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Quantifying The Full Impact Of Foreclosure Gate: Hundreds Of Billions To Start

Tyler Durden's picture





 

As people finally realize that there is no getting away from a self-imposed (or sent from above) foreclosure moratorium reality, the next question is the quantification of what the hit to banks will be. As bank stock shares are demonstrating today, it will be substantial and is already starting to be priced in. According to FBR's Paul Miller, as cited by Bloomberg, "faulty foreclosures may cost U.S. lenders $2 billion for every month that home seizures are delayed and the tab could reach $6 billion... Investigations of how banks are seizing homes may prolong foreclosures by as much as three months, at a rough cost of $1,000 per month for each property in the pipeline. The biggest firms likely need to add staff to comb through the files, costing them each $1 million a year." This is a very a modest estimate. More importantly, a separate study by SNL Financial has determined that the total amount of residential (not commercial) mortgages in foreclosure between directly serviced, and those serviced for others, for the big three banks alone (JPM, WFC, BAC) is nearly a quarter of a trillion dollars! And this number will soon surge. Keep in mind, as we disclosed yesterday, per JPM, the bank, which is a good proxy of the Big 3, keeps mortgages in the delinquent category for on average of 448 days before moving to foreclose (and 678 days in Florida and a stunning 792 days in New York). This means that banks, and especially regional banks, are about to experience the mother of all delinquency-to-foreclosure cliff events, as squatters now certainly will have no intention of ever paying down their mortgage. Which also means that the quarter trillion in foreclosed mortgages are about to explode by orders of magnitude. The hole could end up being as large as a trillion if one throws in the CMBS properties that are delinquent and in foreclosure ($61 billion in August per RealPoint). And poof, there goes the trillion dollars currently sitting in cash and doing nothing (as well as a generous helping of excess reserves) for now... but not for much longer. 

Below is the SNL Financial estimation of properties in foreclosure direct and serviced for others. The number is a whopper. It also excludes all the regional banks which likely account for a comparable number cumulatively.

Look for the number in the bottom right to skyrocket as more research is done on this topic. Add a few trillion in puttable [R|C]MBS and we are starting to talk TARP 2 money.

And, just because it only starts here, here is our favorite chart of leverage upon leverage upon leverage upon leverage.

 

 


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Thu, 10/14/2010 - 12:56 | Link to Comment Bob
Bob's picture

If I were stockholders--or auditors--I would demand that the banks hold back all that "bonus money" as reserves against foreseeable losses (whether from write-downs or legal settlements) that would otherwise jeapordize the very survival of the firms. They have no contractual claim for Gov bailouts. 

The news is out.  There is no way the banksters meet their fudiciary duties if they pay out that bonus money. 

Under the circumstances, it would clearly constitute looting the companies.

And it would be prima facie evidence of a premeditated plan to once again blackmail the taxpayers for a bailout to avert "systemic collapse."

Thu, 10/14/2010 - 13:05 | Link to Comment tahoebumsmith
tahoebumsmith's picture

Unfortunately Bob the Banksters are running the show and the auditors---stockholders--are simply just spectators. This is their game and they will put another gun to Congress's head before they give up that 144 billion.

Thu, 10/14/2010 - 13:09 | Link to Comment Bob
Bob's picture

Then let them set themselves up for a slam dunk on RICO.  They have a lot of money, but not enough to buy all the parties who stand to gain by breaking ranks.  That's how gangsters go down. 

Thu, 10/14/2010 - 13:10 | Link to Comment carbonmutant
carbonmutant's picture

 You can only cry "Wolf" so many times...

The real problem is that they may be right and no one will believe them.

Thu, 10/14/2010 - 15:45 | Link to Comment Bob
Bob's picture

They may be "right" about systemic collapse without intervention, but given that they have once again set it up while further filling their pockets, they will have no tenable argument for being TBTF.  They're undeniably Too Big To Fix.  Let them go into receivership as mortals do. 

Bring back some semblance of capitalism before it's too late.

Thu, 10/14/2010 - 13:39 | Link to Comment bugs_
bugs_'s picture

In 2008 without TARP and the window these shareholders would have been WIPED OUT.  No seat at the table and nothing to complain about.

Truth be told, these banks are insolvent and those shareholders aren't.

Thu, 10/14/2010 - 19:45 | Link to Comment pamriallc
pamriallc's picture

re: Systemic Collapse

 

Capitalism, then, is by nature a form or method of economic change and not only never is but never can be stationary. … The opening up of new markets, foreign or domestic, and the organizational development from the craft shop and factory to such concerns as US Steel illustrate the same process of industrial mutation—if I may use that biological term—that incessantly revolutionizes the economic structure from within, incessantly destroying the old one, incessantly creating a new one. This process of Creative Destruction is the essential fact about capitalism.

Capitalism, Socialism, and Democracy, Joseph Schumpeter (1942)

Shawn A. Mesaros, Pamria, LLC

Thu, 10/14/2010 - 12:56 | Link to Comment crzyhun
crzyhun's picture

Tyler, was this manufactured/created for the benefit of the up coming landslide? Pretty suspicious if you ask me.

Thu, 10/14/2010 - 13:02 | Link to Comment 1100-TACTICAL-12
1100-TACTICAL-12's picture

It is no wonder the Banks have all this cash on the sidlines..

Thu, 10/14/2010 - 15:29 | Link to Comment pan-the-ist
pan-the-ist's picture

Which landslide is that?

Thu, 10/14/2010 - 12:59 | Link to Comment Bearster
Bearster's picture

I agree that the banks look to have committed some pretty egregious sins, not least of which is paying their executives such massive bonuses while cutting loan loss provisions ahead of this disaster.

But I think it's important to also say I agree that the people who reside in these homes without paying their mortgages are squatters.  If we want to see a trillion dollars of housing reduced to uninhabitable ruins (with a corresponding impact on the values of neighboring houses) we will let squatters continue to reside in them for years.  During which time they will make no repairs or perform any maintenance.  And move out when the house is wrecked.

I think, regardless of whatever disputes there may be amongst the various MBS tranche holders, underwriters, investment banks, originating banks, and mortgage brokers... it's obvious that the squatters have to be evicted and foreclosed upon!

Thu, 10/14/2010 - 13:10 | Link to Comment Pedro
Pedro's picture

Keep in mind, however, that the bailout these already wealthy institutions got from the taxpayors devalued these "squatters" money via printing press and contributed to the real estate bubble which contributed to the joblessness in America.  Some of these jobless people would probably be making payments had it not been for this little closed circle of money.

Thu, 10/14/2010 - 13:15 | Link to Comment LeBalance
LeBalance's picture

thing (1): the holder of the note is unknown in many cases, so there is "real" concern as to whom to pay.

Under those circumstances it is not legally required to pay anyone until those who were supposed to have correct paperwork get it right.

thing (2): as the veils of "mortgage" fraud get lifted many will realise that banks did not risk skin in the promise to pay at any point.

Under these circumstances, you might think about not sobbing openly for the bank and just point the finger and laugh at the mushroom cloud.  Bring mushrooms, it will be a nice time to make smores.

Thu, 10/14/2010 - 13:40 | Link to Comment Tortfeasor
Tortfeasor's picture

Man, you must make some effed up s'mores.  

Thu, 10/14/2010 - 13:20 | Link to Comment diesel1104
diesel1104's picture

What's the definition of a squatter?  Someone who paid 15% down and has paid mortgage fees for years including taxes and insurance, or a shell MERS company who has no consideration and has "sold" the asset to other well paying entities without proper title?  There is such a thing as contract law and rule of law.  If one principle breaks the law by breaking the contract, the contract becomes null and void.  The offending entity can not then go back and claim damages when the contract is not followed.  We have hundreds of years of case law concerning this.  

Thu, 10/14/2010 - 14:15 | Link to Comment UGrev
UGrev's picture

I think people forget that these home buyers did pay something and/or continued to pay until they were underwater. Meanwhile, the banks were committing, unadulterated, fraud. Yeah, squatting is bad.. but I think flat out fraud on the back of predatory lending is much, much worse.

Thu, 10/14/2010 - 14:42 | Link to Comment 1100-TACTICAL-12
1100-TACTICAL-12's picture

Even if these so called "squatters" bit of more than they could chew, you have to admit they were allowed & encouraged to do so. Peer pressure form the banks . I vote for the people, time for the banks to get fucked for a change.

Life is not & will never be fair...

Thu, 10/14/2010 - 15:41 | Link to Comment pan-the-ist
pan-the-ist's picture

Let me begin by saying "I TOTALLY AGREE WITH YOU" (in caps even.)

However, on the other end of this is a pensioner who has his money tied to a AAA MBS that will lose money if the property fails to generate any revenue.

If the forecloser fails, the MBS looses (even more) money.

Thu, 10/14/2010 - 16:53 | Link to Comment groucho_marxist
groucho_marxist's picture

exactly.

plus, many of them have put money into these properties, done up keep, etc. and now are being compared to vagrants who just happen to settle onto a property; this is both untrue, and feeds the misinformation that they are criminals who move in. The reality is more like they are transformed into criminals by a criminal system that was set up with the express purpose of robbing them. In truth, the properties are more likely to be wrecked if the people in them are forced out, rather than encouraged to stay and maintain the properties.

I'm just waiting for the fires to start because people are being driven from their homes. Sometimes the appropriate response to rampant criminality is "crime."

Thu, 10/14/2010 - 15:42 | Link to Comment moneymutt
moneymutt's picture

how many people would be underwater if they banks had never created MBS, CDS, CDO's and mortage companies like Countrywide and mortgage brokers had never committed fraud.

House prices went sky high because of the easy money available to buy houses, not cars, not food, but houses. How made the easy money, the FED and private financial industry. Who lied to get more people to invest in MBS, thus raise house prices, the banks.

I'd feel some sense of moral outrage if people were keep gold they took out debt to buy just because they thought they get rich, but if we exclude invertors, most homeowners were just buying a house, one because they needed shelter, wanted their kids go to decent school etc and just did not want to get left behind as houses were getting more and more expensive. Sure, they wanted house to go up in price, but would have been okay if it just flatlined.

But they get a way overpriced asset because of actions of others. They are underwater now due to bad, risky financial practices of banks.

I heard some one on TV dicussing, "would our dads walked away from a mortgage?" the thing is that except for a few regional flare ups, most of our dads never had the tempations or the problems we did, their house did not appreciate much, it was not easy to get credit to buy, and their houses never dropped in price 30,40, 50 percent in a matter of just a few years. Our dads could always get jobs, even without college education.

Don't think consumers to be smarter or way more moral than banks.

Thu, 10/14/2010 - 14:50 | Link to Comment midtowng
midtowng's picture

What do you think happens to empty houses? They stay pristine? No, they degrade. They leak and mold.

The people who bought those houses may not have been able to afford them, but they actually wanted to live in a house. Chances are they will do upkeep on them as long as they think they will keep them.

Thu, 10/14/2010 - 13:04 | Link to Comment detersbb
detersbb's picture

Please do not fall for the coming re-finance move if you hold a mortgage unless you are presented with and put your finger on the actual wet ink signed promissory note.  Demand it, or tell them that all further negotiations of refinancing will only be commenced with Santa Clause, the Easter Bunny, or the Tooth Fairy.

 

No note, no foreclosure, period. 

 

Yeah, I know lets create a new debt instrument that will be taken care of to be used as documentation going forward to foreclose on?

 

Do fall for it!

Thu, 10/14/2010 - 13:05 | Link to Comment ZakuKommander
ZakuKommander's picture

This may not be as big a deal as some think.  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 - 13:34 | Link to Comment Bob
Bob's picture

We'll soon find out in no uncertain terms just what America is.  People are now watching this shit. 

Thu, 10/14/2010 - 13:41 | Link to Comment ZakuKommander
ZakuKommander's picture

Watching . . . and then voting in our one party system.

Thu, 10/14/2010 - 16:23 | Link to Comment pan-the-ist
pan-the-ist's picture

Sounds reasonable

Thu, 10/14/2010 - 13:05 | Link to Comment Smokey1
Smokey1's picture

All the bank fraud should be prosecuted as capital offenses. Life w/o parole is too good for most of those worthless jerks. The very same mfkrs that pay themselves millions in bonuses on top of this most recently discovered cesspool of shit.

Thu, 10/14/2010 - 13:18 | Link to Comment LeBalance
LeBalance's picture

Coinage Act of 1792, "degradation of the currency is punishable by death."

And they did just "print" up a promise to pay from thin air.  But of course the person requesting the mortgage did request it and is therefore equally culpable.

And so are those who use a credit card which prestoes money from thin air.

That's pretty much everyone.

So everyone needs to go to the gallows!

See you there!

Fri, 10/15/2010 - 06:35 | Link to Comment VodkaInKrakow
VodkaInKrakow's picture

Nice, gallows humour.

 

I doubt that many in the world amongst the lower classes know that banks are allowed to leverage, nevermind that banks are allowed to create money out of thin air on an Excel spreadsheet. More and more are waking up to that fact, however.

 

The person taking the loan is not equally culpable. That is the system that they are forced into. No loan, no home. And let us rid ourselves of the FICTION that you just have to save, save, save - that with all those abundant million dollar jobs that provide million dollar jobs - that anyone can get if they just TRY, TRY, TRY - exist for every American and the people of the world.

 

That is a lie that too many believe.

 

Gallows? The proper way or let them hang there for a few minutes. BRING BACK THE GUILLOTINE! And make sure you blink five times after your head rolls!

Thu, 10/14/2010 - 13:08 | Link to Comment curbyourrisk
curbyourrisk's picture

SNL Financial.  Everytime I see that name I think John Belushi in a bee outfit.

Thu, 10/14/2010 - 13:12 | Link to Comment Joe Davola
Joe Davola's picture

Johnny's buzzing off, Johnny's buzzing off!

Thu, 10/14/2010 - 13:11 | Link to Comment Joe Davola
Joe Davola's picture

Every day I feel like a bigger sap for paying off my mortgage early, let alone making payments in the first place.

Thu, 10/14/2010 - 13:12 | Link to Comment Charley
Charley's picture

+1

Thu, 10/14/2010 - 13:11 | Link to Comment goldmiddelfinger
goldmiddelfinger's picture

Squatter class. Hey but kramer says its no worse than the BP oil spill

Thu, 10/14/2010 - 13:12 | Link to Comment Charley
Charley's picture

Well, now we know what all those excess reserve were for...

Thu, 10/14/2010 - 13:15 | Link to Comment Pedro
Pedro's picture

How long can the banks hold out?  They have been sitting on these foreclosures already, in addition, they are going to get double whammied because I believe these assets are way overvalued due to the "mark to model" valuation.  How long?  After the election?  The Spring?  Never?  

Thu, 10/14/2010 - 13:20 | Link to Comment ZakuKommander
ZakuKommander's picture

Never sounds good.

What on earth would lead anyone to believe that anything will change?  A self-imposed foreclosure freeze will not force the banks to revise their "marked to model" valuations.  And the freeze will end when the banks either "find" sufficient documentation, or some law is passed to solve the problem for them

Thu, 10/14/2010 - 13:48 | Link to Comment Bob
Bob's picture

Let's just lay back and enjoy it?  Who sent you in here to peddle this bullshit? 

There's nothing that better serves the interests of TPTB than cynical resignation.

Thu, 10/14/2010 - 15:44 | Link to Comment ZakuKommander
ZakuKommander's picture

I see you're chock full of solutions. So which party in our one party system is going to lead us out of the desert?

Thu, 10/14/2010 - 15:48 | Link to Comment Bob
Bob's picture

Parties have nothing to do with it.  One would think that with your apparent insight regarding parties, you of all people would see that and get over it. 

Let the rule of law be affirmed. 

Thu, 10/14/2010 - 16:30 | Link to Comment pan-the-ist
pan-the-ist's picture

One party system, working for the banksters.  The liberal party throws a bone to the poor, while the conservative party pretends to be for small government.  I think we all wish for the rule of law, but you have to acknowledge that you shouldn't hold your breath.

Thu, 10/14/2010 - 17:23 | Link to Comment ZakuKommander
ZakuKommander's picture

Bob, my friend, who do you think controls "the law"?

Hint: TPTB

LOL

Thu, 10/14/2010 - 17:24 | Link to Comment ZakuKommander
ZakuKommander's picture

Not that I don't wish that you were right!

Thu, 10/14/2010 - 18:18 | Link to Comment Bob
Bob's picture

The jury is still out on that one.  The Courts obviously didn't relish the prospects of sorting out this shit mess, but now they're going to have to.  We'll see if American Judges have as much respect for their obligations as Judges in Columbia and Pakistan, who stood up and did the right thing, even when it them brought mass murders and jailings. 

Thu, 10/14/2010 - 21:27 | Link to Comment pan-the-ist
pan-the-ist's picture

Gore V. Bush demonstrates all you need to know about the American Judicial system.

Fri, 10/15/2010 - 01:06 | Link to Comment RockyRacoon
RockyRacoon's picture

Hey, Bob.  The Courts might be the logical choice, but after November we'll see what Congress has to say about it all.  And it won't be pretty the way they railroad the entire judicial process by decree. 

Fri, 10/15/2010 - 07:41 | Link to Comment Bob
Bob's picture

We'll see if the judicial branch allows itself to be railroaded.  And whether the states will swallow abrogation of their rights.  And whether anything Congress does will be proven constitutional for a multitude of angles.

Thu, 10/14/2010 - 16:56 | Link to Comment groucho_marxist
groucho_marxist's picture

isn't there a statute of limitations, beyond which the squatters become owners, whatever the banks may claim?

Fri, 10/15/2010 - 01:07 | Link to Comment RockyRacoon
RockyRacoon's picture

Adverse possession may be an option but I've not heard it mentioned in any legal sense.  Takes too many years for it to manifest in most states.

Fri, 10/15/2010 - 06:42 | Link to Comment VodkaInKrakow
VodkaInKrakow's picture

As long as they keep paying past, present, and future Administrations and Congress.

Thu, 10/14/2010 - 13:17 | Link to Comment rewired2005
rewired2005's picture

Is this an America only thing, or are we going to find the same skeletons in the UK's closet?

From a Brit. (Sorry about Britain by the way).

Thu, 10/14/2010 - 13:48 | Link to Comment Miles Kendig
Miles Kendig's picture

And more pressing is the Irish nationals (THE dumping ground, esp for SE England paper), The Dutch/UK complex, the Spanish Caja's, the Swiss exposure to Hungary et. al and the Baltic states.... and who would want to make a long wager on the Landesbanks right now knowing their strong history of due diligence with American and Southern European financial products?

No wonder that Deutche bad boy Weber's wheels are about to fall off and the Swiss are looking to boost their banking sectors reserves to 19% rather than ride the 7% Basil III....

Note to self to check the status of the Austrian banking sector and its cross border exposures.

Thu, 10/14/2010 - 13:22 | Link to Comment Miles Kendig
Miles Kendig's picture

I wonder what the metrics look like if all loans run through MARS, or simply sliced n diced since the advent of the same that have since been foreclosed would look like....  Especially when all of the glorious action from Golden West, WaMu (esp their and now JPM's reno action) and the rest of the old mortgage mills is included...  Then the 2d, 3rd & 4th deriv of it all.

Thu, 10/14/2010 - 13:24 | Link to Comment GittyUP
GittyUP's picture

If the banks cannot foreclose on the properties and they cannot sell the properties already foreclosed upon then they will not be marking down any assets this quarter.  Yes they do not mark them down until they actually sell them and close.   This will not hurt their 4th quarter profits but rather help them.  Unless they book a reasonable writedown for future losses and just take it in the 4th quarter anyway.

This whole thing is way overblown.   Its just going to push out the timeline on clearing the foreclosures. 

But I do think the banks are going to dissapoint on the top line from trading and M&A. 

Thu, 10/14/2010 - 14:25 | Link to Comment frankTHE COIN
frankTHE COIN's picture

How are these people on cnbc concluding that housing prices will go up in the short term ?

1) foreclosures are 30% of sales. Professional foreclosure buyers, do so to make money. With the documentation problems, they see they could lose a lot of money and will hold off buying for awhile.

2) the people that buy a foreclosure to live usually do so because they cant afford the higher priced exisiting houses. They now cant buy.

3) existing sales on its own is horrible.

I dont get it.

Thu, 10/14/2010 - 15:07 | Link to Comment Winston Smith 2009
Winston Smith 2009's picture

I can only see prices going up on new homes and pre-MERS homes with clear titles due to an available supply vs. demand issue.  Good luck getting title insurance or a loan, however.

Thu, 10/14/2010 - 14:10 | Link to Comment contrabandista13
contrabandista13's picture

WHATYA TALKIN BOUT MANNNN.....?  ARE YOU LIVING IN MARS....?

 

SO YOU'RE THE ONE THAT STOLE MY CRACK......

Thu, 10/14/2010 - 14:25 | Link to Comment Rob Jones
Rob Jones's picture

In the worst case, lots of people with underwater mortgages who are currently making their payments (but are kind of tempted to default) decide to gamble that the banks will not be able to foreclose in the forseeable future and stop making their payments.

And in the really, really worst case the courts prohibit the banks from foreclosing and the losses on the underwater mortgages (not just the ones in foreclosure) go from 20% to 100%.

Admittedly all this is extremely unlikely. Congress will be under strong pressure to fix things. But there is currently very strong resentment against the banks for 1) creating the mess in the first place, 2) accepting the TARP1, QE1 bailouts, and 3) paying their executives massive bonuses during 1 and 2. Arguably, the best thing that Obama could do to boost his diminishing reelection chances would be to hang some of the big banks out to dry.

Fri, 10/15/2010 - 01:17 | Link to Comment RockyRacoon
RockyRacoon's picture

Congress will "fix" it -- all in the name of helping the poor homeowners.

We'll note a profound absence of the mention of banks.

Thu, 10/14/2010 - 14:53 | Link to Comment tahoebumsmith
tahoebumsmith's picture

How do you hold back flood waters? You build a temporary levee which can be scaled back as the water recedes.

Banks foreclosed on 102,134 properties in September, the first single month above the century mark, RealtyTrac said. There were 347,420 total foreclosure filings in September, 3 percent higher than August and 1 percent higher than a year earlier.

Thu, 10/14/2010 - 14:59 | Link to Comment 99er
99er's picture

SNL Financial?

Surely you jest. Doubt anyone is ready for prime time in this mess.

Thu, 10/14/2010 - 15:04 | Link to Comment Winston Smith 2009
Winston Smith 2009's picture

"The absurdity of illegal activity, criminal conduct, rampant fraud has reached a point where the nation much declare “No More.” We must begin the process of identifying criminal actors — and prosecuting them.

This is not about keeping deadbeats in their homes, as a few idiots and liars have asserted. The corporate sympathizers who are too busy fellating the bank to recognize what is going should be ignored. This is about fundamental property rights and the Rule of Law in the United States — nothing less."

http://www.ritholtz.com/blog/2010/10/robo-signers-hired-criminal-charges...

Thu, 10/14/2010 - 15:11 | Link to Comment dashingdwl
dashingdwl's picture

Someone on CR commented that "It will take the drum beaters to get the peasant amoral scumbags motivated to take on the Banksters amoral scumbag. It should be a great game. Financial Kickboxing without a referee."

 

Hmmmm.... Maybe so. But remember, some of the peasants are those Pension Funds that are holding this MBS crap. And those peasants have a FIDUCIARY responsibility; they will have no choice in pursuing remedy here. They represent the Pension Funds and the individuals to whom that money is owed. Unfortunately for them, they do not get to rationalize whether "this is really worth it to litigate." If the funds do not pursue remedy, they are liable.

 

Thu, 10/14/2010 - 15:17 | Link to Comment Winston Smith 2009
Winston Smith 2009's picture

From over two years ago:

Banks Lose to Deadbeat Homeowners as Loans Sold in Bonds Vanish

http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aejJZdqodTCM

Excerpt:

Judges in at least five states have stopped foreclosure proceedings because the banks that pool mortgages into securities and the companies that collect monthly payments haven't been able to prove they own the mortgages. The confusion is another headache for U.S. Treasury Secretary Henry Paulson as he revises rules for packaging mortgages into securities.

``I think it's going to become pretty hairy,'' said Josh Rosner, managing director at the New York-based investment research firm Graham Fisher & Co. ``Regulators appear to have ignored this, given the size and scope of the problem.''

More than $2.1 trillion, or 19 percent, of outstanding mortgages have been bundled into securities by private banks, according to Inside Mortgage Finance, a Bethesda, Maryland-based industry newsletter. Those loans may be sold several times before they land in a security. Mortgage servicers, who collect monthly payments and distribute them to securities investors, can buy and sell the home loans many times.

Thu, 10/14/2010 - 15:25 | Link to Comment Traveler-2
Traveler-2's picture

I totally hope that what you all are saying about the banks and their responsibilites in this come true.

But I still maintain that those who took out the sub-prime mortages conspired in the fraud and participated.

It is beyond me how Timmy and Ben will ever let the banks go down for this after TARP.  I may be whistling in Dixie, but the powers that be will pass a retro-active bill to cover the banks butts and gloss this all over.  Let's see.

Fri, 10/15/2010 - 04:15 | Link to Comment StychoKiller
StychoKiller's picture

Excerpt from "The Big Short":  " 'Who takes out a home load and doesn't make the first payment?'   Asked Danny Moses, putting the matter one way.  'Who the fuck lends money to people who can't make the first payment?'  asked Eisman, putting it another."

Also:  "Now he got it:  The credit default swaps, filtered through the CDOs, were being used to replicate bonds backed by actual home loans.  There weren't enough Americans with shitty credit taking out loans to satisfy investors' appetite for the end product.  Wall Street needed his bets in order to synthesize more of them.  'They weren't satisfied getting lots of unqualified borrowers to borrow money to buy a house they couldn't afford," said Eisman.  'They were creating them out of whole cloth.  One hundred times over!  [emphasis mine, JTS] That's why the losses in the financial system are so much greater than just the subprime loans.  That's when I realized they needed us to keep the machine running."

Believe me when I say that the borrowers were just more "collateral" damage!

Fri, 10/15/2010 - 09:44 | Link to Comment fallst
fallst's picture

2 1/2 years ago. Good Work.

 

Now, let's turn to page 1,845. Remics and Re-Remics.

 

http://www.irs.gov/pub/irs-pdf/p938.pdf

 

Is Maiden Lane in here? Where does ML live now?

Thu, 10/14/2010 - 15:29 | Link to Comment pazmaker
pazmaker's picture

Well I am going to stop paying my mortgage and place the money in a seperate account in the local credit union(not spend it).  I'm underwater but not behind. I got a USDA rural development loan from a broker thru Fidus Financial, MERS is listed on my deed and now I make payments to JPM Chase.

I want to see a clear title and know for sure who holds my promissory note.

Funny thing is I tried to get Chase to do a loan modification last year when I lost my job and I jump through all the hoops and actually spoke with someone that told "Everything is in order and your new payment amount will be sent to you"  3 weeks later they sent me a note saying my modification was denied because the type of loan(USDA?) isn't participating in Loan Modifications!

 

So now I wait  and see......

Thu, 10/14/2010 - 15:47 | Link to Comment mrcmmm
mrcmmm's picture

As Reggie said, Tyler is optimistic.  These three servicers control about 50% of the outstanding mortgages, so there's double the problem out there with other servicers.  This also does not take into account the losses due to suits by MBS investors, over the securities fraud committed against them, and state/federal tax authorities once they conclude that the REMICs have failed to qualify for tax exempt status.  The losses sought by the investors will NOT be limited to the nominal losses to the loan portfolios due to teh mess, but will be for the loss of value of the SECURITIES, which will be substantially greater as a result of the uncertainty larded onto ALL of the loans in the portfolios by the fraud.  Systemic losses will be double that trillion, IMHO.

Thu, 10/14/2010 - 18:28 | Link to Comment daneskold
daneskold's picture

This VASTLY understates the potential liability.

Utah, as has every other state, enacted a statute to punish vexatious litigators who sue judges and record liens against their real property.  Typically, a victim of a wrongful lien is entitled to treble damages and attorney fees incurred to obtain a court order nullifying the wrongful lien.

Such statutes are broadly written to provide easy, total, equitable relief from the wrongful lien.

A fraudulent assignment of note and trust deed, substitution of trustee, and trustee's sale deed, all would constitute wrongful liens.

Assuming a loan and credit bid of $333,333, a dead beat house owner whose house is foreclosed and sold based on a fraudulently-signed document would then be entitled to not only recover the house, but also a check for $666,666 plus attorney fees.

How long do you reckon it will take astute attorneys to realize they've got a gold mine on their hands based on these robo-signed documents?

And how easy is it to win on a petition to nullify wrongful lien?

Cake

If the nominal value of these bad mortgages is say, a $500 Billion, treble that for potential liability.

Fri, 10/15/2010 - 02:42 | Link to Comment Buck Johnson
Buck Johnson's picture

That is why the Whitehouse with it's people came out tepidly against a moratorium on foreclosures.  They know that this can essentially take down the same banks that they have propped up and as one author on this blog has said it will lessen the value of the toxic mortgages that was traded by the banks for US Treasuries.

Fri, 10/15/2010 - 06:02 | Link to Comment VodkaInKrakow
VodkaInKrakow's picture

Nice class warfare here TD (or whichever split personality of Norton's character you are): "...as squatters now certainly will have no intention of ever paying down their mortgage."  Everyone in America is a squatter. Yeah, right.

Jesus. You sound like you work for a bank. Those morally and financially (hahahahaha) BANKrupt (hahahahaha) that somehow managed to very possibly break the chain of ownership in America of the most valuable thing you could own...

 

LAND, BITCHEZ!

 

Even Timmy and Bernanke are scared. How much in bad MBS/CRE could The Federal Reserve possibly have on their books. $1.5 trillion? And all because, almost and entire industry forgot to do what Americans have been doing for two-hundred years.

 

File the fucking paperwork. The Golden Rule of Ownership. No papers, no ownership. Got Paper? Got a Claim! Just make sure the Paper is legitimate. Unfortunately for these assholes, The BANKrupt BANKs. Well, showing up to court too many times with too many excuses and with too many fraudulent or suspect documents - well, thems the breaks. Ya fucked up because you did not do what banks have been doing for their entire existence - Keeping the books straight.

 

If they would have followed the rules, laws, and regulations - this Financial Doom would not have happened. Banks did well for centuries and now the amateurs are in charge.

 

I am not advocating class warfare.  These are just facts.  The ones with the greater standing before the law just has to pay less.  Once again, in life...

 

There are winners and losers.

 

Until Congress steps in to write retroactive legislation that nullifies a few hundred years of common law and American law to favour their owners... the banks. Will it happen?

Tue, 11/16/2010 - 10:35 | Link to Comment daniel
daniel's picture

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