[Cid_Yama]

You miss the point. These mortgages were written by places like Countrywide that then bundled those mortgages into securities which they sold.

Because of this, the writers of the mortgage do not own the mortgage, they sold it. The mortgage was chopped up and spread among derivitives all over the world, making it impossible to trace ownership of that mortgage.

The sellers of that mortgage, that sold it and no longer own it, are never the less trying to forclose.

But they can't go to court if the owner is going to demand to see proof of ownership of that mortgage. Which they can't provide because they no longer hold the paper on that mortgage.

Which means their only recourse is if the owner doesn't realize this and voluntarily moves out or by hiring people to change the locks, even though they haven't got the legal right to do so since they no longer hold the mortgage, and hope the owner don't just break back in and change the locks themselves.

There are 100s of thousands of properties out there, that no clear line of ownership can be established.

Those that are trying to forclose have no claim to the property since they sold the mortgage. The property owner at least has equity.

This is just financial intstitutions trying to take advantage of a situation they are aware of, but most property owners are not.

[Ludi]

$this->bbcode_second_pass_quote('Cid_Yama', '
')The sellers of that mortgage, that sold it and no longer own it, are never the less trying to forclose.

[Pops]

Back when I was a kid I was really impressed my mom and dad who were really small time, black collar workers could go into one of several banks and come out with a small check to buy a used car, pay a medical bill or whatever.

When I was old enough and got on the revolving credit merry-go-roun, I thought "this is cool, I have credit anywhere they accept this card - I don't need to know the banker and he, me." I always paid my bills like you're supposed too and I kept on the look out for shenanigans by cheating bankers like happened in the S&L "Crisis".

But I gotta tell you all, I've become of the opinion that obligation is not the one way street the bankers have had for quite a while now. It isn't fair for it to only be on the borrower to hold up his end of a crooked deal.

I have sympathy for the people whose retirement backed those crappy loans but in the end it's just as much their fault for thinking they were getting money for nothing as it is the borrowers for thinking the deal they were getting was too good to be true.

I think we need a major reset before either end is going to have much faith again.

[dorlomin]

Well it is quite common for businesses to have their loan obligation renegotiated, 'taking a hair cut' is the euphenism for it. Its better to get back some of your money than none, and the banks also took on a risk that borrowers could repay. So far as I understand the problem is that there is a lien on who gets repayed. So some holders of the mortgage get first dibs on any cash recovered and their interests are in foreclosing and getting whatever they can for the house even if its 10% they get cash. This is a change in the traditional relationship between bank and lender.


Renegotiating many of these loans so people can stay in homes and the market does not utterly collapse should be in the general interest of the country.

[jbrovont]

When a house is foreclosed on, the equity in the house is either confiscated by the bank, or destroyed in the foreclosure. For instance, a $200,000 with $40,000 in equity, goes 180 days down, resulting in forclosure. The total missed payments in that period of time will max out at around $12,000, but the difference repo'd by the bank will be $28,000. Because of finance charges, that $28,000 in equity represents between $70k and $90k in payments. As punishement for having the misfortune of being in a horrible economy, we should fine someone $70k and kick them out of their home? That doesn't include taxes and insurance paid.

Having a bunch of poor people struggling to make ends meet doesn't benefit society. It increases crime and disease rates, which ultimately turn into higher costs both in the private and public sector. Instead of getting a societal advancement from that spending, you're just paying to not degenerate.


$this->bbcode_second_pass_quote('Cog', '')$this->bbcode_second_pass_quote('Ludi', 'W')hat's the benefit to society in letting a bunch of houses sit empty?

[Cog]

$this->bbcode_second_pass_quote('jbrovont', ' ') As punishement for having the misfortune of being in a horrible economy, we should fine someone $70k and kick them out of their home? That doesn't include taxes and insurance paid.

Having a bunch of poor people struggling to make ends meet doesn't benefit society. It increases crime and disease rates, which ultimately turn into higher costs both in the private and public sector. Instead of getting a societal advancement from that spending, you're just paying to not degenerate.


$this->bbcode_second_pass_quote('Cog', '')$this->bbcode_second_pass_quote('Ludi', 'W')hat's the benefit to society in letting a bunch of houses sit empty?

[jbrovont]

Very true - foreclosing damages us as a society, as does not foreclosing, albeit just in different ways.

$this->bbcode_second_pass_quote('Cog', '')$this->bbcode_second_pass_quote('jbrovont', ' ') As punishement for having the misfortune of being in a horrible economy, we should fine someone $70k and kick them out of their home? That doesn't include taxes and insurance paid.

Having a bunch of poor people struggling to make ends meet doesn't benefit society. It increases crime and disease rates, which ultimately turn into higher costs both in the private and public sector. Instead of getting a societal advancement from that spending, you're just paying to not degenerate.


$this->bbcode_second_pass_quote('Cog', '')$this->bbcode_second_pass_quote('Ludi', 'W')hat's the benefit to society in letting a bunch of houses sit empty?

[Plantagenet]

Its not just a matter of banks of deadbeat homeowners. The taxpayer is getting screwed too.

Fannie and Freddie bought all the subprime loans from the banks, and they bundled the mortgage loans into groups and made them into securities...then Fannie and Freddie sold the bundles of mortgages to get more money to buy more subprime loans to keep the housing bubble going.

When things were going good, Fannie and Freddie promised to pay interest on the mortgate securities they had created. Now people are defaulting, and Fannie and Freddie aren't taking in enough to pay the interest.....that means the taxpayers are paying.

If people don't pay their mortgages and are allowed to stay in their homes, the taxpayer will have to pay. Its going to cost the taxpayer hundreds of billions of dollars if the deadbeats don't pay or if the banks don't get to foreclose and resell the homes.

Damn.

[blukatzen]

If you live in a large city (I live in Chicago), you will see quite a few neighborhoods within the city go through mortgage "cleansings". Most of the folks who could not afford the mortgage arm reset cleared out. The value of those homes have gone down due to many homes being trashed due to too many people living in them.

There were no improvements made to those bungalows, who need an upgrade in wiring, plaster repair, etc. over the ages and just wear and tear of a family living in said homes.

Right now, there are quite a few handymen who have bought these homes, and are rehabbing them. These are NOT flippers, per se, but those who know good solid homes, and see an opportunity. I am not sure who they think will buy those homes, and we have seen some with hope.

It was a quiet summer, though, and there were no loud parties in the backyards, drunken people fighting, etc. We needed to get the riff-raff out of here. Even the section 8 homes were cleared out. (I have heard from one neighbor who goes to the monthly aldermanic/cop/neighborhood "Watch Program" that the FBI have been quietly doing raids, getting the drug cache houses shut down, along with those who may have been illegally here.

(And NO I don't live in a high crime area, but that is exactly WHERE you put drug cache storehouses, certainly NOT in a high crime area. You would have drug wars in no time, and that attracts the law(or those you have not paid off.)

Not having a lot of folks in the neighborhood is very stressful for the HOUSING STOCK. Just ask any realtor. Just ask any alderman. It is NOT good for neighborhoods to stand empty. That is when crime can happen, drugs move in, gangs, prostitutes plying their trade, etc. Housing needs to be kept up, repaired, lawns need to be cut, flowers planted, etc.

When you do NOT have this happening, it is punishing the lifeway of the ensuing neighbors that are left, to watch out for the homes that are to the left and right of them. It DOES affect MY LIFE if someone starts burning down the houses. I live here, and I feel what the bankers have done have affected MY neighborhood down the line.

It affects safety, social fabric, housing stock quality, small businesses, tax bases, a whole web of life that gets affected when neighborhoods are emptied. It's like dead-mall syndrome, but it starts affecting your block where you live. It's depressing.

I had to give a lecture in a suburb that has a high rate of immigrants. It was this August. I had lived there, a while back. I went down the street where my grandparents had a few apartment buildings, way back in the day. There were SO MANY homes knocked down, (whilst riding down a few streets to get there) that I felt that Cicero was beginning to resemble certain parts of Detroit. One building was still standing, my grandparents' old 3-flat. The 2-flat we used to own, and I once had to remodel, was knocked down.

I would hope that the other factors, more subtle, but yet just as prevalent, and "real-world" would be accounted for. These bankers, mortgage brokers have a lot to answer for, and it's not just money. It's the destruction of neighborhoods they have to answer for. They've just callously walked away from any responsibility for that. (along with the realtors, mortgage brokers, aldermen who had something to do with those now empty houses.)

[Cid_Yama]

Isn't it interesting that the Democrats fought hard and long to keep Fannie and Freddie from becoming toxic waste dumps for the banks, but the Bush Administration did it anyway.

[Serial_Worrier]

Why am I not shocked that lefties are not in favor of honoring contracts? Contract obligations are one of the foundational touch-stones of capitalism. Undermine that, and you are half-way to socialism just like that.

[evilgenius]

$this->bbcode_second_pass_quote('Ludi', 'W')hat's the benefit to society in letting a bunch of houses sit empty?

[dorlomin]

$this->bbcode_second_pass_quote('Serial_Worrier', 'C')ontract obligations are one of the foundational touch-stones of capitalism.

[Ludi]

$this->bbcode_second_pass_quote('dorlomin', '')$this->bbcode_second_pass_quote('Serial_Worrier', 'C')ontract obligations are one of the foundational touch-stones of capitalism.

[gollum]

$this->bbcode_second_pass_quote('Serial_Worrier', 'W')hy am I not shocked that lefties are not in favor of honoring contracts? Contract obligations are one of the foundational touch-stones of capitalism. Undermine that, and you are half-way to socialism just like that.

[Pops]

http://www.ritholtz.com/blog/2010/10/the-foreclosure-mess/

It's long but a good explanation of the whole mess...
$this->bbcode_second_pass_quote('', 'P')eople still haven’t figured out what all this means. But I’ll tell you: if enough mortgage-paying homeowners realize that they may be able to get out of their mortgage loans and keep their houses, scott-free? That’s basically a license to halt payments right now, thank you. That’s basically a license to tell the banks to take a hike.

What are the banks going to do—try to foreclose and then evict you? Show me the paper, Mr. Banker, will be all you need to say.

This is a major, major crisis. The Lehman bankruptcy could be a spring rain compared to this hurricane. And if this isn’t handled right—and handled right quick, in the next couple of weeks at 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?

[gollum]

$this->bbcode_second_pass_quote('Pops', '[')url]http://www.ritholtz.com/blog/2010/10/the-foreclosure-mess/[/url]

It's long but a good explanation of the whole mess...
$this->bbcode_second_pass_quote('', 'P')eople still haven’t figured out what all this means. But I’ll tell you: if enough mortgage-paying homeowners realize that they may be able to get out of their mortgage loans and keep their houses, scott-free? That’s basically a license to halt payments right now, thank you. That’s basically a license to tell the banks to take a hike.

What are the banks going to do—try to foreclose and then evict you? Show me the paper, Mr. Banker, will be all you need to say.

This is a major, major crisis. The Lehman bankruptcy could be a spring rain compared to this hurricane. And if this isn’t handled right—and handled right quick, in the next couple of weeks at 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?

[Cid_Yama]

$this->bbcode_second_pass_quote('', 'A')nd earlier this month a federal judge in Oregon issued an injunction blocking Bank of America [BAC 12.0401 -0.2999 (-2.43%) ] from foreclosing on a borrower’s home. United States District Court Judge Garr M. King said that under Oregon law, the borrower was likely to prevail on the argument that the use of MERS had invalidated the mortgage.

About 60 percent of mortgages in this country show up in local records as being owned by the service. In fact, none are owned by MERS. It was created to act as an agent for others, whether banks or securitization trusts, which own the actual mortgages.

Mr. Peterson, in a paper with the dry title of “Two Faces: Demystifying the Mortgage Electronic Registration System’s Land Title Theory,” argues that MERS cannot have it both ways, and that it faces problems if it is deemed to be only one of them.

If it is an agent, he wrote, “it is extremely unclear that it has the right to list itself as a mortgagee,” as it does. State real estate laws, he said, “do not have provisions authorizing financial institutions to use the name of a shell company,” in large part because “the point of these statutes is to provide a transparent, reliable record of actual — as opposed to nominal — land ownership.”

If it is a mortgagee, Mr. Peterson added, it has the right to record mortgages in its own name, as it did. But since it does not own the actual loan, doing that could be seen as violating a long line of precedents that bar separating a mortgage from the underlying note in which the borrower promises to pay. He quotes from an 1879 Supreme Court decision holding that “the assignment of the note carries the mortgage with it, while an assignment of the latter alone is a nullity.”

If an assignment of the mortgage alone is a nullity, then the mortgage can no longer be enforced. The borrower would still owe the money, but no foreclosure would be possible and the borrower could sell the home without paying off the mortgage.

[Plantagenet]

$this->bbcode_second_pass_quote(' ', '[')
This is a major, major crisis. The Lehman bankruptcy could be a spring rain compared to this hurricane. And if this isn’t handled right—and handled right quick, in the next couple of weeks at 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?

[Cid_Yama]

What he vetoed would have removed the homeowner's right to challenge the person attempting to forclose by demanding proof that they actually held the mortgage.

In other words, rip off the home owner in favor of the Banks who committed widespread Fraud.

From Summer 2007:

What is Fraud?
$this->bbcode_second_pass_quote('', 'O')k, it's time for a little truth telling. We all know what the scam was. Interest rates were at their lowest ever. There was no place else for interest rates to go but up. Thus, the creation of Adjustable Rate Mortgages. How much you pay goes up with interest rates. Sold to consumers as good deals as, if interest rates go down, so does the amount you pay. Nowhere down for interest rates to go, only up. Misrepresentation? You Bet'cha.

Now lets spend billions on television advertising to not only sell loans to people looking to buy a house(a very small percentage), but let's talk everyone into refinancing, taking out second mortgages, move that fixed mortgage into an adjustable rate one, money to spend on anything. Let's even make it sound Hip and call it ReFi.

Oh, let's not forget the credit cards, they can get in on the adjustable rate thing too. How many billions of 'preapproved' credit card applications were mailed out? Low starting rate, no interest for six months, ADJUSTABLE. Whenever, Wherever. Just read the fine print. Questionable business practice? You Bet'cha.

You've noticed I've not said the word FRAUD yet. Oh, but this is only the beginning.

Can't hold on to these loans, as soon as interest rates go up, they won't be able to pay. So, repackage them as financial instruments and sell them to pensions and hedge funds. Make a tidy profit and push these bad loans into someone else's lap. HIGH YIELD! Those Pension Funds were hurt bad last time around, barely standing on one leg. They need to recoup those losses. Suck(er) them in with promises of high return.

Now add in synergy. If now everyone can afford to buy a house, real estate values go through the roof. People are paying prices far far higher than before all this started. Inflated valuations means booked assets are inflated, meaning more money can be borrowed against those assets. And the Bubble grows.

FRAUD
Definition

Intentional misrepresentation or concealment of information in order to deceive or mislead. It is illegal.

fraud (frôd)
n.
A deception deliberately practiced in order to secure unfair or unlawful gain.


fraud

Intentionally deceiving another person and causing her to suffer a loss. Fraud includes lies and half-truths, such as selling a lemon and claiming "she runs like a dream."