mainstream media just mentions it casually—“and in other news tonight . . .”—like it’s no big deal: A couple-three lines, lots of complicated, unfamiliar terms, an attitude like it’s a brouhaha over paperwork of all things!—and then zappo-presto-change-o!: They’re showing video footage of a cute koala nursing in the arms of a San Diego zookeeper.
But even the koalas know that something awful is heading America’s way. Smart little critters, they’re heading for the treetops, to get away from this mess.
So what the hell is going on with the God forsaken mortgage mess in the United States?
It’s got a lot of bells and whistles, but it’s basically quite simple: It’s all about the fucking Mortgage Backed Securities (MBS). Again.
So this is what happened, more or less—the short version:

In the crazed frenzy to get as many mortgages securitized during the Oughts, banks took shortcuts with the paperwork necessary for the Mortgage Backed Securities. The reason was because everyone in the chain of this securitization mania got a little piece of the action—a little slice of the MBS pie in the shape of commissions.
So in the name of “improved efficiencies” (and how many horror stories are we finding out, carried out in the name of “improved efficiencies”), banks digitized the mortgage notes—they didn’t physically endorse them, like they were supposed to by the various state and Federal laws.
Plus—once the wave of foreclosures broke, and the holes in this bureaucratic paperwork became evident and relevant—some of the big law firms handling the foreclosures for the banks started doing some document fabrication and signature forgery, in order to cover up the mistakes—which is definitely illegal.
Long story short (since this is the short version): A lot of the foreclosed properties might not have been foreclosed legally. The people evicted might still have a right to their old houses. The new buyers might not actually own the REO’s they bought off the banks. The banks could be on the hook for trillions of dollars, and in the sights of literally millions of lawsuits.
In short: This could become another massive oozing sore, complete with yellow-green pus drip-drip-dripping out of some unmentionable places on the Body Economic.
Now—the long version:
Homeowners can only be foreclosed and evicted from their homes by the person or institution who actually has the loan paper—only the note-holder has legal standing to ask a court to foreclose and evict. Not the mortgage—the note, which is the actual IOU that people sign, promising to pay back the mortgage loan.
Before Mortgage Backed Securities, most mortgage loans were issued by the local Savings & Loan. So the note usually didn’t go anywhere: It stayed in the offices of the S&L down the street.
But once mortgage loan securitization happened, things got sloppy—they got sloppy by the very nature of Mortgage Backed Securities.
The whole purpose of MBS’s was for different investors to have their different risk appetites satiated with different bonds. Some bond customers wanted super-safe bonds with low returns, some others wanted riskier bonds with therefore higher rates of return.
Therefore, as everyone knows, the loans were “bundled” into REMIC’s (Real-Estate Mortgage Investment Conduits, a special vehicle designed to hold the loans for tax purposes), and then “sliced & diced”—split up and put into tranches, according to their likelihood of default, their interest rates, and other characteristics.
This slicing and dicing created “senior tranches”, where the loans would likely be paid in full, if past history of mortgage loan statistics was to be believed. And it also created “junior tranches”, where the loans might well default, again according to past history and statistics. (A whole range of tranches were created, of course, but for purposes of this discussion, we can ignore all those countless other variations.)
These various tranches were sold to different investors, according to their risk appetite. That’s why some of the MBS bonds were rated as safe as Treasury bonds, and others were rated by the ratings agencies as risky as junk bonds.
But here’s the key issue: When an MBS was first created, all the mortgages were pristine—none had defaulted yet, because they were all brand new loans. Statistically, some would default and some others would be paid back in full—but which ones specifically would default? No one knew, of course. If I toss a coin 1,000 times, statistically, 500 tosses the coin will land heads—but what will the result be of, say, the 723rd toss specifically? I dunno.
Same with mortgages.
So in fact, it wasn’t that the riskier loans were in junior tranches and the safer mortgage loans were in the senior tranches: Rather, all the loans were in all the tranches, and if and when a mortgage in a given bundle of mortgages defaulted, the junior tranche holders would take the losses first, and the senior tranche holder take the loss last.
But who was the owner of the junior tranche bond and the senior tranche bond? Two different people. Therefore, the mortgage note was not actually signed over to the bond holder. In fact, it couldn’t be signed over. Because, again, since no one knew which mortgage would default first, it was impossible to assign a specific mortgage to a specific bond.
Therefore, how to make sure the safe mortgage loan stayed with the safe MBS tranche, and the risky and/or defaulting mortgage went to the riskier MBS tranche?
Enter stage right, the famed MERS—the Mortgage Electronic Registration System.
MERS was the repository of these digitized mortgage notes that the banks originated from the actual mortgage loans signed by homebuyers. MERS was jointly owned by Fannie Mae and Freddie Mac (yes, those two, again, I know, I know: Like the chlamydia and the gonorrhea of the financial world—you cure ‘em, but they just keep coming back).
The purpose of MERS was to help in the securitization process. Basically, MERS directed defaulting mortgages to the appropriate tranches of mortgage bonds. MERS was essentially the operating table where the digitized mortgage notes were sliced and diced and rearranged so as to create the Mortgage Backed Securities. Think of MERS as Dr. Frankenstein’s operating table, where the beast got put together.
However, legally—and this is the important part—MERS didn’t hold any mortgage note: The true owner of the mortgage notes should have been the REMIC’s.
But the REMIC’s didn’t own the note either, because of a fluke of the ratings agencies: The REMIC’s had to be “bankruptcy remote”, in order to get the precious ratings needed to peddle Mortgage Backed Securities to insitutional investors.
So somewhere between the REMIC’s and the MERS, the chain of title was broken.
Now, what does “broken chain of title” mean? Simple: When a homebuyer signs a mortgage, the key document is the note. As I said before, it’s the actual IOU. In order for the mortgage note to be sold or transferred to someone else (and therefore turned into a Mortgage Backed Security), this document has to be physically endorsed to the next person. All of these signatures on the note are called the “chain of title”.
You can endorse the note as many times as you please—but you have to have a clear chain of title right on the actual note: I sold the note to Moe, who sold it to Larry, who sold it to Curly, and all our notarized signatures are actually, physically on the note, one after the other.
If for whatever reason, any of these signatures is skipped, then the chain of title is said to be broken. Therefore, legally, the mortgage note is no longer valid. That is, the person who took out the mortgage loan to pay for the house no longer owes the loan, because he no longer knows whom to pay.
To repeat: If the chain of title of the note is broken, then the borrower no longer owes any money on the loan.
Read that last sentence again, please. Don’t worry, I’ll wait.
You read it again? Good: Now you see the can of worms that’s opening up.
The broken chain of title wouldn’t have been an issue if there hadn’t been an unusual number of foreclosures. Before the housing bubble collapse, the people who defaulted on their mortgages wouldn’t have bothered to check to see that the paperwork was in order.
But as everyone knows, following the housing collapse of 2007–‘10-and-counting, there’s been a boatload of foreclosures—and foreclosures on a lot of people who weren’t sloppy bums who skipped out on their mortgage payments, but smart and cautious people who got squeezed by circumstances.
These people started contesting their foreclosures and evictions, and so started looking into the chain of title issue . . . and that’s when the paperwork became important. So the chain of title became important. So the botched paperwork became a non-trivial issue.
Now, the banks had hired “foreclosure mills”—law firms that specialized in foreclosures—in order to handle the massive volume of foreclosures and evictions that occurred because of the Housing Crisis. The foreclosure mills, as one would expect, were the first to spot the broken chain of titles.
Well, hell, whaddaya know—turns out that these foreclosure mills might have faked and falsified documentation, so as to fraudulently repair the chain-of-title issue, thereby “proving” that the banks had judicial standing to foreclose on a delinquent mortgage. These foreclosure mills might have even forged the loan note itself—
—wait, why am I hedging? The foreclosure mills actually, deliberately and categorically faked and falsified documents, in order to expedite these foreclosures and evictions. Yves Smith at naked capitalism, who has been all over this story, put up a price list for this “service” from a company called DocX—yes, a price list for forged documents. Talk about your one-stop shopping!
So in other words, a massive fraud was carried out, with the inevitable innocent bystander getting caught up in this fraud: The guy who got foreclosed and evicted from his home in Florida, even though he didn’t actually have a mortgage, and in fact owned his house free-and-clear. The family that was foreclosed and evicted, even though they had a perfect mortgage payment record. Et cetera, depressing et cetera.
Now, the reason this all came to light is not because enough people were getting screwed that the banks or the government or someone with power saw what was going on, and decided to put a stop to it—that would have been nice, to see a shining knight in armor, riding on a white horse.
But that’s not how America works nowadays.
No, alarm bells started going off when the title insurance companies started to refuse to insure the title.
In every sale, a title insurance company insures that the title is free-and-clear: That the prospective buyer is in fact buying a properly vetted house, with its title issues all in order. Title insurance companies stopped providing their service because—of course—they didn’t want to expose themselves to the risk that the chain-of-title had been broken, and that the bank had illegally foreclosed on the previous owner.
That’s when things started gettin’ innerestin’: That’s when the Attorneys General of various states started snooping around and making noises (elections are coming up, after all).
The fact that Ally Financial (formerly GMAC), JP Morgan Chase, and now Bank of America have suspended foreclosures signals that this is a serious problem—obviously. Banks that size, with that much exposure to foreclosed properties, don’t suspend foreclosures just because they’re good corporate citizens who want to do the right thing, with all the paperwork in strict order—they’re halting their foreclosures for a reason.
The move by the United States Congress last week, to sneak by the Interstate Recognition of Notarizations Act? That was all the banking lobby—they wanted to shove down that law, so that their foreclosure mills’ forged and fraudulent documents would not be scrutinized by out-of-state judges. (The spineless cowards in the Senate carried out their Master’s will by a voice vote—so that there’d be no registry of who had voted for it, and therefore no accountability, the corrupt pricks.)
And President Obama’s pocket veto of the measure? He had to veto it—if he’d signed it, there would have been political hell to pay, plus it would have been challenged almost immediately, and likely overturned as un-Constitutional in short order. (The jug-eared milquetoast didn’t even have the gumption to veto it—he pocket vetoed it.)
As soon as the White House announced the pocket veto—the very next day!—Bank of America halted all foreclosures, nationwide.
Why do you think that happened? Because the banks are screwed—again. By the same fucking thing as the last time—the fucking Mortgage Backed Securities!
The reason the banks are fucked again is, if they’ve been foreclosing on people they didn’t have the legal right to foreclose on, then those people have the right to get their houses back. And the people who bought those foreclosed houses from the bank might not actually own the houses they paid for.
And it won’t matter if a particular case—or even most cases—were on the up-and-up: It won’t matter if most of the foreclosures and evictions were truly because the homeowner failed to pay his mortgage. The fraud committed by the foreclosure mills casts enough doubt that now, all foreclosures come into question. Not only that, all mortgages come into question.
People still haven’t figured out what this all means—but I’ll tell you: If enough mortgage-paying homeowners realize that they may be able to get out of their mortgage loan and keep their house, scott-free? Shit, that’s basically a license to halt payments right the fuck now. That’s basically a license to tell the banks to fuck off.
What are the banks gonna do—try to foreclose and then evict you? Show me the paper, motherfucker, will be all you need to say.
This is a major, major crisis. This makes Lehman’s bankruptcy look like a spring rain, compared to this hurricane. And if this isn’t handled right—and handled right quick, in the next couple of weeks on the outside—this crisis could also spell the end of the mortgage business altogether. Of banking altogether. Hell, of civil society. What do you think happens in a country when the citizens realize they don’t need to pay their debts?
If this isn’t handled right, then this will be the second leg down, in the American Death Spiral.

    Oh dear Lord, he said, calm yet despondent. Look at it, he said. I mean just look at it! Have you ever seen anything like it?!?

    No, said the koala—truthfully. And you know, uh . . . it’s . . . It’s pretty disgusting, actually. So would you mind putting that thing away?

«««  •  »»»
Note: Next post, I’ll discuss a possible—I emphasize, a possible—silver bullet that will fix this whole Mortgage Mess—but it’ll have to be done soon, and have to be carried out fast, and sold under the guise that it’s this great new program that everybody—and I mean everybody—will simply just love to be a part of!—
—Streamlined Refinance.



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Thu, 10/14/2010 - 11:22 | 649294 Dagny Taggart
Dagny Taggart's picture

a possible—silver bullet that will fix this whole Mortgage Mess

funny timing for the post, silver just blew through $24.55.

Thu, 10/14/2010 - 11:28 | 649323 Henry Chinaski
Henry Chinaski's picture

Tough for those who are waiting to buy the dip.

Thu, 10/14/2010 - 12:05 | 649479 caconhma
caconhma's picture

The situation is quite simple: both Bush and Obama administration together with the Congress declared that fraud and financial crimes are OK. Nobody will be punished, nobody goes to a jail, and everybody is entitled to keep the stolen loot and bonuses...

The situation will not have a "happy" ending without a collapse of US political and/or economic system. There are no silver bullets to fix it. It is not an economic issue anymore. It is a political collapse. It is a coming of guillotine times.

Thu, 10/14/2010 - 12:37 | 649582 Jean Valjean
Jean Valjean's picture

I remember the last guillotine times .... good times...., good times.

Thu, 10/14/2010 - 14:41 | 650082 Ripped Chunk
Ripped Chunk's picture

Man, you must be really old.

This time it will be a pay-per-view event. That is until the mob storms all of the TV stations and earth stations and makes it free for all.

Thu, 10/14/2010 - 15:32 | 650338 groucho_marxist
groucho_marxist's picture

ah, yes. the joy of the reign of terror.


Robespierre, where are you now? see:

Thu, 10/14/2010 - 13:06 | 649695 cossack55
cossack55's picture

Again, go long knitting needles and rocking chairs.

Thu, 10/14/2010 - 13:31 | 649799 Cognitive Dissonance
Cognitive Dissonance's picture


Knitting needles as the last line of defense and rocking chairs as winter fuel for the wood stove.

What else?

Thu, 10/14/2010 - 14:13 | 649982 Dagny Taggart
Dagny Taggart's picture

I see you are just being practical, but by that line of thinking, you'll have my kittens in a crock-pot.

Thu, 10/14/2010 - 14:37 | 650072 Cognitive Dissonance
Cognitive Dissonance's picture


If I need to consider your kittens as a food source, I'm in a whole heap of trouble and they might or might not be worth the effort. Besides, there's something to be said about food for the soul over food for the belly. Your little kittens seem to be of more value to the former than the latter.

Of course, I'm not presently hungry. :>)

Thu, 10/14/2010 - 15:34 | 650350 groucho_marxist
groucho_marxist's picture

don't forget too that the Mediaeval hatred of cats is part of why they had plague.

Thu, 10/14/2010 - 15:22 | 650284 RabidLemming
RabidLemming's picture

a little soy, brown sugar and a good hot grill are all you need.

also the age old adage:

Cats are hats and kittens are mittens.

We must not waste in these dire times.

Thu, 10/14/2010 - 15:52 | 650450 Dagny Taggart
Dagny Taggart's picture

That's so bad. I do threaten to stew them when they're moshing in my charts, but kittens as mittens?

Thu, 10/14/2010 - 17:14 | 650782 Conrad Murray
Thu, 10/14/2010 - 19:04 | 651089 Cognitive Dissonance
Cognitive Dissonance's picture

The human race is doomed, doomed I tell you. :>)

Thu, 10/14/2010 - 19:32 | 651174 Conrad Murray
Conrad Murray's picture

I hope it ends like this:

Sat, 10/16/2010 - 13:38 | 655246 MsCreant
MsCreant's picture

I may not hear that song the same way again.

Thu, 10/14/2010 - 13:12 | 649721 BobPaulson
BobPaulson's picture

Agree 100% with paragraph 1. Whether it's the end times as a result, it seems likely, but I'm not completely convinced. When basically everybody is involved in the corruption, I expect this is more likely to end in some currency devaluation, a reconciliation commission, and some dead people or Madoff equivalents blamed for all the worst crimes. Justice comes at the hands of competing nations, and right now the US has the biggest army. I seriously think the carrier fleet is what is keeping the US afloat now. 

Thu, 10/14/2010 - 13:28 | 649781 ZakuKommander
ZakuKommander's picture

This may not be as big a deal as some think.  A note is a promise to pay.  One does not need an original to prove up a promise to pay in court; otherwise a fire would absolve the borrower of all obligation.  Yes, there will be a delay in foreclosure, but a delay means relatively little in the scheme of things.  Remember, we all understand that just because a foreclosure takes place does not mean that the bank who obtains the property is putting it on the market and cashing in.  Many, many foreclosed homes are just left sitting, out of the market so as not to depress prices.  So sitting in a delayed foreclosure case and sitting in a holding situation wouldn't necessarily cause the books of the bank to be cooked any more or less.

Now of course without foreclosure the homeowner (so to speak) remains in place, paying nothing, and using his or her money to buy gadgets.  A good thing for retail, no?  

Don't count on the "missing documents" problem leading the banks to losses, either.  The law will come up with a fix, so no major financial donor is left out in the cold.  This is America.

Thu, 10/14/2010 - 13:38 | 649828 DosZap
DosZap's picture

WHO has the original TITLE is the issue I see.

If you cannot come up with that,OR WHO the  lien holder is .............your screwed.

Thu, 10/14/2010 - 13:50 | 649905 still kicking
still kicking's picture

Who has been promised to be paid?  The original bank sold that promise.

Thu, 10/14/2010 - 14:57 | 650127 DosZap
DosZap's picture

My point.

THEY do not have the TITLE DEED.

If they do not have that, their SOL.

Thu, 10/14/2010 - 16:28 | 650637 Fox Moulder
Fox Moulder's picture

It then becomes an unsecured loan.

Thu, 10/14/2010 - 17:31 | 650823 ZakuKommander
ZakuKommander's picture

None of this commentary is off the mark.  It's just that in the inevitable court case, it gets sorted out.  The people that owe money have to pay it.  Promises made (all down the line) are enforced.  And yes, thre may be unsecured debt, but that doesn't help the homeowner; it's just a fight among creditors over who gets rights to the house.  Which in the end gets put up for sale.

Actually, in real life -- and that's kinda what counts -- there are huge fights, then 99% of civil litigation will get settled, and it won't end up that much differently.

Except the lawyers will be richer!

Thu, 10/14/2010 - 21:36 | 651548 StychoKiller
StychoKiller's picture

Moral of the story:  No one in their right minds is gonna be buying foreclosed property for a looonnnggg time.

Thu, 10/14/2010 - 15:55 | 650467 swmnguy
swmnguy's picture

If disposition of the house were the issue in question, I'd agree with you.  Seems to me the issues with the actual houses will get sorted out one way or another, in some ugly foul way.  The real money, however, is in the hierarchy of MBS products, derivatives on those, etc. etc.  That's where the faults in the chain of title become heavily leveraged and really deadly.  And I'm not sure how the sausages get made--or hidden--to work that mess out.

Thu, 10/14/2010 - 21:38 | 651554 StychoKiller
StychoKiller's picture

Tranches are gonna be exchanged for Truncheons! (and tar, feathers, pitchforks and Torches!)

Thu, 10/14/2010 - 16:51 | 650747 CH1
CH1's picture

Can you imagine the overflow of the court system? A tidal wave into a cup.

Thu, 10/14/2010 - 13:47 | 649892 Kayman
Kayman's picture

Hey Lloyd ! You've been invited to a guillotine party. And you've got to bring your own basket !

Going long on wicker.

Thu, 10/14/2010 - 11:39 | 649363 Dr. Richard Head
Dr. Richard Head's picture

I just picked up a couple hundred oz this morn.  YEAHHHH

Thu, 10/14/2010 - 15:00 | 650141 DosZap
DosZap's picture

Dr.,Dr., Mr. M.D., can you tell me, where you buy?.

APMEX seems to be the best I have found.

Fri, 10/15/2010 - 00:39 | 649518 Problem Is
Problem Is's picture

"silver just blew through $24.55."

I love my silver... genuine coin of the realm...

"For one ounce of this, you can by 24 dollars of talk..."


Thu, 10/14/2010 - 12:29 | 649556 spdrdr
spdrdr's picture

Has anyone noticed that the recent gyrations in the silver price are moving at a regular 20:1 ratio with the PoG?

Gold goes up $4.00, silver goes up $0.20. Gold goes up $20.00, silver goes up $1.00.  Et cetera.

Given that the PoG/PoS ratio remains at 56:1 to 58:1, this creates significant leverage - is this a market based reaction to the true PoG/PoS ratio's historical norms, and can we finally be seeing a return to the norm?



Thu, 10/14/2010 - 13:35 | 649813 Cognitive Dissonance
Cognitive Dissonance's picture

Looks like Gold has found support at $1,372. I love my Silver. I love my Gold. I love me.

The original menage-a-trois.

Thu, 10/14/2010 - 13:49 | 649903 duo
duo's picture

AGQ.  Nice leverage.  Actually moving up faster than the miners.

Thu, 10/14/2010 - 13:52 | 649908 Cognitive Dissonance
Cognitive Dissonance's picture

Is that a parabolic move in your pants or are you just happy to see me? :>)

Thu, 10/14/2010 - 16:51 | 650749 downrodeo
downrodeo's picture



I know i've seen a picture of silvio burlusconi with the exact same expression on his face as the guy in the postcard from the link. It is a kind of malicious mirth. I love (to hate) that guy. To me, he seems like the Italian Rod Blagojevich; or at least, that is the aura he projects.


this was it: 

Thu, 10/14/2010 - 15:02 | 650151 DosZap
DosZap's picture

IF we were at( TRUE) historical NORMS, there would not be an ounce above ground on the planet.

Tue, 04/26/2011 - 13:30 | 1208288 william.smith61
william.smith61's picture

Navigation Screen Meanwhile, Iran's Press TV reported that a very large contingent of US ground forces had massed in Azerbaijan, near the Iranian border. The independent Azerbaijani news website Trend confirmed the report

Thu, 10/14/2010 - 11:22 | 649295 NoBull1994
NoBull1994's picture

Ruh roh, Shaggy.

Thu, 10/14/2010 - 12:21 | 649534 BobWatNorCal
BobWatNorCal's picture

Ruh roh, indeed!

"And President Obama’s pocket veto of the measure?"
On another thread someone said that Sen Reid had technically left the Senate in session even though the senators had physically gone home.
Because of that the pocket veto did not apply and the law would go into effect when the time period expired.

Does anyone know how this turned out?

Thu, 10/14/2010 - 12:51 | 649650 iDealMeat
iDealMeat's picture

The bill originated in the house..  so it went back to the house.. No one is home at the house..

I was seriously concerned that Pelosi would sneak in a recall session but I think we're past the 10 days..

Thu, 10/14/2010 - 13:13 | 649727 Milestones
Milestones's picture

The veto of HR 3808 was over the House vote which had already passed. What the Senate status was is of no cosequence.

If the Congress wants to pass this after the election on the 3rd there may more than a matter of conscience; some ropes may well be involved with a wrong vote.

More and more politicians had better dial in to their caculations- what is more important, money or getting a next breathe.

Push is coming to meet shove very quickly. Remember there are 11,000,000 houses under water. Thats a lot of pissed off people.


Thu, 10/14/2010 - 14:33 | 650049 moneymutt
moneymutt's picture

I'd like to see the real numbers if you figure some certain percentage of additional defaults if they don't find a political solution soon...and there will be no political solution til late Nov.

Some numbers questions:

1) so how many previously foreclosure takings of house will be contested?, maybe 1 out of 100? a lot of people never contested, a lot of people put keys in the mail etc...but some fought it and lost due to forged documents. So what does 1 out of 1000, 1 out of 100, 1 out of 50 houses already taken and sold now being contested in court, do to banks.

2) how much does this accelerate existing strategic defaults...what percentage of 11,000,000 underwater houses have already strategically defaulting? how much does this increase that percentage, how much in certain states? While someone with equity and good credit would need high level of confidence to default as they have lot riding, someone way underwater has little to lose now by going for it and defaulting...even if realize they may never get their house for free,  they now know, depending on their state and the type of loan they have, they may get house rent free for 2-3 years...thats a lot of encouragement. In addition, now the banks are shown publicly to be cheating, less moral reason to honor contract, gives people an excuse to quit their end. And strategic defaulting is contagious.

I'd love to see what the datamining guys at the bank who are looking at loan performance in the next month, I bet there will be a huge spike in underwater folks stopping payment. Even if banks get these houses eventually, loss of income and great increase in expense in meantime.

3) How much is this going to cost the banks in legal fees and additional staffing? Is this significant to their bottom line? Now foreclosures will be fought tenaciously by every laid-off lawyer in town. They will have to address the now-building back log. There will be class action law-suits, depositions of their staffs. The will be new legal challenges to previously foreclosed and closed loans. There is the AG and DOJ investigations to respond to and, and there is having to do more expensive, more thorough job on tracking title on all new sales.

4) Plus, any foreclosed REO they try to sell make less as the REO will be brand tainted for some time, even if they are cleaned by political court action, individual homeowners will be wary, value of REOs will go even lower. How much?

If you put some conservative estimates each of these increase costs/losses, even if we factor in some sort of political/court stick save for these too big to jail types, I bet we see a blood bath. And if there isn't a political save that holds up in court, ouch.

Reggie, where are you, I need some numbers...


Thu, 10/14/2010 - 21:42 | 651569 StychoKiller
StychoKiller's picture

HR3808 is only a sideshow now, the Tiger (MBS, CDO holders) is out of the bag (and (S)He is pissed!)

Thu, 10/14/2010 - 14:44 | 650088 midtowng
midtowng's picture

This isn't going to get fixed anytime soon. It's election season. Congress isn't even in session, and won't be in session for another month.

Thu, 10/14/2010 - 11:28 | 649305 AnonymousMonetarist
AnonymousMonetarist's picture

'Bernanke and his ilk are not just trying to boost the US economy, they are trying to salvage their reputations and theories. The crime is that they are savaging average Americans and have bet the country in a desperate attempt to prove that they know best.'
-Bill King, the King Report 10/14/2010

'The effect of QE2 on interest rates could be small and limited to an announcement effect...many believe that the effect on output or employment would be small...unlikely to stimulate aggregate demand...little effect on aggregate demand implies a corresponding small effect on output and, hence employment. QE2 could have adverse effects.'
-Federal Reserve Bank of St. Louis

'The folks at the Fed are frozen in fear. They don't know what to do.'
-Chris Whalen

'But they that will be rich fall into temptation and a snare, and into many foolish and hurtful lusts, which drown men in destruction and perdition. For the love of money is the root of all evil...'
- 1 Timothy 6:9-10

'There hath no temptation taken you but such as is common to man...'
- 1 Corinthians 10:13

'Don't Task Don't Smell', the central plank of the 'I Can't Believe it's Not Capitalism Plan', has given us Sugar Mountain, where stupidity is cupidity.

Ringfencing the multitude through financial pulchritude is but Federales psych ops, masquerading debasement as growth, as the plutocracy sips sweet ambrosia from the skull cap of the common man.

Phat, Plummed and Cupid is no way to go through strife son. Mr. Hand's strong dollar policy is the chimera of currency debasement masquerading as America's wealth exporting machine that is regularly promulgated by our leaders as an exceptional example of America's resiliency(AM Rule #5). Timmy G even takes credit for the creation of the 'strong dollar' policy.'Nuff said!

As the epigram, 'Yes Virginia , there is no collateral' becomes an accepted norm, as the metaphorical fork in the middle of the road er scratch that kicked can hangs with horsehair, the splinter of our disconnect in the deep bosom of our equity buried is proclaimed by the Federales as nothing but a thorn discovered as they fervently hope not to be cast to the lions.

Is it Back to the Future of folly and bubbles or Fade to Back as we peer down the chasm of the black diamond demographic? Building a bridge to nowhere is at least doing something, but please don't peer down dear citizens lest ye randomwalkers realize the gravity of our situation.

The Oracle at Eccles and assembled throngs of Nancy Capitalists beseech their models that show 100% chance of 'no fail' when the money is easy and free to deliver them like Aesop's Shepherd so when the masses see that which healed them, they will pardon and not attack.

Golden goose or scrambled eggs?

The answer it would seem as we destroy our standard of living to create a Potemkin recovery, is both, in an ever increasing divergent measure.

The insouciance of elites and the Antoinette economy.

Verily, let them eat debt.

Thu, 10/14/2010 - 11:43 | 649386 SWRichmond
SWRichmond's picture

The Oracle at Eccles and assembled throngs of Nancy Capitalists beseech their models that show 100% chance of 'no fail' when the money is easy and free to deliver them like Aesop's Shepherd so when the masses see that which healed them, they will pardon and not attack.

That one's a keeper.

Thu, 10/14/2010 - 12:19 | 649527 Oh regional Indian
Oh regional Indian's picture

AMet, your writing is just awesome. Ah laihks it, a lot!


Thu, 10/14/2010 - 12:49 | 649641 Papa Legba
Papa Legba's picture

Just because you can always use a metaphor doesn't mean you should.

Thu, 10/14/2010 - 13:17 | 649734 Cognitive Dissonance
Cognitive Dissonance's picture

I remember my mother saying something about bridges.

Why does a dog lick his this a family blog?

Because he can. :>)

BTW I would trade all my silver to be half the writer AM is. So while we can all complain about his prose, we might want to concentrate on the message.

Thu, 10/14/2010 - 14:07 | 649961 Papa Legba
Papa Legba's picture

Working on the explication now...

Thu, 10/14/2010 - 14:24 | 650021 Cognitive Dissonance
Cognitive Dissonance's picture

Wife: "So CD, what did you learn at work today?"

CD: "Well honey, I learned a new word. Explication. At first I thought my chain was being pulled and I was just about to say so. But then I decided to do some research before opening my mouth and inserting foot."

Wife: "Did you thank the nice person?"

CD: "Yes I did, in a round about way. What's for supper?"

Wife: "I'm afraid it's franks and beans again dear. If you would spend less time on ZH and more on your business, we might be able to afford hamburgers some day."

CD: "Yes dear."

Thu, 10/14/2010 - 15:13 | 650230 nuinut
nuinut's picture

For the love of money is the root of all evil...

Explicating this particular quote reveals implications of the seemingly never ending variety. 

A veritable room full of mirrors. 

Thu, 10/14/2010 - 15:17 | 650256 kathy.chamberli...'s picture

CD luv ya know but that was the dumbest ass post I think I have ever read of yours. but maybe I don't get husband and wife jokes.

Thu, 10/14/2010 - 21:47 | 651585 StychoKiller
StychoKiller's picture

Another word for ya:  Persiflage!

Thu, 10/14/2010 - 22:25 | 651668 Borrowed Merkin
Borrowed Merkin's picture

Actually, because he can't get his paw into a little fist....50

Thu, 10/14/2010 - 11:43 | 649313 wintermute
wintermute's picture

MERS is a computer system - not a company. It is just like Skynet, but destroys property (title and mortgages) instead of humans.

The big banks are Terminators using MBS as money-sucking weapons. But this time they are failing. The resistance has turned the tide. We may win a scorched earth littered with the skulls of foreclosure victims - but we will win!

Down with MERS-Skynet!

Up with Durden-Connor :-)

Thu, 10/14/2010 - 11:59 | 649453 The Real Fake E...
The Real Fake Economy's picture

i've been thinking a lot recently about the Terminator and Matrix series and how it pertains to so much of what is happening now.  between the robo signings, high-frequency trading and all of the other tasks/jobs that have been outsourced to technology.  at what point do the robots/machines start taking over? 

Thu, 10/14/2010 - 12:22 | 649535 Oh regional Indian
Oh regional Indian's picture

Hey Real, the age of machines is NOW:



Mr. Lira, worth every pound of truthy angst, less bodily references.

Thu, 10/14/2010 - 12:49 | 649638 Screwball
Screwball's picture

Already been discussed.  From 2000 Wired Magazine -

Written by Bill Joy, co-founder and Chief Scientist of Sun Mircrosystems.

Kind of long but a hell of a read.  I'm sure you remember Ted Kaczynski, the Unibomber.  Crazy Ted wondered the same thing, and did something about it.

Disclosure: Not advocating nor condoning what Ted did.

Thu, 10/14/2010 - 13:53 | 649893 Cognitive Dissonance
Cognitive Dissonance's picture

I strongly suggest that people ignore the mainstream media induced verboten skull and cross bones don't ever speak about Ted Kaczynski/Unabomber in any other manner than as evil incarnate line in the sand. Has anyone investigated why he did what he did or has everyone just accepted the "official story"? The trick is to conflate his actions with his words so you won't read his words. Or at least you'll reject his words.

Because if one were to find his "manifesto" (a term of derision when used by the press to disparage, just like "conspiracy theory") on the Internet and actually spend some time reading it, you might just be surprised how prescient he was when he wrote it. I refuse to ignore something simply because my masters (or their controlled MSM) tell me to do so.

Let me riddle you this. At precisely what point does someone turn from a "normal" everyday cog in the social wheel into a bomb mailing revolutionary/terrorist/rebel/freedom fighter? Why was this guy labeled crazy, as all rebels are by the masters in control, and why are we accepting this label so readily? If we really are independent thinkers, and I would be hard pressed to find someone on ZH who didn't think they were independent, why do we still accept so many of the myths of the state.

Just askin'

Thu, 10/14/2010 - 14:28 | 650036 LeBalance
LeBalance's picture

That's why you and I need to do our duty and bring this world a better class of criminal.

The present (upper)class of criminal just suck.

Thu, 10/14/2010 - 21:52 | 651595 StychoKiller
StychoKiller's picture

Our Terrorist(s) are someone else's Freedom Fighter(s)

Thu, 10/14/2010 - 16:58 | 650769 CH1
CH1's picture

How about a NON-bomb throwing freedom fighter? Quite possible, you know!

Thu, 10/14/2010 - 17:44 | 650862 CH1
CH1's picture

How about a NON-bomb throwing freedom fighter? Quite possible, you know!

Thu, 10/14/2010 - 22:01 | 651614 BrosMacManus
BrosMacManus's picture

A little Boondock Saints justice...or old school Death Wish Bronson.


Thu, 10/14/2010 - 11:30 | 649330 papaswamp
papaswamp's picture

This could be the governments plan all along...what easier way to push through a fix than to say...well as you can see the whole thing is broken, so everyone will get a quickie refi down to 3.755% (or whatever)...right before the election.

Thu, 10/14/2010 - 13:17 | 649738 dehdhed
dehdhed's picture

yup, that's my guess too

Thu, 10/14/2010 - 14:22 | 650014 centerline
centerline's picture

Thinking the same thing here. The silver bullet is a national refinance program. Zero cost and low rate but with a longer term. And forgiveness for late payments / default status. Gonna need some sort of tickler to get people going en masse in said direction. Or maybe it will go full contact through some sort of nationalization process wherein few people will even have a choice. Who knows. But, I can feel the ground shaking... there is something coming this way soon as an attempt to was away this mess.

Thu, 10/14/2010 - 11:33 | 649333 doomandbloom
doomandbloom's picture

what is it about Lira's writing that makes it all so clear?


Thu, 10/14/2010 - 11:58 | 649450 DosZap
DosZap's picture

It's called TRUTH, and REALITY BITES (Big Time).

And, like WE did not have enough issues already?.

If this is not handled properly, grab your ankles and kiss your ass bye-bye.

Thu, 10/14/2010 - 13:10 | 649710 cossack55
cossack55's picture

No funds in bank.  No investments in banks.  Bring it on.

Thu, 10/14/2010 - 12:00 | 649457 -Michelle-
-Michelle-'s picture

I don't know, but thank goodness for it.  I actually had a little animation playing out in my head as I read each line.

Thanks, Mr. Lira!

Thu, 10/14/2010 - 12:50 | 649643 Screwball
Screwball's picture

He swears good. :-)

Thu, 10/14/2010 - 14:49 | 650100 doomandbloom
doomandbloom's picture

the circular reference to koala and linking of questions, makes it seem like he conceived the whole article together in once piece...almost like a painting...

Thu, 10/14/2010 - 17:31 | 650820 Gonzalo Lira
Gonzalo Lira's picture



Go to my blog, so you can see the pic I included of the koala bears. 


Notice their captions. 



Thu, 10/14/2010 - 11:33 | 649334 HarryWanger
HarryWanger's picture

People still haven’t figured out what this all means—but I’ll tell you: If enough mortgage-paying homeowners realize that they may be able to get out of their mortgage loan and keep their house, scott-free? Shit, that’s basically a license to halt payments right the fuck now. That’s basically a license to tell the banks to fuck off.

Here we go again with the overly dramatic "if this happens, etc." commentary. Look nobody's going to get out of their mortgage and keep their house. Ain't gonna happen. May be other shit to hit the fan but this isn't part of it.

Thu, 10/14/2010 - 11:41 | 649375 SheepDog-One
SheepDog-One's picture

Mortgage, schmorgage, very soon youll just be able to pick whatever house you like and move into it, that is if you can defend against the Road Warrior bands of marauding motorcycle homo murdering rapist plunderers. Good luck!

Thu, 10/14/2010 - 12:01 | 649464 cossack55
cossack55's picture

Peak Oil rewrite:

"marauding Moped homo murdering rapist plunderers".

Thu, 10/14/2010 - 12:43 | 649609 cowdiddly
cowdiddly's picture


Bands of knife wielding skateboard punks and attack rickshaws.

I find it most interesting that the Chinese are trading in the rickshaws and bicycles for new compact cars while the rest of the world starts to look at a bicycle as viable transportation.

Thu, 10/14/2010 - 12:55 | 649664 Bananamerican
Bananamerican's picture

heh, that's funny...

My 16 year old daughters $600 MadeInChina Mountain bike just SNAPPED IN HALF yesterday....

Thu, 10/14/2010 - 14:07 | 649942 Kayman
Kayman's picture

When you took it out of the crate ?

While Bernanke and Obama are looking for solutions to the economy, your daughter found the solution. 

The U.S. can make a $600 Mountain bike that doesn't snap in half, but Welch and his ilk and Wallymart won't stock it.

Thu, 10/14/2010 - 14:01 | 649943 trav7777
trav7777's picture

Solution:  don't buy china.

Get something better-made from elsewhere.  The stuff China makes is mostly cheap shit, no quality whatsoever.

I notice some things, when I listen to people tell me that if shit was made here it would cost a ton more.  My youngest has a bunch of stuffed animals, some made China some made USA.  The prices on them were the same.

I would rather pay 3x as much for a pair of italian shoes that will last 5x as long.

Thu, 10/14/2010 - 14:10 | 649973 Kayman
Kayman's picture


Wallymarts message of falling prices, fails to address that quality has fallen faster than price. 

China has sold trillions of dollars of crap to the U.S. consumer and its time to ask for a refund.

Thu, 10/14/2010 - 14:17 | 649995 Misstrial
Misstrial's picture

Made in USA or made in Taiwan, my friend.

Its all about the quality of the welds and materials.

Check Craigslist for a good used one made in USA or Taiwan.


Thu, 10/14/2010 - 14:47 | 650098 Ripped Chunk
Ripped Chunk's picture

I hope she was not riding it at the time or at least going slow.

If you want to make a good video, buy one of those $149 WalMart bikes and have someone who does not care about personal safety ride it down a rocky single track that an actual mountain bike could shred. I mean the whole bike is put together in the middle of the night by a WalMart employee that has a pair of pliers as his only tool.

Thu, 10/14/2010 - 15:33 | 650343 kathy.chamberli...'s picture

my really good buddy, Timmy Rutherford with team Ritchey on a Ritchey mountain bike riding into first place at the Durango Colorado world championship mountain bike race, elite class. his ritchey broke in half it was made in USA. I have lots of other parts braking/breaking stories. one problem the composit metals being used now and they all want lightness. lots of very expensive gruppos brake/break. ask my friend David Blair who played football with Hank Paulson @ dartmouth about his seat tube braking/breaking. OUCH.

Thu, 10/14/2010 - 17:40 | 650353 kathy.chamberli...'s picture


Thu, 10/14/2010 - 13:13 | 649725 cossack55
cossack55's picture

Granted, I don't get let out much, but was in Savannah and St. Augustine lately and notice pedicabs for first time.  Came back home and saw them in Indy downtown.  If I wasn't so fat, old and lazy, could be a good gig.

Thu, 10/14/2010 - 15:49 | 650434 kathy.chamberli...'s picture

yes I looked into that business model and plus bikes that haul with a trailer . a lot of companies are manufacturing and building cool cool styles of bicycles. I was interested in doing a business in Boston where they really need bikes to fit in those narrow crowded streets. be great too bad it is so bad rainy and inclement. then the NYC bike peds have to be regulated and only a certain amount can get operating licensed. now throw in insurance and fees well sweetheart can't make money but you sure shit get in shape. when I was in Beijing riding bike around you would see these platform bikes carrying tons of coal all piled up on the back with an old children man peddling slow mo Joe. then I wanted to open a bike courier business cause it is just grid lock from the financial district to the forbidden city. like FedEx on bicycles make millions. I never saw one bicycle courier while there. I throw out the idea to my rich friends, no takers. here in boulder they have on street bike lock up stations. way more bikes then anywhere else plus sun. P E D A L. P O W E R

Thu, 10/14/2010 - 13:44 | 649870 DosZap
DosZap's picture

Yes, and they just ASSUMED the title of the #1 Energy User in the World.

Pics of their freeway, looked just like LA.

Thu, 10/14/2010 - 15:40 | 650378 cowdiddly
cowdiddly's picture

"Santa Mongolian Freeway, sometimes makes Chen woo blue, woo,woo,woo.

Your the reason God made Oklahoma, and I'm sure missing you"

Thu, 10/14/2010 - 14:11 | 649880 DosZap
DosZap's picture


Thu, 10/14/2010 - 13:02 | 649684 aheady
aheady's picture

That brought tears - ba ha ha ha ha ha!

Thu, 10/14/2010 - 13:25 | 649774 FEDbuster
FEDbuster's picture

When the investors who bought these bags of shit filled with bogus mortgages, realize that they may be able to force the originators (Countrywide (BofA), Chase, Wells Fargo, Citi, etc...) and the securitizers (Merrill Lynch (BofA), Bear Stearns (JPMorgan/Chase), Goldman Sachs, etc...) to buy back the fradulent securities at original purchase price plus fees, thats the "Oh, shit" moment for the TBTF bankstas. 

Upside down homeowners will reach the "fuckit" moment shortly, which will be the straw that breaks the camel's back.  Foreclosuregate is all over the MSM now, this shouldn't take too long.

Thu, 10/14/2010 - 12:00 | 649459 Tao Jonesing
Tao Jonesing's picture


You're right.  Lira is wrong.

If there's no chain of title, all that means is the note is no longer secured by the property, and foreclosure is not available to the note holder.  That does not mean the debt is extinguished, as the note holder can still sue for breach of contract.  The debt still exists.  The borrower still owes the debt.  The note holder can still collect on that debt, it just can't get the house directly (although suing the homeowner might force bankruptcy and the sale of the home to pay off the debt).

Thu, 10/14/2010 - 12:11 | 649502 weinerdog43
weinerdog43's picture

Any who, pray tell is the note holder?  This is the essence of the point.  The mortgagee owes the note holder.  Who is that entity?  Tranche A, B or C?  In other words, show me the note and I'll show you the money.

Thu, 10/14/2010 - 12:47 | 649625 ChanceIs
ChanceIs's picture

Point of order:  It is the mortgagee who is the creditor.  The mortgagor created the mortgage (lien against the property) and offered it as security for the loan.  There are those who would challenge me (and I would not resist) that the mortgagee and creditor are not the same - at least not in this Brave New World.  I believe that it is the case that the creditor is the note holder, and the mortgagee holds the paper lien.  They are usually one and the same, but it isn't any longer the case, or it may have started out that way but undergone strange mutations. Teenage mutant NINJA mortgages!!!!



   noun, verb, -gaged, -gag·ing. –noun
a conveyance of an interest in property as security for the repayment of money borrowed. 2.
the deed by which such a transaction is effected. 3.
the rights conferred by it, or the state of the property conveyed. –verb (used with object)
Law . to convey or place (real property) under a mortgage. 5.
to place under advance obligation; pledge: to mortgage one's life to the defense of democracy.


1350–1400;  earlier morgage,  ME < OF mortgage,  equiv. to mort  dead (< L mortuus ) + gage  pledge, gage1
Thu, 10/14/2010 - 13:00 | 649681 weinerdog43
weinerdog43's picture

Gah.  You are correct of course.  Morgagor, not mortgagee.  Thanks.

Thu, 10/14/2010 - 12:16 | 649517 Boxed Merlot
Boxed Merlot's picture

...(although suing the homeowner might force bankruptcy and the sale of the home to pay off the debt)...


Who would buy such an asset from the indebted homeowner?  The subsequent purchaser would not be given any assurance their possesion is legitimate.  This is the crux of the matter.  A clouded title is a clouded title. And the indebted homeowner did nothing to cloud the title, but IS the one who suffers for it.


As mentioned before, let the state's AG keep their "fines", the home owner/buyers deserve restitution!

Thu, 10/14/2010 - 12:35 | 649574 Winston Smith 2009
Winston Smith 2009's picture

"Who would buy such an asset from the indebted homeowner?  The subsequent purchaser would not be given any assurance their possesion is legitimate.  This is the crux of the matter.  A clouded title is a clouded title."

Bingo!  And, thusly, the entire edifice comes a tumblin' down...  The legal expense of resolution is terminal unless there is government intervention at which point more sheep might wake up to the systemic scam that laws apply only to them.

Thu, 10/14/2010 - 12:53 | 649658 ChanceIs
ChanceIs's picture

Somebody (the venerable Janet Tavakoli I think) wrote recently that a stream of regular payments would constitute evidence of a debt.  One just writes that montly check to the service company out of charity, right??? I think that there will be few who are able to completely ditch their mortgages.  If there are many, it will topple the banks and they won't let that happen.  I think in the one or two cases where the mortgagor has skated, the foreclosing party so offended the judge that he handed them their head.  A difficulty for the banks is that they now have to figure out how to own the judiciary - much harder than getting a mortgage on Congress, especially under the new scandal scrutiny.  

Thu, 10/14/2010 - 13:36 | 649817 NotApplicable
NotApplicable's picture

I'm thankful that property law is still in the domain of state courts, else this too would be swept under the proverbial, ever-enlarging federal rug.

Problem is though, my gut tells me that whatever fix this problem ends up getting will federalize the entire system, all in order to make it "fair," as there is no way the criminal class in DC will allow everyone to claim a free house. Instead, they will steal (read: print money) all of the houses, and we will pay tribute directly to them.

Just another example of the elites "breaking some eggs to make an omelette."

I hate omelettes.

Thu, 10/14/2010 - 15:19 | 650262 High Plains Drifter
High Plains Drifter's picture

What would be really intestesting is if this legal statutory situation, somehow

finds its way over into credit card law. Credit card banks do almost the same thing as the mortgage banks , especially in any lawsuit. When documents are requested all they rpoduce is some robo signed affidavit stating that the debt is true. The man or woman who signs this bogus affidavit , usually never, ever has absolutely any idea about the alleged debt, nor do they know anything about how this alleged debt came about. They merely sign the affidavit and use it as "evidence" to "prove" their case.

Thu, 10/14/2010 - 12:55 | 649660 ChanceIs
ChanceIs's picture

Deleted - duplicate.

Fri, 10/15/2010 - 01:42 | 649883 kayl
kayl's picture

There is no money, and there is no debt. It's just fake money and the discharge of debt. It's easy enough for everyone just to discharge the debt and keep the house.

File a UCC 1 Financing Statement and ask for a non-cash discharge of debt through the US Treasury. Use Standard Form SF5510 in the GSA forms library.

Look into Article 3 of the Uniform Commercial Code (UCC) for the procedure to discharge debt.

Thu, 10/14/2010 - 14:00 | 649939 ArsoN
ArsoN's picture

I think bankruptcy allows people in most states (particularly south and west, think FL, AZ) to claim a homestead exemption.  Poor but honest mortgage payer probably has few other assets.  Final result could end up the same in many instances (plus legal fees). 

More importantly, can anyone elaborate on how owning the mortgages directly would affect the bankruptcy remoteness of the REMICs?  I don't see where the liability would arise that could affect an agency rating.  Even if, why not set up another a conduit vehicle to hold title?  Are they just that cheap and lazy?  

Thu, 10/14/2010 - 18:25 | 650973 Milestones
Milestones's picture

Maybe. If the house is protected in a bankrupcy protected state, the owner declares bankrupcy, his home is excluded from the bankrupcy and the bank has an unsecured debt. T.S. for the bank, as the house is not collertal (sp) anymore.

Credit in the toliet; so will half of all -mericans be. Wowey woo. Milestones 

Thu, 10/14/2010 - 12:58 | 649669 Marla And Me
Marla And Me's picture

That's because the bank has what's called an "equitable lien" in the property.  It's a last resort remedy to secured interests, a sort of catch-all "yeah we might have messed up, but they still owe us" kind of thing.  If the bank lent $200k for someone to buy a house, no judge that was educated at an american law school is just going to turn around and say that, because the lien-recording process wasn't properly done, now the homeowner gets a house free and clear of all claims.  It simply doesn't work like that.  Maybe in Wonderland, but not in this place called reality.  The people who think this chain-of-title issue is going to magically end up getting people who defaulted on their mortgage loan a home free & clear are completely ignorant of the law, and I'm sorry to have to say, are talking out of their asses.  Plus, since when do the "people" get a break?  Big hint - the bankers. always. win.  And yes, I fully realize that the bankers just debited and credited accounting ledgers in order to create this "money," but unless that system completely disappears, these fantasies of free homes will remain just that...

Thu, 10/14/2010 - 13:42 | 649853 RSDallas
RSDallas's picture


Thu, 10/14/2010 - 14:08 | 649963 kayl
kayl's picture

A few holes in your theory. Yes, it is true that the banks didn't actually provide a security interest in the transaction. They didn't lend any of their money or credit. They used your signature to access YOUR own credit and bring it into the bank. This is all acceptable by bank licensing. However, they then withhold your credit. Now this is a violation of law. Three years after you get a mortgage, the bank files an abandonment form with your name saying you abandoned your credit without your knowledge or consent. This is also a violation.

The banks don't file the 1099OID forms reporting the tax they owe on the new money creation used in leveraging up your credit through the magic of fractional reserve banking. They are now tax evaders with the Fed and IRS.

I wrote a letter in Affidavit form to the Office of the Comptroller of the Currency outlining the fraud committed against me. Three months later, the CEO of the bank called me to ask what I wanted to get my house back. I told him I would discharge the debt under Article 3 of the Uniform Commercial Code and then I discharged the debt. They keep sending me letters like I own the place, no bills. I just keep sending them the discharge of debt and after three times, I'll issue a Confirmation of Discharge letter with the account paid in full report like I always do. Ah, the joys of handling your own commercial affairs and sending claims or contracts back to the bank!

At some point, I'll show my discharge affidavits to the courts in a Quiet Title suit. The bank has agreed to the discharge of debt through its silence. Silence means consent.

Thu, 10/14/2010 - 14:49 | 650105 Marla And Me
Marla And Me's picture

It's not a theory, it's basic secured transactions law.  The lender doesn't provide any security interest because it obtains one in the collateral (the home), in exchange for providing you with debt that enables you to take possession of the house.  What do you mean by "However, they then withhold your credit."  How?  Where?  Seems to me that they used your credit to provide you with possession of a home, which they then promptly collateralized for their benevolent act of providing you with debt to get the home?  I'm not following you. 

In the securitization of things, banks assigned a large portion of these loans (do you know which ones weren't securitized?  Jumbo loans, you know, the large ones that the bankers get to buy their own homes...) back and forth a multitude of times.  This is where the water gets muddy; apparently the banks and the servicers were real loose with the assignments, and that's where a lot of the troubles are coming from.  You can't foreclose on a home if you don't own the note.  It doesn't mean that no one has a mortgage or equitable lien on the property, it just means that the party that started the foreclosure doesn't have standing.  There will be fines handed out to the parties that showed up in court, swore under oath that they owned the note, and foreclosed, when in reality they never owned the note in the first place.  Even if the mortgage wasn't properly recorded, that's what the "equitable lien" doctrine is for.  It's a catch-all that allows the judge to say "I see that you didn't do the proper recording, but since you "lent" the mortgagor $200k, I can't in good conscience just let him walk away with your collateral for free."

Good luck with your plan.  I say it's about as likely to work as when I went on my first jackelope hunt...  People are confusing this story as some sort of money falling out of the sky thing.  It's not.

Thu, 10/14/2010 - 18:42 | 651025 kayl
kayl's picture

There are 8 requirements to create a contract under the Common Law: offer, acceptance, intention, sufficient and equal consideration, mental and lawful capacity to contract, legality of purpose, genuine consent (willingly, knowingly, and voluntarily), certainty of the terms. Full disclosure of the material terms and conditions of the loan.

I meant that the bank offered no consideration in the contract, but the individuals are offering their homes as collateral. The banks do not disclose the material terms and conditions of the loan. There is no genuine consent, because we are lied to in regard to the loan. The entire mortgage process is a fraud, since they provide us access to our own credit. The contract is not valid, it doesn't meet at least 3 criteria. There's been no meeting of the minds.

Under the UCC and the definition of a "person" corporate fiction as a transmitting utility is given in Article 3. Living beings create debt-based money with our signature. This is the credit I was discussing. The minute you sign the loan application, you bring debt-based money into the monetary system. The house is already paid for since we are the surety and chattel supporting the monetary system.

Under the UCC even without filing a UCC 1 form, you are the principal. You are the originator of the money. You are the recognized owner of your credit. When you file a UCC1 correctly, you can file for the recoupement of all the interest and rents created off the credit you signed for.

They withhold your credit when they don't acknowledge that they received your credit by accessing your exemption account at the Treasury. And they move on to the signing of the promissory note, the mortgage note. That is evidence that your credit was withheld.

Three years later, the bank files the 1099A form Acquisition or Abandonment of Secured Property, indicating you aren't claiming your credit. You didn't even know your credit was in the bank's possession.

Yes, in the loan transaction they obtain a promise for you to pay back your credit plus interest. They make you promise to use your house as collateral. This is the bank's secured interest. But it is a trick, since they had no consideration in the contract.

The 1099OID filing is the tax that the banks must pay to the IRS for using your credit and creating a profit from it. They never file them. They are tax evaders.

I've had full confirmation from my CPA. But he warned me, this knowledge is dangerous. No one is to acknowledge the complete bankruptcy of the United States in 1933, or discuss the method used to support the monetary system during this bankruptcy in the last 77 years. The debt-based money system and the Uniform Commercial Code are keys.

There is no money, and there is no debt. There's only fake money and the discharge of debt. Paper claims that the bankers have created under the UCC are discharged with more paper. Look up transfer instruments under Article 3. Valid claims may be discharged with debt-notes or a paper instrument you write out yourself.

The Office of the Comptroller of the Currency is very much concerned with violations concerning the UCC and the monetary system. Discharge of debt isn't theory, it's the law. It's posted on the Cornell Law University website.

Every valid claim must be accepted for value and returned for discharge, settlement, and closure of the account. The bank must honor your discharge. And if they don't honor your discharge, they are in sedition with the currency laws. You can claim damages.

All the lawyers, judges, bankers, and high flying banking executives know this stuff. The people who haven't gotten a degree in high finance or law have been left out of the loop for the last 77 years. That is why we are in this mess.

Marla, you have a good grasp of the problems, but are either misleading the public or working on controlling opposition. The UCC is irrefutable. And the cat's out of the bag.



Thu, 10/14/2010 - 14:57 | 650129 edwardscpa
edwardscpa's picture

kayl - my kneejerk reaction to reading this is not unlike what I think when I hear a tax protester's detailed and studied explanation for why they don't owe income tax:  "good luck".  You also seem to imply that the money a bank lends is taxable to the bank and I'm quite sure that's not the case, but I'll hear you out on the rest of it.  Please explain in detail, and reconcile with your other post on UCC Article 9. 

Thu, 10/14/2010 - 20:53 | 651342 kayl
kayl's picture

Please  take the link to Article 9 of the UCC at Cornell Law University.

Section 9-102 is interesting. Look up the definition for (7) Authenticate and (31) electronic chattel paper. And (56) New debtor, a person who assumes the debt from a previous security agreement. This may apply to these short and foreclosure sales.

Section 9-105 Control of Chattel paper. Doesn't say the goods must be in your possession, only documented in an electronic medium.

Section 9-110. Security Interests Arising under Article 2 or 2A. Filing is not required to perfect the security interest. 

Section 9-202 Title to collateral is immaterial.

Poke around and it will come to light.

BTW, banks don't lend money or credit. They access your credit and leverage it up 9x by the miracle of fractional banking. It's the interest they gain from your credit and all the loans spawned that they pay taxes on.

Thu, 10/14/2010 - 15:13 | 650211 Marla And Me
Marla And Me's picture

Kayl, I went and read your other posts.  Even if we were able to get rid of all of the banks, we would still have to operate as personal creditors to each other.  If I'm a home builder, I'll build you a house for cash any day, but if you need credit from me, I'll make sure that you don't get to own it outright until all my payments have come in.  You might "own your credit," but you'll still use it to get what you need.  In that kind of world, absolutely EVERYTHING would be fully collateralized, or it would cost a lot less because of the unavailability of credit.  I know people hate the bankers and all, but they actually are useful.  They only facilitate the credit that you and I want to have in order to trade with each other.  They create the system that we use to operate.  It's exactly why TPTB and the TBTF bankers aren't going anywhere.  They are a parasitic class that clearly understands and masterfully exploits human nature.  They insert themselves between me and you, and take a pound of flesh at every turn.  The problem is that because of compound interest (their pound of flesh), math dictates that the system will collapse from its inception.  They collateralized their loans along the way, and when the system can no longer expand and implodes on its own weight they just show up to repossess what's "theirs."  In turn, this creates nasty havoc, which TPTB channel into wars that cull the herd and provide a smaller base from which the system can be reset.  It's really not that complicated.  It will be especially necessary now that it looks like our consumption levels are pushing us against the limit of oil production.  Should be a fun decade...

Thu, 10/14/2010 - 20:48 | 651411 kayl
kayl's picture

Don't be an apologist for these banksters. We don't need them whatsoever. You are a confirmed malthusian that has no compassion for the human race. Ya, it is simple. Off yourself first if you are so concerned about dwindling resources.

We are completely on to them and the thievery that they have perpetuated with the Uniform Commercial Code (law of contracts), fiat currency, and war mongering. We know their history starting with the French Revolution, the Russian Revolution, the Cultural Revolution in China, etc. We know the IMF bank; 36 countries worldwide have repudiated the fake debt imposed on them. We know the fake UN human rights charter (an ideological constitution if I've ever read one!), corrupted WHO working for the big pharma. Things are not going to fly the same way this time.

A patriot nationalism movement isn't going to work to get us into WWIII. They'll be pushing for it though. We aren't interest in NWO and globalism.

You will be swept up too, unless you've already built your little hideaway in the Caribbean.

Read some better material like Critical Path by Buckminster Fuller. 

Fri, 10/15/2010 - 14:21 | 653284 Marla And Me
Marla And Me's picture

Kayl, your heart is in the right place, but you're missing my point.  My point is very basic; human beings, even without the help of banks, want to be able to pledge their future productive capacity in order to consume today.  Bankers and money changers are just a shrewd and sociopathic bunch who recognize this desire, and profit off of it immensely.  Once they introduce their non-productive compound interest in the system, it guarantees that the finite MONETARY SYSTEM (I didn't say mankind) will self-destruct under the weight of the impossible exponential growth curve.  This is basic fourth grade math.  My point is that even if the system that is presented to us were to disappear, people would still find ways to use and create credit for each other.  Credit isn't evil, but usury will certainly wreak havoc where ever it is allowed to roam.

BTW, I know it's very Malthusian to talk about Peak Oil, but it has to be discussed.  All this global warming and green movement bullshit is just a cover for TPTB to try to control the narrative and hinder people from recognizing what is really taking place.  It's all about power and control.  Money is just a tool.

Thu, 10/14/2010 - 14:19 | 649999 FEDbuster
FEDbuster's picture

Calling on "Mako" are you out there?  Time to go through this one more time. 

Thu, 10/14/2010 - 13:10 | 649707 doolittlegeorge
doolittlegeorge's picture

"possession is 9/10ths the law" buddy.  don't get between a lawyer and 10,000,000 voters.

Thu, 10/14/2010 - 17:20 | 650795 kiwidor
kiwidor's picture

Possession is ALL of the law.

Thu, 10/14/2010 - 13:19 | 649749 Minion
Minion's picture

"Look nobody's going to get out of their mortgage and keep their house. Ain't gonna happen"

I may be mistaken, but I've been reading about people who have quit paying their mortgages and still live in the house, almost 2 years later.

Thu, 10/14/2010 - 13:39 | 649834 NotApplicable
NotApplicable's picture

Yes, but they are far from being "free and clear" of the debt. Sometime, someone, somewhere will come looking to collect.

They may have a free home today, but tomorrow, they may find themselves back under the gun.


Thu, 10/14/2010 - 14:43 | 650081 Misstrial
Misstrial's picture

Agree with N/A.

When you factor in the real estate industry learning that they won't be able to collect a commish on all of those unpaid-for houses, the current disaster won't continue for long and very very few loanowners are going to be able to continue living in a not-paid-for house.

Already the real estate industry is in agony over all these homes that should be forclosed on and up for sale and commish-ready. Until recently, foreclosures constituted about 1/3 of homes sold in the US.

Don't think for a minute that realtors are going to let this pass by without their imput.


Thu, 10/14/2010 - 14:46 | 650096 midtowng
midtowng's picture

You might be right, but not in the short run. There are going to be many moons where the outcome is going to be questionable.

Thu, 10/14/2010 - 11:33 | 649335 Charley
Charley's picture

I love this guy...

Thu, 10/14/2010 - 11:37 | 649352 B9K9
B9K9's picture

If you don't understand that the US gov't was behind the MBS fraud from the very start, then you will never be able to figure out the truth. Using Maslow, here is the USA's priority list of essential needs:

  • Oil
  • Oil
  • Oil

The so-called War on Terror was, is & will continue to be about securing ME oil supplies. In order to fund our overseas military empire and achieve these mission objectives, the USA needed & continues to need a growing economic base.

Since the US doesn't have a 'real' functioning, productive economy, for the last 30 years we have utilized a faux, fraudulent bubble-economy in order to make the numbers work. To do so, the US gov't had to get (even further) into bed with the bankster criminal class to pull off the world-wide scam.

After the .com implosion and 9/11, our critical need for a 'growing' economy took on even more importance. Hence the housing bubble, enabled by fraudulent mortgage securitization, guided and directed by the Fed, will full acquiescence of both the Bush administration & Congress.

When Obama came and was told the story, he of course went along with the program. After all, he really had no choice at all in the matter. What Ben & Timmy promised him was that they would be able to blow another bubble that would enable them to paper over the sins of the past.

Didn't happen and it ain't gonna happen. They had their 2 years, and now 11/2 is upon us. Does anyone really want to find out what happens when the deflationary collapse wipes out not only the last cycle of fraud, but the whole thing going back 30+ years? Well, hang on, 'cause it's gonna be a very bumpy ride.

Thu, 10/14/2010 - 11:42 | 649377 Gully Foyle
Gully Foyle's picture


Oil is a bit simplistic. Certainly rescources are involved. But every action TPTB takes has a number of implied results.

Establishing that ring of bases and disrupting local ( and international) power structures are also important.

They kill many birds with a single stone.


Thu, 10/14/2010 - 11:43 | 649387 Hulk
Hulk's picture


Thu, 10/14/2010 - 13:15 | 649732 cossack55
cossack55's picture

Suicide or something else is irrelevant.  Bottom line: The gene pool just got a little cleaner.

Thu, 10/14/2010 - 13:55 | 649917 traderjoe
traderjoe's picture

I agree with most everything said, B9K9, except that portions of this MBS fraud were planned from the start. Certainly MERS, the very convoluted nature of securitization, etc. were 'planned'. And were needed as one more bubble of 'organic credit growth' that you discuss to feed the ponzi. 

The robo-signers, the fraudulent documentation, and the general sloppiness of transferring the documents into the MBS I don't think were planned. They might have been the logical conclusion of a bubble frenzy (akin to analyst 'fraud' during the bubble. But, the meme of fraud on the courts, and not doing their job (perfecting the chain of title) are just too bank un-friendly. There's at least some likelihood of popular revulsion/revolt over this, as it's granny in the home against the executed fraud of the fat-cat bankers. Just some thoughts...

Thu, 10/14/2010 - 14:24 | 650013 kayl
kayl's picture

Of course, this was all planned. Article 9 of the Uniform Commercial Code was updated during the late 90s. It establishes the concept of ownership in contract law that allows them to operate. If you read a synopsis or overview of Article 9, it states that physical possession is not an indication of ownership. It states that an electronic report mechanism that documents the chain of title is sufficient. As many statesmen and lawyers have stated in the media, the contract and possession of the wet ink note are antiquated methods to prove ownership.

Maybe they didn't train enough lawyers and judges on the new ownership qualifications under Article 9. Article 9 was supposed to cover their asses for the MERS. Judges didn't get the memo and are now adjudicating foreclosure proceedings under the former Article 9 ownership criteria.

Go figure....

Thu, 10/14/2010 - 17:26 | 650806 kiwidor
kiwidor's picture

..."an electronic report mechanism that documents the chain of title is sufficient."  Perhaps, but how many of these efficiency-loving crooks have such a thing?  A single incongruity in your electronic record has the same effect;  chain of title is broken.  Combine this with the false declarations ON PAPER and you still have bankers with shit running down their legs.


Thu, 10/14/2010 - 21:01 | 651444 kayl
kayl's picture

Read Article 9 of the UCC

The lenders have almost no requirements to prove ownership, just an electronic record.

Thu, 10/14/2010 - 11:38 | 649359 Gully Foyle
Gully Foyle's picture

The first pundit/Economist who can predict exactly what will happen in two months wins.

Fuck these guys. You can't even test them with punch a psychic.

Thu, 10/14/2010 - 11:39 | 649361 goldmiddelfinger
goldmiddelfinger's picture




Thu, 10/14/2010 - 11:40 | 649365 Henry Chinaski
Henry Chinaski's picture

Therefore, legally, the mortgage note is no longer valid. That is, the person who took out the mortgage loan to pay for the house no longer owes the loan, because he no longer knows whom to pay.


But with so much at stake, somebody will figure out who needs to get paid.

Thu, 10/14/2010 - 11:41 | 649376 HarryWanger
HarryWanger's picture

Actually, I see it just the opposite with about 4 different banks knocking on your door ALL demanding money from you. 

Thu, 10/14/2010 - 12:25 | 649545 Boilermaker
Boilermaker's picture

I see those same 4 banks being told to fuck-off and "I'll see you in court".

Thu, 10/14/2010 - 12:43 | 649612 Jean Valjean
Jean Valjean's picture

Harry is much to sophisticated to own a pistol.

Thu, 10/14/2010 - 13:21 | 649754 Minion
Minion's picture

Right on - I was thinking the same thing!  :D

Thu, 10/14/2010 - 14:54 | 650119 uberfinch
uberfinch's picture

Or too concerned for the safety of his children.

Thu, 10/14/2010 - 15:32 | 650335 FEDbuster
FEDbuster's picture

My kids (teenage boys) keep their shotguns in their bedrooms, and yes they have access to shells, too.

Thu, 10/14/2010 - 16:34 | 650654 akak
akak's picture

Only a completely careless idiot would provide the situation in which his children could access, and be harmed by, his own guns.  The children who harm or kill themselves with their parent's own guns are innocent and tragic victims, but at least remove one more idiot gene from the gene pool (which is nevertheless overflowing nowadays).

Thu, 10/14/2010 - 17:55 | 650885 CH1
CH1's picture

Gee, have some self-esteem wrapped up in that opinion?

Farm kids of 50 years ago almost always had access to guns. Their parents just whipped the hell out of them if they tried to do stupid things with dangerous tools.

Thu, 10/14/2010 - 19:42 | 651200 akak
akak's picture

You pretty much completed what I should have said in my first comment, about also teaching one's children responsibility towards firearms.  And true, in rural areas, and in years past in particular, many children did have access to firearms at home.  However, in the majority of (if not most) such situations, you would be talking about rifles and shotguns as opposed to pistols, the latter being much more dangerous in the hands of a child.  I was mainly thinking about pistols in my post above.

Thu, 10/14/2010 - 14:32 | 650055 Overpowered By Funk
Overpowered By Funk's picture

Show the 4 bankers your collection of auto - loading rifles and then make 'em an offer they can't refuse.

Thu, 10/14/2010 - 14:46 | 650097 Misstrial
Misstrial's picture

I'm sure that this was posted to be humorous, however I don't recommend displaying any firearm or weapon to any collector showing up at the front door.

You do not want a SWAT team to respond perforce.


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