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California Lt. Governor: This Aggression Against Our Expropriation Of Private Property Will Not Stand, Man

Tyler Durden's picture


It is not news that California, despite what the money laundering practices aided and abetted by the NAR at the ultra-luxury segment of housing may indicate, is and has been for the past 5 years neck deep in a massive housing glut (with millions of houses held off the books in shadow inventory), which together with a complete economic collapse of this once vibrant economy, which happened to be the world's 7th largest, led various cities to resort to the socialist practice of expropriation, or, as it is known in the US, eminent domain, whereby a citizen's rights in property - in this case their home - are forcefully expropriated with due monetary compensation, naturally set by the expropriator. It is also no secret, that Wall Street, which has the most to lose by handing over property titles on mortgaged houses in exchange for money that is well below the nominal value of the mortgage, is not happy about this draconian quasi-communist measure, and has apparently told California to cease and desist. It is, apparently news that California has had enough of these bourgeois capitalist pawns, and has decided to, appropriately enough, channel El Duderino, and to tell Wall Street that this aggression against forced socialist expropriation, by broke deadbeats, will not stand... man.

From Reuters:

California Lieutenant Governor Gavin Newsom says he wants the U.S. Department of Justice to investigate "threats" against local communities considering using eminent domain to seize and restructure poorly performing mortgages to benefit cash-strapped homeowners.


Newsom sent a letter on Monday to U.S. Attorney General Eric Holder asking federal prosecutors to investigate any attempts by Wall Street investors and government agencies to "boycott" California communities that are considering such moves.


"I am most disturbed by threats leveled by the mortgage industry and some in the federal government who have coercively urged local governments to reject consideration" of eminent domain," he wrote in a letter, a copy of which was provided to Reuters.


Newsom, a Democrat who was previously mayor of San Francisco, warned the influential Securities Industry and Financial Markets Association in July to "cease making threats to the local officials of San Bernardino County" over the proposed plan to seize underwater mortgages from private investors.


Some towns in San Bernardino County, which is located east of Los Angeles, have set up a joint authority that is looking into the idea of using eminent domain to forcibly purchase distressed mortgages. Rather than evict homeowners through foreclosure, the public-private entity would offer residents new mortgages with reduced debts.


Newsom said in the letter on Monday that while he is not endorsing the use of eminent domain at this time, he wants communities in California to be able to "explore every option" for solving their mortgage burdens "without fear of illegal reprisal by the mortgage industry or federal government agencies."

This is what Lebowki Newsom had said previously:

Today California Lieutenant Governor Gavin Newsom calls on the Securities Industry and Financial Markets Association (SIFMA) to cease making threats to the local officials of San Bernardino County.


SIFMA has attacked the idea of local governments using existing law to help families remain in their homes and keep their communities viable.


"Communities have been ravaged by the housing crisis and the financial sector has had long enough to fix the problem they helped create," Newsom said. "We cannot let another day go by while families are forced from their homes. We must think big and help our local governments develop solutions - because the industry and federal government have not."


"This may be an aggressive idea, but communities such as San Bernardino, Chicago and others have no choice in these desperate times," Newsom continued. "We cannot allow Wall Street, who exploited the housing market for financial gain, to kill an idea before it is given a fair hearing."


"The true injustice of the last few years is that as banks were bailed out and government claimed it has done all it can, the homeowner, the backbone of our communities, has received nothing but eviction notices," said Newsom. "We need to help the people that government bailout programs have left behind - ordinary folks that have worked hard to keep their homes even as values plummeted."


"The economic power that would be unleashed if consumers are untethered from the anchor of these underwater mortgages would result in a return of consumer confidence, economic grow and job creation."


San Bernardino County Chief Executive Officer Greg Devereaux, joined by the cities of Ontario and Fontana, have set up a JointPowers Authority (JPA) to explore options to keep people in their homes before they are in foreclosure.


"I applaud the leaders in San Bernardino for thinking and acting big to protect their communities," said Newsom. "Greg Devereaux' communities are some of the hardest hit in the country and his leadership on this issue should be rewarded with support not the threats of a Washington, DC interest groups that are protecting Wall Street."


"The Washington, DC special interest groups needs to back off," said Newsom. "We owe it to homeowners everywhere to see if the solutions being discussed in San Bernardino will work."

Because it's "only fair." In other news, obviously socialists are not golfers. They may be, however, housebroken.


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Mon, 09/10/2012 - 13:27 | 2778956 FubarNation
FubarNation's picture

Commence the BL quotes and references!

STFU Newsom!

Mon, 09/10/2012 - 13:30 | 2778968 Vincent Vega
Vincent Vega's picture

I think you just commenced.

Mon, 09/10/2012 - 13:33 | 2778981 Pladizow
Pladizow's picture

Yeah, well, you know, that's just like your opinion, man -

Mon, 09/10/2012 - 13:52 | 2779079 Precious
Precious's picture

NAR is the biggest whorehouse outside Nevada and Newsome is its biggest John.

Mon, 09/10/2012 - 14:09 | 2779176 AldousHuxley
AldousHuxley's picture

"private property" protection legally and forcefully is define by the state. so how can you argue against the defining authority?


you can't.


and nothing is ever private.....real estate taxes.



Mon, 09/10/2012 - 14:22 | 2779222 insanelysane
insanelysane's picture

real estate taxes which then become liens on a property.

Mon, 09/10/2012 - 19:00 | 2780139 tbone654
tbone654's picture

well at least we own the roads, cuz "we did dat"...

Mon, 09/10/2012 - 20:39 | 2780379 redpill
redpill's picture

Any sign of the Creedence tapes, man?

Mon, 09/10/2012 - 14:23 | 2779226 goldfish1
goldfish1's picture

California does what it wants. Fukk wall street.

Tue, 09/11/2012 - 14:28 | 2782574 dark pools of soros
dark pools of soros's picture

Exhibit A:  Facebook

Mon, 09/10/2012 - 15:04 | 2779374 A Nanny Moose
A Nanny Moose's picture

These are just legal fictions and ex post facto justifications of theft. Theft is either universally wrong, or it is universally right. If it was universally right, it would be voluntary (mutually agreed upon), and no longer called theft.

Furthermore, your comment presupposes that The State is the only means of enforcing private property rights. It amounts to the linear thinking, not dissimilar from the idea that freeing slavesn would have prevented cotton from being picked? It doesn't matter. Slavery is wrong. If all men were created equal, why are a few men allowed to have all the guns, and why is it legitimate for them to commit acts that would land the rest of us in jail?

Mon, 09/10/2012 - 17:20 | 2779879 pufferfish
pufferfish's picture

"...nothing is ever private..."


+1 Quote of the day.


The converse also this applies. The state manipulate for & against.


The headless arbitrary meddler.


Mon, 09/10/2012 - 14:28 | 2779244 Gringo Viejo
Gringo Viejo's picture

Proposition 13, the Jarvis_Gann initiative to limit rises in property taxes, was passed by the people of California in 1978. Jerry "Moonbeam" Brown was the Governor then and the people, that were seeing 10% year over year property tax increases, rose up en masse and said "Enough!' The State of California fought this all the way to the SCOTUS, where they lost in 1992....for14 freakin'years they fought to retain their right to squeeze the people to whatever degree they wished. Now...guess who's Governor today and guess what he's trying to overturn?

We are in thrall to the communists, the california dream has become the california nightmare.

Mon, 09/10/2012 - 18:03 | 2779969 Son of Loki
Son of Loki's picture

Cali went from one extreme over to the other with Prop 13.

It's not uncommon but with time, market forces tend to move these extremes back to the median. Taxing $2 million houses as if they were still $230k will not last. The Parteee may be  over but I can't blame them for fighting. I tried fighting property taxes and lost double....stuck with higher taxes and a Fat Legal bill to boot !


Many newer neighborhoods (the ones built the last 10 years with zero down) with city hall expansions, new fire dept, police expansion, etc....are raising taxes rapidly to pay for all the "new stuff."


My taxes shot up from $7,200 pa to over $12,500 pa in five years despite fighting the good fight.

Mon, 09/10/2012 - 18:08 | 2779989 californiagirl
californiagirl's picture

I couldn't agree more!  Trying to run a business in this state is becoming ridiculous.  And since surveys were showing that the people were going to vote against the high-speed rail, he did a run-around on that legislation as well, sneaking it through the legislature and already issuing over $2 billion in bonds.  It this goes like a typical Caltrans project, it will end up costing us a half trillion or more by the time it is completed.  For those of you not living in California, you will also be paying for this California disaster since they expect most of the money to come from the federal Grants and loans. They say that the average ticket is supposed to be $81.  Hah! The cost will be more like $8,000 per seat!

Mon, 09/10/2012 - 21:13 | 2780449 facepalm
facepalm's picture

all the Dude ever wanted was his rug back

Mon, 09/10/2012 - 17:54 | 2779953 Chuck Walla
Chuck Walla's picture

NAR is the biggest whorehouse outside Nevada and Newsome is its biggest John.


The Dude abides....



Mon, 09/10/2012 - 14:24 | 2779233 ChubbNut
ChubbNut's picture

Careful man there's a beverage here!

Mon, 09/10/2012 - 19:02 | 2780144 ZeroAvatar
ZeroAvatar's picture

I'm fixin' to make m'self a white russki!


I am NOT Chumbawamba!

Mon, 09/10/2012 - 14:27 | 2779243 Big Slick
Big Slick's picture

Say what you like about the tenets of National Socialism, Dude, at least it's an ethos.

Mon, 09/10/2012 - 13:29 | 2778957 Cognitive Dissonance
Cognitive Dissonance's picture

The last line delivered by The Dude in the clip. " least I'm housebroken."

Broken by the housing Ponzi. Speaks volumes!

Mon, 09/10/2012 - 16:48 | 2779789 Dr. Kenneth Noi...
Dr. Kenneth Noisewater's picture

Obviously, you are not a golfer.

Mon, 09/10/2012 - 13:26 | 2778958 Ostapuk Ivano
Ostapuk Ivano's picture

Where is Marla?

Mon, 09/10/2012 - 13:32 | 2778990 Cognitive Dissonance
Cognitive Dissonance's picture

"Zed's dead baby. Zed's dead."

Where have you been?

Mon, 09/10/2012 - 15:06 | 2779388 A Nanny Moose
A Nanny Moose's picture

Getting medieval with a pair of pliers and a blowtorch.

Mon, 09/10/2012 - 13:27 | 2778960 williambanzai7
williambanzai7's picture

Why don't we just stop bailing out Wall Street and allow the whole sewer, consisting of shitty banks, shitty deals and shitty borrowers, to implode naturally.

Mon, 09/10/2012 - 13:32 | 2778992 slaughterer
slaughterer's picture


Mon, 09/10/2012 - 13:35 | 2779002 Bastiat
Bastiat's picture

Exactly what I was saying in 2008. We'd be well into a fresh start now.

Mon, 09/10/2012 - 13:47 | 2779069 MachoMan
MachoMan's picture

you and the rest of america...  now everyone figured out how poor we really are and no one wants to bite the shit sandwich.

Mon, 09/10/2012 - 15:15 | 2779418 A Nanny Moose
A Nanny Moose's picture

The irony is that Gavin would screw pensioners, by screwing the banks. Where does he think CALSTRS and CALPERS keep some of their money?

Something about serving two masters applies.

Mon, 09/10/2012 - 18:16 | 2780010 californiagirl
californiagirl's picture

Gavin is a moron and brain donor if he thinks this will help the poor people.  What bank in their right mind will want to underwrite mortgages in California without a hefty downpayment and 800 FICO score?  Mortgages will be even harder to get, blocking even more people from the dream of home ownership, except his wealthy elitist friends, of course! 

Mon, 09/10/2012 - 19:47 | 2780263 A Nanny Moose
A Nanny Moose's picture

Gavin is a zombie looking for brains.

There, fixed.

Mon, 09/10/2012 - 15:39 | 2779500 stormsailor
stormsailor's picture

july 2007 would have imploded the banks, but that was the first time the fed lowered rates, in a suprise announcement at 8:30 on opex.  news had leaked out because the last hour of thursday the /es futes shot straight up green.


it would have tanked then, and we would be more than 5 years into the recovery.  all of us that were savers would have been justly rewarded, and all the overreaching, debt-ridden bastards would have got what happens to people when they fuck a stranger in the ass

Mon, 09/10/2012 - 19:28 | 2780210 Chrome Child
Chrome Child's picture

Dude, +1.


At least this story isn't about the Chinaman who pissed on the Dude's rug...

Mon, 09/10/2012 - 13:40 | 2779025 Temporalist
Temporalist's picture

WB7 that is craziness!  Don't you think that if that were a good idea one of the two awesomestest presidential candidates would have suggested it?

Mon, 09/10/2012 - 16:23 | 2779706 Overfed
Overfed's picture

I know. He sounds just like that crazy Ron Paul! :-)

Mon, 09/10/2012 - 13:40 | 2779028 Stoploss
Stoploss's picture

It would then be called capitalism.

And we just can't have that. Duuude..

Mon, 09/10/2012 - 13:44 | 2779046 resurger
resurger's picture

What will be the fucking catalyst so that they implode naturally WB7?


Mon, 09/10/2012 - 14:36 | 2779280 prains
prains's picture

Ron Paul ? just a thought more than a vote for

Mon, 09/10/2012 - 21:14 | 2780452 californiagirl
californiagirl's picture

Stopping all the trillions in back door bailouts would do it.

Mon, 09/10/2012 - 13:46 | 2779056 EscapeKey
EscapeKey's picture

Because our chosen career politicians receive donations from institutions which depend on said politicians giving them free money.

Mon, 09/10/2012 - 13:50 | 2779077 ptoemmes
ptoemmes's picture

Who is this "we" you speak of? ;-)

I ain't giving them anything.

Wait...I'm a unwilling taxpayer....damn.

Mon, 09/10/2012 - 13:55 | 2779103 williambanzai7
williambanzai7's picture

All that was accomplished in four years was we saved some heavy duty Wall Street welfare Queens. Team Bush came up with the idea and O'Bombo executed it brilliantly.

Don't let anyone convince you otherwise: both parties share the blame for this clusterfuck.

And now they want everyone to vote for their guys.

Fuck all of them.

Mon, 09/10/2012 - 14:19 | 2779211 williambanzai7
williambanzai7's picture


Mon, 09/10/2012 - 14:21 | 2779219 ptoemmes
ptoemmes's picture


Mon, 09/10/2012 - 15:16 | 2779419 A Nanny Moose
A Nanny Moose's picture

Paddle faster, I hear banjoes.

Mon, 09/10/2012 - 14:27 | 2779239 Cognitive Dissonance
Cognitive Dissonance's picture

I just knew little Timmy had no wood and thus was overcompensating. Better to think that then to acknowledge we are "ruled" by sociopaths.

Thanks for clearing that up Bill.

Mon, 09/10/2012 - 14:33 | 2779268 Calmyourself
Calmyourself's picture

Priceless, fluke holding the baby is fiction however..  The rest spot on..  Absolutely priceless..

Mon, 09/10/2012 - 15:07 | 2779390 ShrNfr
ShrNfr's picture

With a face like that, I am surprised she has to worry about birth control.

Mon, 09/10/2012 - 19:08 | 2780156 Boozer
Boozer's picture

William your work needs to be seen by more than just the ZH crowd.  Nobody comes even

remotely close.  Stab some sheeple in the eye with pictures and perhaps they will wake up a little. Bichon has a bigger johnson than tiny tim.


Mon, 09/10/2012 - 14:50 | 2779332 Rearranging Dec...
Rearranging Deckchairs's picture

exactly ............  plus a thousand green arrows

Mon, 09/10/2012 - 14:14 | 2779194 piceridu
piceridu's picture

It would be refreshing if someone just grabbed onto the giant handle and flushed all this shit down the toilet where it belongs...

Mon, 09/10/2012 - 14:37 | 2779286 bankruptcylawyer
bankruptcylawyer's picture

y u no stop printing money?

Mon, 09/10/2012 - 15:00 | 2779350 Colonel Klink
Colonel Klink's picture

Because of the oh so obvious reason that our pole-iticians, lawless enforcement, injustice department, deregulatory agencies, and jewdicial branch have been purchased by the banksters.

Too bad the "terrorists" didn't do us a favor and crash the planes into Golum Sacks and Blackheart theft funds.

Mon, 09/10/2012 - 15:08 | 2779394 A Nanny Moose
A Nanny Moose's picture

This idea would make sense. Can't have that.

Mon, 09/10/2012 - 13:27 | 2778963 Temporalist
Temporalist's picture

Oh Newsom sent a letter to AG Holdup?  That should work out well.

Mon, 09/10/2012 - 15:03 | 2779363 Colonel Klink
Colonel Klink's picture

If he sent the letter and it supports the banksters, trust me he'd act faster on it than how quickly a Mexican drug dealer can get a new F&F gun!

Speaking of the AG, his job should be renamed as Attorney Private, because that's where he spends most of his time on the bankers.

Mon, 09/10/2012 - 13:29 | 2778966 bob_dabolina
bob_dabolina's picture

We just need "the big one"

That big earthquake to occur all along the California border and just watch it slide off into the ocean and float over to where it belongs...North Korea or Venezuela.

Mon, 09/10/2012 - 14:21 | 2779215 iDealMeat
Mon, 09/10/2012 - 13:30 | 2778967 docj
docj's picture

I have family and a couple of friends living in Commiefornia - they moved there quite some time ago, before it was taken-over by the assorted breakfast cereal that is the CA electorate (as-in nothing but fruits, flakes and nuts). For them, I feel bad.

But anyone who, from this day forward until "The Great Reset" happens, buys a piece of real property in Commiefornia richly deserves the epic boning they are almost certain to get.

But for the previously mentioned family and friends I'd have a hard time not wishing for the entire sorry state to get flushed into the Pacific.

Mon, 09/10/2012 - 13:34 | 2778999 Midas
Midas's picture

If you are going to talk about California and Flakes then I am compelled to post a link:

Tue, 09/11/2012 - 03:10 | 2780485 californiagirl
californiagirl's picture

Actually, it is a beautiful place to live and there are more of us normal people here than you realize.  However, we are far outnumbered by the bleached-brain morons, expecially here in Silicon Valley.  Instead of having California fall into the ocean, I would rather that normal folks from all over the country (those that still have brains capable of logic) move here, take over the State and evict the socialists, Hollywood, and other assorted idiots and turn this place back into the "Golden" state of opportunity it was when my parents immigrated.  Then we can fix the state and secede! 

Tue, 09/11/2012 - 03:36 | 2780922 bunnyswanson
bunnyswanson's picture

I love it when at 7 a.m. I am in the central valley and then just a couple of hours later, I am at Big Sur with a view that most people only see in magazines.  People from all over the world live here, many professional people including physicians from other states and countries move here.

Ever been to Santa Barbara, Carmel, San Francisco's Union Station during the Xmas season?  Skiing in the many mountain resorts.

Fruit and vegetable stands on every corner priced right.  A heating bill in the winter that is under 50 bucks, bike paths on beautifully maintained city streets with colorful flowers everywhere, no litter in comparison to the northeast where I grew up. 

The lack of humidity makes the heat tolerable unlike Florida and Texas (let's talk about Texas...or W. Virgina..Nevada..(casinos and the smell of desperation).if you want to take about people who are not the best neighbors. 

Gay people I suppose are the fruits...whatever...I don't really care about what people do behind closed doors.  The nuts?  they like living outdoors in a schizophrenic kinda way.  What is hurting the state small towns is gang activity and overcrowded system with illegal immigrants who are in place to increase profits while keeping the price down.

It's changing quickly here but it has more to do with the politicians and banks than the nuts and fruits. 

Wed, 09/12/2012 - 04:13 | 2784471 californiagirl
californiagirl's picture

Unfortunately it is the morons and ill informed who keep voting in the wrong politicians. The folks that can tell you more about TV show plots and who is dating who in Hollywood than what is really going on in the world. Most of them make their voting decisions from stupid soundbites rather than from reading the propositions, or decide on a candidate based on campaign promises rather than researching their actual track record or anything having to do with the truth. And many of them want to believe in the "wouldn't it be nice" fantasies rather than making informed decisions based on reality. Frankly, so many are pseudo socialists.

Mon, 09/10/2012 - 13:30 | 2778976 LawsofPhysics
LawsofPhysics's picture

Bizarro world indeed. This amounts to government fighting with itself over the theft of private property when the original note was separated from the borrower.  Last time I checked, 200+ years of contract law says that the second the chain of title is broken, the borrower becomes the owner, bitchez.

Mon, 09/10/2012 - 13:37 | 2779015 pods
pods's picture

And your last sentence proves why there was no thorough investigation into "robosigning" and a quick settlement was reached.

Now the banks just have to wait for the proles to refinance away the mistake, and make things good and foreclosable again.


Mon, 09/10/2012 - 13:52 | 2779081 LawsofPhysics
LawsofPhysics's picture


That which cannot be sustained, won't be.  In many parts of California already, possession is the law.

Coming soon, everywhere.

Mon, 09/10/2012 - 13:55 | 2779106 walküre
walküre's picture

But the prols aren't stupid. They don't refinance. Refis are at all time lows. Sure, interest rate policies or rather lack thereof has to do with it. But how many homeOWNERS are just flipping the middle finger to Wall Street by keeping what is rightfully THEIRS.

So what if Wall Street imploded. It wouldn't hurt anyone. But massive foreclosures on families who are simply struggling to pay off ODIOUS debts is hurting.

Maybe Cali is on the right track with this one.

Mon, 09/10/2012 - 21:54 | 2780530 Talleyrand
Talleyrand's picture

A "homeOWNER" does not have a mortgage; that would be a mortgaor - finger flipping not withstanding.

And, yes, the prols with mortgages they can't afford are stupid.

Mon, 09/10/2012 - 13:58 | 2779118 ParkAveFlasher
ParkAveFlasher's picture

Well they can always get a favorable refi to an ARM with a rate based on the LIBo- oh wait

Mon, 09/10/2012 - 13:38 | 2779018 chunga
chunga's picture

Typical investment disclaimer:

All investors are advised to conduct their own independent research into individual stocks before making a purchase decision. In addition, investors are advised that past stock performance is no guarantee of future price appreciation.

Yeah sure, REMIC and REIT investments (bets) ARE guaranteed. Blow the bubble up and lock it in baby.

Mon, 09/10/2012 - 13:56 | 2779110 MachoMan
MachoMan's picture

First, the chain of title is never broken in these separation issues...  we know who the legal owner is at all times (the debtor)...  no one else has an ownership interest until they successfully foreclose.  Now, title may be clouded due to outstanding liens, but the chain of title isn't broken...  term of art.

Second, even if the creditors separate the notes from the mortgages, the mortgages are STILL GOOD AS TO THE MORTGAGOR and, further, the creditors can pursue unsecured breach of contract claims against the debtor.  The only thing that screwing up the mortgage process gets you (except in extreme circumstances, typically only in the case of a penalty by the court) is a loss of your priority amongst other creditors.  It's axiomatic in contract law that you have to abide by it if you sign it...  this goes for both parties.  However, if you do not follow the controlling jurisdiction's recording acts, then you do not get to partake in its protections of priority, among other things.  You get to go to the back of the bus with the other unsecured creditors and fight over the meat remaining on the bones, if any, after the priority buzzards have had their fills.

I encourage you to look at the case law in your state...  I promise you that you will find cases where even if a mortgage is inherently defective (cannot be recorded, improperly notarized, etc.), then it's still good as against you if you signed it...  this is a pretty just outcome in that the debtor still has to keep his promise, but the creditor no longer gets priority in the security.  With multiple claims on every household, it's going to hurt when the dust settles.

Mon, 09/10/2012 - 14:21 | 2779218 Winston Churchill
Winston Churchill's picture

US bankruptcy Court  and recent cases setting  precedent  have consistently ruled against

the banks/MERS and relegated them to unsecured creditors.

See my post below.Black letter law by SCOTUS back in the 1860's.

Applies to ALL states.Whats relevant is whether your state has a homestead law.

You may have appeal to a higher court in state but you will win if you have the money.

Mon, 09/10/2012 - 14:30 | 2779252 pods
pods's picture

My take on the situation was that if the terms of the contract were broken then the note became unsecured, which could could be expunged in a bankruptcy.

It seems that you are seeing this the same way?


Mon, 09/10/2012 - 15:17 | 2779424 MachoMan
MachoMan's picture

No.  The only terms of the contract broken are when the debtor fails to pay...  Typically, assignment of the note/mortgage is expressly allowed (given the banks draft the documents and intended to assign them from the start).  So, the botched assignment isn't really a breach of contract...  it is this contract that the creditor uses to assert a claim against your estate.

The issue with bankruptcy seems to be a misnomer given secured and unsecured debts can be discharged...  you may even be entitled to keep the security depending on your jurisdiction's laws...  (e.g. homestead laws).  Typically, they limit the amount of acreage and/or monetary value of the home that you can keep.

Where a creditor has been determined to have screwed up the assignment(s) and/or initial drafting/execution of the documents, then it will likely get pushed back to status as a general creditor...  which will then get a % of your estate based upon its weight of your total debt.  However, other creditors, e.g. secured, may have a higher priority and, thus, get first bite at the apple.

In short, you're not going to get a free house, but some of your creditors may get cock stamped for being stupid...  sounds fair to me.

Mon, 09/10/2012 - 16:42 | 2779766 pods
pods's picture

Thanks for clearing this up Machoman.  I thought the whole MERS and messing up the assignments (blank or incomplete assignment) through the REMICs basically severed the secured interest in the property.


Mon, 09/10/2012 - 18:09 | 2779994 Son of Loki
Son of Loki's picture

Thanks Macho. Good explanantion. Glad to see the laws have bot changed. I was involved with one of these years ago and screwed up paperwork also results in more legals costs and delays but the final results are as you state.

Mon, 09/10/2012 - 15:22 | 2779446 chunga
chunga's picture

Part of what brought about the advent of the Mortgage Backed Security (MBS) is what is called the Real Estate Mortgage Investment Conduit (REMIC). REMICs were invented in the late 1980’s by investment banks as a means to funnel mortgages to investors and avoid taxation by the IRS. The laws that indenture these REMIC products are NY Securities Law and they are very strict. Upon closer examination it is revealed that at the heart of these MBS innovations are many, perhaps millions, of legally and permanently defective mortgages.

Here is a link for anyone interested. New York Estates, Powers & Trusts - Part 2 - § 7-2.4 Act of Trustee in Contravention of Trust

If the trust is expressed in the instrument creating the estate of the trustee, every sale, conveyance or other act of the trustee in contravention of the trust, except as authorized by this article and by any other provision of law, is void.

Servicers will often move under state statute to foreclose, identifying themselves as "owner" or "holder". In many instances they are actually nothing more than a conduit to an "investor" whose identity they claim they can't reveal per some type of agreement they made amongst themselves. Without revealing that investor's identity it is not possible to establish an agency relationship. They also frequently assert that that borrowers cannot assert any claims against any of these third parties when in fact, given the very first opportunity to break the law...they did. They broke the terms of their own MBS contract. After the Trust is closed nothing can be "back-filled" into the Trust without triggering massive negative tax consequences per IRS 860 A - G so they are tax cheats too.

The reason for this is many times the trusts have triggered a credit event and all the loans that reside in them are paid by a bailed out phoney unregulated default insurance peddler. Any loans in the trust that are still performing go right in the servicers pocket as a windfall.

The big bankers realize this is a problem. This report from the Illinois Bankers Association gives an indication of how screwed they will be if they (gasp) have to follow the law. They go on to cite the "moral hazard" that following the law would create. It's spooky.

What a racket. Lenders send out their own agent to make an outcome based "appraisal". There is no risk because the "value" is locked for good. The bailed out fake insurance companies pay out with taxpayer money. Presto!

Appraisers Petition Concerned Real Estate Appraisers from across America

The concern of this petition has to do with our "independent judgment" in performing real estate appraisals. We, the undersigned, represent a large number of licensed and certified real estate appraisers in the United States, who seek your assistance in solving a problem facing us on a daily basis. Lenders (meaning any and all of the following: banks, savings and loans, mortgage brokers, credit unions and loan officers in general; not to mention real estate agents) have individuals within their ranks, who, as a normal course of business, apply pressure on appraisers to hit or exceed a predetermined value.

Mon, 09/10/2012 - 16:38 | 2779756 pods
pods's picture

Thanks for the info.  That take on REMICs was the same conclusion I came up with.  REMICs needed all the details filled in BEFORE notes went through them. MERS made the note a number and then it was plowed through to be filled in later.  Many were never even filled in, and still others (will have to look for the links) were assigned to multiple MBSs, so the banks basically were fractionally reserving MBSs.

Gigantic load of crap is what it is.


Mon, 09/10/2012 - 17:49 | 2779931 MachoMan
MachoMan's picture

Yep.  Total clusterfuck...  and, more importantly, a toal clusterfuck of epic proportions...  pratically speaking, it's the largest reason why there have been no reforms made in the housing industry...  the issues of title, lienholders, right to foreclose/standing, etc. are all issues commonly dealt with over the last few centuries+...  in other words, the system can work it through...  the dark pools, derivatives, and shadow banking...  not so much.

Mon, 09/10/2012 - 18:15 | 2780008 Son of Loki
Son of Loki's picture

excellent work, chunga! Thnx for the explanation.

Mon, 09/10/2012 - 18:52 | 2780120 chunga
chunga's picture

You're welcome.

It's important to point out that my opinion contrasts sharply with that of state AGs, congress, president[s], SEC, OCC, DOJ, ABA, NAR, etc., and pretty much every element of our "judicial system".

Personally I believe it be the single biggest ponzi ripoff in the annals of mankind; utter lawlessness that will eventually result in medeival feudalism.

Mon, 09/10/2012 - 22:12 | 2780566 MachoMan
MachoMan's picture

I think it would be fair to paint the present system as feudalism...  maybe we'll get to swords, shields, and whiping our asses with our bare hands, but I'm thinking you weren't meaning it that literally...

Mon, 09/10/2012 - 23:59 | 2780710 chunga
chunga's picture

I sure hope it doesn't come to that Macho.

I've been a half-assed student of politics for a few decades and what I perceive to be happening now in this country is unprecedented.

Social Security Administration buying hundreds of thousands of rounds of .40 JHP? NOAA doing the same?

Facial recognition, drones, TSA "chat-downs", check-points, constant scandals one after another.

There seems to be some sort of wacky "arms race" going on with govt. agencies arming up and the citizens responding in kind.

Why this is happening is something I just can't answer. It doesn't seem right.

Tue, 09/11/2012 - 13:16 | 2782301 MachoMan
MachoMan's picture

I think the simplest explanation is risk aversion...  I don't really see some united and sinister purpose, I simply see general governmental functions (spend it all this year or else get less next year) combined with risk aversion in the uncertainty of the outcome of an economic/monetary collapse.  J6P is doing likewise...  not much choice really.  Black rifle disease has a hold on many houses...

Mon, 09/10/2012 - 13:59 | 2779124 Winston Churchill
Winston Churchill's picture


Bifurcation of the promissory Note and its incidental Mortgage or DoT just makes

the obligation unsecured.It does not remove the obligation itself,however it becomes

then  a dischargeable debt in BK.

The truth is that nearly all mortgages written post 2004 thru'2008 are bifurcated,but

while 95% do not fight foreclosure the banks win anyway.

Mon, 09/10/2012 - 15:05 | 2779379 FreedomGuy
FreedomGuy's picture

What part of "unlimited state power" do you not understand? The State at all levels had been given unlimited power, especially with Robert's decision on Obamacare. Individual states write their own constitutions and now the Fed can help, too.

Theft is legal because power is not limited.

Mon, 09/10/2012 - 13:30 | 2778979 Kastorsky
Kastorsky's picture

This is worse than California!

Mon, 09/10/2012 - 13:33 | 2778996 q99x2
q99x2's picture

If that letter to Holder didn't have $100,000 with it he won't even read it. You get what you pay for in Washington and not a penny more. Now if Holder would see an opportunity or someone should show him an opportunity on how to address this issue he may be on board.

Mon, 09/10/2012 - 13:37 | 2779009 Never One Roach
Never One Roach's picture

Illinois and Cali taxpayers face some powerful Headwinds:


Chicago Teachers Strike Symbolizes One Of The Biggest Problems This Country Faces Read more: xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx You Thought California State Pensions Were Out Of Control? Wait Until You See This List From Illinois


Mon, 09/10/2012 - 13:40 | 2779030 Never One Roach
Never One Roach's picture

Meet Neil Codell an Illinois educator with a $26 million state pension

Just to drive the point further -- if Obama gets his way on his proposed state bailout, you will be paying a portion of Mr. Codell's pension.  'Codell, Neil C.' is 4th from the top of the list.  His estimated career pension is $26,661,604.  That's almost $27 million for a single administrator within just one local Illinois school system (Niles, to be exact).

Mon, 09/10/2012 - 13:42 | 2779033 docj
docj's picture

Yep - reality can be one hell of a headwind at times.

And math.

Mon, 09/10/2012 - 13:37 | 2779010 earleflorida
earleflorida's picture

Remember the great, "Nihilist"?

btw... perhaps they should ask bambi-o-care, while the country burned!

Mon, 09/10/2012 - 13:38 | 2779016 morning_glory
morning_glory's picture

This is what happens when you fuck a stranger in the ass

Mon, 09/10/2012 - 13:46 | 2779060 Temporalist
Temporalist's picture

When you say it like that it sounds so wrong.

Mon, 09/10/2012 - 14:03 | 2779153 Joe Davola
Joe Davola's picture

But she said no - Client 9

Mon, 09/10/2012 - 16:51 | 2779798 Dr. Kenneth Noi...
Dr. Kenneth Noisewater's picture

You see what happens Larry?  You see what happens when you FORGET a STRANGER in the ALPS?!?!?!


Haven't you got any..  you know..  Leads?

Mon, 09/10/2012 - 13:39 | 2779023 goldfreak
goldfreak's picture

Newsom sent a letter on Monday to U.S. Attorney General Eric Holder asking federal prosecutors to investigate any attempts by Wall Street investors and government agencies to "boycott" California communities that are considering such moves

Eric Holder HAHAHAHAHAHAHAHA!!!!!!!!!!!!!!!!!!!

Mon, 09/10/2012 - 13:45 | 2779051 otto skorzeny
otto skorzeny's picture

Holder could not be reached for comment-he was taking his third nap of the day.

Mon, 09/10/2012 - 14:39 | 2779288 Calmyourself
Calmyourself's picture

Actually last seen driving a truck full of ak-47's across the border..

Mon, 09/10/2012 - 19:26 | 2780207 ZeroAvatar
ZeroAvatar's picture

What's that? He's taking a dirt nap.....?

Mon, 09/10/2012 - 13:41 | 2779031 slaughterer
slaughterer's picture

OT: but this .10% "plunge" in SPY is making us nervous.  It is as if nobody at the Fed cares about nudging SPY up into the green today, or am I just impatient?  We should be testing S&P 500 1450 by now.  Can WSJ give us a few Hilsenrumors before day's end, please?   

Mon, 09/10/2012 - 13:42 | 2779034 Johnny Yuma
Johnny Yuma's picture

If you will it dude... It is no dream.

Mon, 09/10/2012 - 13:47 | 2779061 F22
F22's picture

Make my Caucasian a double....


Mon, 09/10/2012 - 13:47 | 2779068 Joebloinvestor
Joebloinvestor's picture

The feds have started property siezure again in Calif.


Donald Scott, a 61-year-old wealthy Malibu rancher, was murdered in 1992 by a joint task force (comprised of members of the Los Angeles County Sheriff's Department, L.A.P.D., Park Service, D.E.A., Forest Service, California National Guard, and California Bureau of Narcotics ) conducting an early-morning raid on the pretense that Scott was growing pot on his property. Responding to his wife's screams, a clueless Scott grabbed a gun and confronted the intruders. Two bullets were pumped into him. No pot was found. Ventura County District Attorney Michael D. Bradbury released a report criticizing the task force for using false information to secure a search warrant. Bradbury characterized the effort as an attempt to use forfeiture laws to slice up Scott's considerable assets between the participating agencies. "Clearly one of the primary purposes was a land grab by the Sheriff's Department," Bradbury wrote. They had obtained an appraisal of the property weeks before the raid. Los Angeles County and the feds tentatively agreed to pay $5 million to Scott's survivors.

Mon, 09/10/2012 - 14:57 | 2779349 pods
pods's picture

That goes on in every county in the country on a daily basis.  Civil forfeiture laws are tyranny magnified.  Your property, be it cash, cars, house, etc can be seized and no charges even filed against you.

The Scott case was egregious, but merely par for the course when it comes to LEO raising revenue.


Mon, 09/10/2012 - 15:05 | 2779382 Joebloinvestor
Joebloinvestor's picture

The Scott case was criminal and never prosecuted as such.

That it wasn't is the biggest proof on which side the government is on when it comes to your rights vs their agenda.

Mon, 09/10/2012 - 13:50 | 2779076 Precious
Precious's picture


Mon, 09/10/2012 - 14:12 | 2779083 kito
kito's picture

come on guys, cant you just get along....both sides need to remember that we are a fascist corporatocracy now!!!!! this isnt good for either sides lets just sit down and hammer out a new bond arrangement with onerous terms and oodles of fees so that everybody is happy again!!!!!

Mon, 09/10/2012 - 13:53 | 2779088 Zymurguy
Zymurguy's picture

Funny, it seems no one is asking the homeowner their opinion in any of this... it's merely the wolves deciding how to prepare the sheep for dinner... boiled, fried or raw?

Mon, 09/10/2012 - 14:09 | 2779174 Joe Davola
Joe Davola's picture

Good point, they might be living "rent free" now, would it become section 8 after eminent domain?  Government gonna want some rent or else they'll find someone who can pay pass through the federal housing allowance.

Mon, 09/10/2012 - 14:33 | 2779262 marathonman
marathonman's picture

Boiled sheep?  My mouth would water at the thought of a 12 hour slow roasted lamb on a 225 degree pecan fueled pit smoker.  But boiled?  That sounds completely awful. 

Mon, 09/10/2012 - 13:53 | 2779091 GolfHatesMe
GolfHatesMe's picture

Darkness Warshed over the Dude

Mon, 09/10/2012 - 13:54 | 2779099 buzzsaw99
buzzsaw99's picture

Shomer fucking shabbos.

Mon, 09/10/2012 - 13:55 | 2779104 Seasmoke
Seasmoke's picture

Gavin needs a blowjob from Kimberly Guilfoyle

Mon, 09/10/2012 - 14:46 | 2779314 Calmyourself
Calmyourself's picture

Who the hell doesn't??

Mon, 09/10/2012 - 14:47 | 2779316 Vergeltung
Vergeltung's picture

don't we all?


Mon, 09/10/2012 - 13:58 | 2779117 Atlantis Consigliore
Mon, 09/10/2012 - 14:00 | 2779127 slightlyskeptical
slightlyskeptical's picture

The only real solution for the housing crisis is for the Fed to buy up all the MBS and other outstanding primary mortgages and refinance them directly to the people with write downs in principal up to 30%.

A $100,000 mortage, reduced to $70,000 will bring back an entity $135,000 over 30 years at 4% interest. So it doesn't have to cost the government anything. It will cost investors future profits.

I would be ok with cities doing this as well, but cities can't print money so it wouldn't work as effectively. I am not in favor of cities forcing investors to take less than they are due. There are legal processes already established for such.

Mon, 09/10/2012 - 14:37 | 2779281 marathonman
marathonman's picture

Cities and states can print money!  It's called fractional reserve banking and everyone can do it.  What do you think the various for profit banks do every day to make a living?  They loan money they don't have.  They create credits in peoples accounts that trade as money.  Looks a lot like printing to me.

Mon, 09/10/2012 - 14:03 | 2779151 blunderdog
blunderdog's picture

Maybe California will be the first state to secede? 

They've got the size and the terrain to be their own country, and I'm sure everyone would feel a lot better after that divorce.

Mon, 09/10/2012 - 15:44 | 2779510 Rat Patrol
Rat Patrol's picture

Deep water ports. They aren't going anywhere. We'd have to keep at least San Diego.

Be cheaper to just kill them all, and move in some non-crazy workers.

Mon, 09/10/2012 - 18:43 | 2780088 blunderdog
blunderdog's picture

The Feds just aren't powerful enough to put down any major insurrection.  They know this.  They could hold the bases for awhile, though.

Mon, 09/10/2012 - 19:46 | 2780260 mjcOH1
mjcOH1's picture

Well lets hope then that Californians dont insurrect and try to find some other country to bailout their unions and fund their welfare state.   We'd have to let them go to greener pastures!

Tue, 09/11/2012 - 09:22 | 2781360 blunderdog
blunderdog's picture

California contributes more to the Federal budget than they cost.  The wealthy and populous states all tend to pay more than they get back.

Wed, 09/12/2012 - 22:03 | 2788059 mjcOH1
mjcOH1's picture

Actually, no.  California receives about $1.09 in benefits for every $1 paid in federal tax.   


There are worse offenders.     But probably none so close to insolvency at the state level, with such a large resulting step-change up on the dependancy scale.

Mon, 09/10/2012 - 14:18 | 2779207 sbenard
sbenard's picture

The rule of law is now DEAD in these United States! Once the Union Organizer in Chief declared that bondholders were no longer in a senior position, so that he could give money, including taxpayer funds, to his union cronies at Government Motors, the rule of law has been under assault by the Thief in Chief!

Prepare for tyranny! It's here! And it's called Obama!

Having lived in foreign countries under both military dictatorships and socialist dictatorships, I've seen some of what is coming to American shores. Most Americans have been so complacent about their freedom and prosperity for so long, that they no longer recognize the threats to that freedom. We have no idea how bad things can get! It can get REALLY bad!

There are few places to run or hide. I've lived in even a few countries recommended by Simon Black, and they are NOT safe havens either.

Tyranny is here and going to get worse. Plan and prepare accordingly!

Mon, 09/10/2012 - 14:31 | 2779253 spanish inquisition
spanish inquisition's picture

You can add a 2 party dictatorship to the list! The potential coming tyranny can be either red or blue.

Mon, 09/10/2012 - 14:25 | 2779232 Zen Bernanke
Zen Bernanke's picture

this article isn't about bailing out wall street.  it's about government using eminent domain to break contracts and steal private property.  if the owner of the property can't pay for it, after legal foreclosure proceedings, they are evicted and it then belongs to whoever the creditor is.  period!    The mere fact that gov't wants to interfere with this is another example of political overreach to buy votes at the expense of the taxpayer.  Pathetic.  WTF is happening to the USA?

Mon, 09/10/2012 - 15:09 | 2779400 AynRandFan
AynRandFan's picture

Progressivism, where the ends (economic equality) justify the means.

Mon, 09/10/2012 - 15:28 | 2779464 Joe Sixpack
Joe Sixpack's picture

"... if the owner of the property can't pay for it, after legal foreclosure proceedings, they are evicted and it then belongs to whoever the creditor is.  period!..."


In theory, yes.


Equally theoretical: If a bank collpapses because it created trillions in derivatives, and their derivatives strategy failed,  the bank goes under, and the creditors get the proceeds. Right?

It's not like there are one set of rules for the banks and one for the people, right?





Mon, 09/10/2012 - 18:45 | 2780097 blunderdog
blunderdog's picture

It's not as simple as you imply if you can't identify the creditor.  Additionally, in order to seize assets, that creditor has to DEMAND it in a court--it's not an automated process.

You don't seem to understand the real issue here.

Mon, 09/10/2012 - 21:16 | 2780458 calgal
calgal's picture

Ding dng ding

We have a winner

You just gave a beautiful definition of Fascism my friend.....

Mon, 09/10/2012 - 14:29 | 2779247 Catullus
Catullus's picture

I'll just go find a cash machine.

Tue, 09/11/2012 - 06:33 | 2781006 MiltonFriedmans...
MiltonFriedmansNightmare's picture

Brad can't watch, or he as to pay a hundred.

Mon, 09/10/2012 - 14:29 | 2779248 wagthetails
wagthetails's picture

God damn you newsom! You fuckin asshole! Everything's a fucking travesty with you, man! And what was all that shit about bailouts? What the fuck has anything got to do with bailouts? What the fuck are you talking about?

The dude abides. If hollywood made more movies like this, people would go to the theater.

Mon, 09/10/2012 - 14:31 | 2779251 ebworthen
ebworthen's picture

Moral Hazard alert!

Let's see:  bail out the banks (which is a form of financial eminent domain upon the citizenry) then bail out the state using eminent domain of property.

I see two sharks fighting over baby seals (Us).

Mon, 09/10/2012 - 14:31 | 2779256 Calc
Calc's picture

Why steal them when Fannie will give them away to their buddies for free:

(or at lease with 7:1 synthetic leverage...)

Mon, 09/10/2012 - 14:38 | 2779287 monopoly
monopoly's picture

So lets see. I buy a house at the top of the market, lose my job, cannot make the payments, am underwater big time, but I can continue to live in the house, and get a reduced mortgage, since the city has decided that this is not good for the community. Ummm.

Now, my next door neighbor, who also bought about the same time I did and is also underwater, has not lost his job and his wife got a second job, since they both took pay cuts over the last 3 years, so they could make their mortgage payments on time, since that is the contract they agreed to. And because of the eminent domain clause at some point his and her taxes will increase so I can still be his neighbor and not get evicted. 

Seems fair, No!

I love Amerika!

Mon, 09/10/2012 - 15:05 | 2779383 MachoMan
MachoMan's picture

Exactly.  I'm curious as to where the municipalities/states are planning on getting the funny money to purchase mortgages...  the state doesn't get to set the price if the person on the receiving end disagrees with the valuation...  having participated in a dozen or so of these cases, juries tend to give the owner far more than the state ever offered.

I understand that cities have inherent police, safety, and sanitation powers...  these are inherent and SCOTUS will not touch them.  However, I'm having a hard time understanding the constitutional justification for the taking...  the public purpose.  It seems to me that it's nothing more than a private benefit...  regardless of how you dress it.  Why cities/states want to take another bite at a rotten apple, I'm at a loss...  not only shouldn't they, but I don't think they should be allowed to try.  I literally see no basis for doing so, outside of blight/dangerous construction.  However, if it was simple blight, then they would not need to concoct some scheme to justify doing so.

Mon, 09/10/2012 - 15:29 | 2779465 Joe Sixpack
Joe Sixpack's picture

" I'm curious as to where the municipalities/states are planning on getting the funny money to purchase mortgages..."


Private investors.

Mon, 09/10/2012 - 19:26 | 2780206 GCT
GCT's picture

Macho they have private investors waiting to gobble up the properties from what I have read.  They need their taxes and this program in my small mind is against all the laws I ever read.  Investors will actually buy up the properties.  Eminent Domain is being abused big time for this. This program is not a public program, but a program with private profits.  The local government will also get a cut of the proceeds.

I honestly do not know how this is legal. Declaring emminent domain for private profit entities was illegal at one time in this country.  Or should I say getting one hell of a deal for the new appraised price or for pennies on the dollar.  This whole scheme should be illegal.

Mon, 09/10/2012 - 22:22 | 2780583 MachoMan
MachoMan's picture

I can't fathom anything that would be legal about it from my cursory inspection.  The only way it can become legal is to utlize existing methods for eminent domain usage, e.g. blight, public nuisance, health hazard, etc.  The problem is that some of the houses are actual homes and are being kept in a mediocre manner, sufficiently above the eminent domain threshold.

Now, this same exact plan is what happens when banks go tits up, so it shouldn't come as any shock...  ultimately, political power must be leveraged into pecuniary gain...  but, often times, it would at least be a little more covert.

Lienholders aren't going to take too kindly to this approach either.  Eminent domain works as long as the organization using its domain powers doesn't actually have to pay market value for the taking.  Some might ask how it is possible for the state to not pay fair market value for properties, but it simply boils down to taking things from unassertive people...  some of them unwitting (elderly, etc.).  If you go to court and challenge the valuation, YOU WILL WIN MONEY.  Period.  The amount estimated by the state for the value of the taking is but a mere first offer...  and typically a laughably low one at that.  The simple solution is to clog the courts with challenges of valuation...

Of course, the jury's sympathy might be nonexistent when the homeowner has been long booted out and no longer gives a shit what value is assigned to the house.

Mon, 09/10/2012 - 14:39 | 2779290 d2themfi
d2themfi's picture

STFU Donny

Mon, 09/10/2012 - 14:40 | 2779294 Piranhanoia
Piranhanoia's picture

There are no legit mortgage loans.  That would have gotten in the way of hypothecation.   The states know it,  the feds know it,  and every idiot with MBS exposure knows it now.

Read the results from the folks that have been trying to find just one correct set of documents.  

Mon, 09/10/2012 - 15:06 | 2779386 Ms. Erable
Ms. Erable's picture

Not only that, how many people are aware they signed a Note, NOT a Promissory Note, are aware of the differences between the two document types, and understand that the terms of the note have been satisfied once it is deposited by the broker?

Mon, 09/10/2012 - 14:43 | 2779304 Clashfan
Clashfan's picture

All the dude wanted was his rug back, remember. It really tied the room together.

Mon, 09/10/2012 - 14:44 | 2779306 Skyprince
Skyprince's picture

Ayn Rand was truly prescient.


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