Badges! We don't need no steenking affidavits
The truth is, this is about getting a quick fix to paper over the paper gufflaw to protect Wall Street.
Here's the con, the "insignificant" paper error and the merit-less defaulting owner (the payoff to the banks is down below):
A Primer On The Foreclosure Crisis
So what’s going on here? Why is the foreclosure machinery of our nation’s largest banks suddenly grinding to a halt?Now, Guambat can digress to tell you, in days gone by he has had to pursue many collection cases, most of them default, and in every case he had to prove his claim, under penalty of perjury and loss of professional license, if not further penalty to both Guambat and Guambat's client, whose claim he was averring.
In 2007, a federal judge held that Deutsche Bank lacked standing to foreclose in 14 cases because it could not produce the documents proving that it had been assigned the rights in the mortgages when they were securitized.
The federal judge's decision against Deutsche Bank is entirely consistent, routine and unremarkable in Guambat's admittedly limited experience.
Maybe in other places the courts just take the lawyer's word for everything.
Now wouldn't that be a happy world!?
But back to the CNBC Primer:
Every time a mortgages changes hands, the new owners are supposed to receive an “assignment” of the mortgage notes from the buyers. The assignment is typically a short little document signed by both the seller and buyer of the mortgage acknowledging the sale, which is then attached to the mortgage documents themselves and delivered to the new owner.Guambat can only day dream about telling the judge that a contract or a mortgage or an assignment must surely exist somewhere. Oh what a wonderful place where judges say, "no problemo, Counselor: proceed".
When a mortgage is securitized it is typically sold to a Wall Street firm, which pools the mortgage with thousands of others. Investors buy slices of the pool, entitling them to cash-flows from the mortgage payments. The actual mortgages are assigned to a newly created investment vehicle. A servicer is tasked with ensuring the payments to borrowers get divided up properly and that delinquent borrowers get foreclosed upon.
Here’s where things get tricky. When a mortgage is securitized, the investors in the mortgage bonds don’t get assignments or notes. The investment vehicle doesn’t get the assignments or notes either. Instead, the physical notes are typically sent to a document repository company. The transfer of interests is noted in an electronic database.
For most mortgages, the note probably still exists somewhere.
And it is in this sarcastic world that some of the commentators actually live, lost in the daydream, as this following comment from a Bloomberg report illustrates.
A complete halt would be “catastrophic” for the U.S. economy and hurt home sales, said a statement today from President Tim Ryan at the Securities Industry and Financial Markets Association, Wall Street’s biggest lobby.So, why even bother with all that "proofy" stuff?
SIFMA, which represents Wall Street securities firms, banks and asset managers, said a moratorium would “unjustly” create losses for housing market investors, including workers with pensions, retirement accounts or mutual funds, and “further constrain consumer credit and spending” because of uncertainty in the securitization market.
Thomas Brown, chief executive officer of Second Curve Capital LLC said “People on average have not been paying for a year and a half and that’s not in dispute,” Brown told Tom Keene and Ken Prewitt on “Bloomberg Surveillance” this morning. “A third of these homes that are in foreclosure are completely empty, so people have already left or they never actually owned them because they were investors.”
Just go take it away; won't take long to sort this out. We don't need no steenking poofy proofies. It ain't nuthin' more than paper work, anyway. Hey, give a bank a break!
"Rocket Docket" rushing foreclosures, lawyers say
With 15,000 open foreclosure cases in Duval County, it's staffed by retired judges with a goal of resolving 25 cases an hour, leading some critics to label it the "Rocket Docket," and there are harsher descriptions as well.
"The fundamental problem," said Chip Parker, an attorney who specializes in foreclosure defense, "is that for the first time, this court was created with the specific goal of reducing foreclosures 62 percent."
"If they find for the defendant, the plaintiffs [usually lenders] just refile," he said. "The only way to reduce [the case load] is to give it to the plaintiff. It's designed with a result in mind, and that's not how justice is supposed to work."
Now, here's the payoff for the con, saving Wall Street's ass -- again. At our expense -- again.
Don't Underestimate the Fauxclosure Mess
Massive liability for banks
Washington Post writer Ezra Klein spoke with Congressman Brad Miller (D-N.C.) about what this mess could mean for the banks. According to Miller:There is massive potential liability for the securitizers, which are mostly the biggest banks. The contract was that if mortgages didn't meet certain requirements, then the securitizer would buy them back.The controversy also raises more questions about investment banks such as Morgan Stanley and Goldman Sachs that securitized these mortgages in the first place.
There's been lots of litigation where investors try to get securitizers to buy back the bad mortgages because they were flawed, but that litigation has been stymied by procedural objections.
If the private investors can break through that defense and require the mortgages that don't meet the requirements to be bought back, the liabilities for the biggest banks will be enormous.
BUT WAIT, THERE'S MORE:
Foreclosure Fear: Q&A Risk Analytics Chris Whalen
All the documents are questionable.
If the lien wasn't changed, you can't go into court and foreclose. You can't stand up in front of the judge and say "I am the party who owns the mortgage your honor." He's going to look at the docket and if the record in the New York State courthouse doesn't say that he's the owner - he may not agree.
So when you have an imperfection in the record, you're in big trouble as a lender. You basically have an unsecured loan. That's the issue that's really going to commit the banks this year and next year.
Investors are going to sue them [banks] because they were sold a security that was fraudulent. It was not collateralized. And the underwriter of the security did not take the steps required to go out there and perfect the collateral lien, because they wanted to keep the extra half point for themselves as profit in the underwriting instead of having it as the expense for the underwriting.
The fact of bad documentation does not change the fact that the mortgage is bad.
The fact that Wall Street didn't want to spend an extra half point when they did a mortgage-backed security to send paralegals around the country to change the collateral lien on the mortgage - nobody noticed.
Factbox: The role of MERS in foreclosure furor
WHAT IS MERS?
MERS, based in Reston, Virginia, is a private company owned by leading banks and mortgage processors. They founded it in 1995 to speed up legal record-keeping of mortgages and sales of mortgage loans through securitizations. Its main purpose was to be an electronic registry that would keep track of repeated sales of mortgage loans as the number of new mortgages and refinancings boomed.
WHY IS MERS FACING LEGAL CHALLENGES AND GOVERNMENT INQUIRIES?
MERS, on behalf of the banks and myriad trusts that own the mortgage loans, has initiated thousands of foreclosure actions around the country, as the "mortgagee of record" listed on homeowners' mortgages. Homeowners' lawyers and advocacy groups contend that MERS has no right to initiate the actions because it doesn't own the mortgage loans. Lending laws specify that only the actual owner of the loan can file a foreclosure action. Lawyers also have alleged that MERS bypassed laws requiring mortgages and refinancings to be recorded in county recorders offices. Issues have been raised in several court cases about whether MERS misled courts about ownership of the loans.