Report: Foreclosure Mess Could Threaten Banks

[Mad Scientist]

Ok first it was; "Give us a huge bailout NOW! The sky is falling". Now it's: "Umm, we don't know who owns the title to your house. Oops!"
Report: Foreclosure mess could threaten banks - Yahoo! Finance

Revelations that several big mortgage issuers sped through thousands of home foreclosures without properly checking paperwork already has raised alarm in Washington.
"Clear and uncontested property rights are the foundation of the housing market," the report says. "If these rights fall into question, that foundation could collapse."
It lays out the possible scenarios: Borrowers may not be able to ascertain if they're sending their mortgage payments to the right party. Judges may block all foreclosures. Prospective buyers and sellers could be in left in limbo.

That means if you re-fied your house or if the bank sold the mortgage as a financial instrument (mortgage backed securities, remember those?) multiple banks and lending institutions may try to foreclose on you.
You bank may have sold your mortgage multiple times, like 10-20 times, to different investors.

But that's ok, I'm sure the Federal Reserve can come to the rescue by printing the banks some money that we the tax payers have to pay back right? We already have 13 trillion in debt what's 6.4 trillion more?

 

[iamwhatiseem]

This is serious...and is a direct reason I have been out of the markets since April, and will not get back in until at least next spring when the washout that this will create has settled.
We should be more worried about what is happening in Washington this very minute as top banking CEO's are meeting with our government right now.
You should be worried about how much more of your money will the government give to the banks in yet ANOTHER attempt to stop the real economic crises that has not yet happened.
The banks estimate this to be about $500 billion.
Other experts put that number closer to $600 billion.
A $trillion has been put into this system, and yet there is still $600 billion to worry about.

 

[william the wie]

This is why I think QE II may be all about saving the banking system.

 

[loosecannon]

This is why I think QE II may be all about saving the banking system.

Ben Bernanke

 

[william the wie]

This is why I think QE II may be all about saving the banking system.

Ben Bernanke

Yeah he has sent that QE II cartoon viral. "Who hired this idiot Bernancke?"

 

[loosecannon]

We all know the mortgage securitization process is complicated.

But just how complicated? The chart below from Zero Hedge shows the convoluted journey a mortgage takes as it morphs into a security.

Man Makes Ridiculously Complicated Chart To Find Out Who Owns His Mortgage (CHART)

 

[william the wie]

Where's the click to enlarge button, LC?

 

[loosecannon]

right here, WTW Man Makes Ridiculously Complicated Chart To Find Out Who Owns His Mortgage (CHART)

or just click the bar at the top of the graphic.

 

[william the wie]

right here, WTW Man Makes Ridiculously Complicated Chart To Find Out Who Owns His Mortgage (CHART)

or just click the bar at the top of the graphic.

I did have to ask but except for Wells Fargo being at least three separate boxes I think the graph missed more steps than it duplicated. For example a CDO is a Special Investment Vehicle not technically part of Wells Fargo as was shown. But in order to be legal all the boxes cover about three pages in really small print. What was left out were some of the boxes that only crop up at the beginning and the end of the mortgage process. But he never did find out who held his mortgage because there are multiple people who own various parts of his mortgage.

 

[uscitizen]

More stuff the finiancial industry brought upon themselves.
Or is this fannie and freddie's fault too?

 

[loosecannon]

right here, WTW Man Makes Ridiculously Complicated Chart To Find Out Who Owns His Mortgage (CHART)

or just click the bar at the top of the graphic.

I did have to ask but except for Wells Fargo being at least three separate boxes I think the graph missed more steps than it duplicated. For example a CDO is a Special Investment Vehicle not technically part of Wells Fargo as was shown. But in order to be legal all the boxes cover about three pages in really small print. What was left out were some of the boxes that only crop up at the beginning and the end of the mortgage process. But he never did find out who held his mortgage because there are multiple people who own various parts of his mortgage.

I loved the black hole at the end of the flow chart.

 

[william the wie]

More stuff the finiancial industry brought upon themselves.
Or is this fannie and freddie's fault too?

Yes and no. Fannie, Freddie, Fink (First Boston) and Ranieri (Saloman Brothers) are all credited/blamed for causing this problem. In simple terms no one understands how all of this stuff works and yet this same system is still used despite the S&L crisis and the meltdown because it leverages money like nobody's business. When the profits run they run huge.

 

[Revere]

More stuff the finiancial industry brought upon themselves.
Or is this fannie and freddie's fault too?

All underwriting rules were loosened in the effort to allow people who could not pay back loans to magically get them.

Underwriting=Freddie and Fannie.

 

[blu]

can't wait for all the bankers to face a firing squad

 

[uscitizen]

More stuff the finiancial industry brought upon themselves.
Or is this fannie and freddie's fault too?

Yes and no. Fannie, Freddie, Fink (First Boston) and Ranieri (Saloman Brothers) are all credited/blamed for causing this problem. In simple terms no one understands how all of this stuff works and yet this same system is still used despite the S&L crisis and the meltdown because it leverages money like nobody's business. When the profits run they run huge.

And no one changed any rules to prevent it from continuing.

 

[william the wie]

can't wait for all the bankers to face a firing squad

Actually house and senate members from the 2002-8 vintages would be my choice for mass executions.

 

[uscitizen]

can't wait for all the bankers to face a firing squad

Actually house and senate members from the 2002-8 vintages would be my choice for mass executions.

How about making them pay for any bailout or at least as far as their money will go?


If they were spending their money they would every one be very fiscally conservative.

Or at least drain their health and retirement funds for a bailout.

 

[william the wie]

right here, WTW Man Makes Ridiculously Complicated Chart To Find Out Who Owns His Mortgage (CHART)

or just click the bar at the top of the graphic.

I did have to ask but except for Wells Fargo being at least three separate boxes I think the graph missed more steps than it duplicated. For example a CDO is a Special Investment Vehicle not technically part of Wells Fargo as was shown. But in order to be legal all the boxes cover about three pages in really small print. What was left out were some of the boxes that only crop up at the beginning and the end of the mortgage process. But he never did find out who held his mortgage because there are multiple people who own various parts of his mortgage.

I loved the black hole at the end of the flow chart.

Went over it three times and didn't see that but there are three such mechanisms:

Mortgage guarantee or insurance

Title insurance

CDS

Because the note and fractions of notes are not properly accounted for in public records any of these three insurance companies can claim violation of covenant and refuse to payout. Title insurance also protects the mortgage insurer and CDS issuer in most states. So far that has not been a major public scandal but it may come.

 

[william the wie]

can't wait for all the bankers to face a firing squad

Actually house and senate members from the 2002-8 vintages would be my choice for mass executions.

How about making them pay for any bailout or at least as far as their money will go?


If they were spending their money they would every one be very fiscally conservative.

Or at least drain their health and retirement funds for a bailout.

I am fairly certain that almost all parties could make credible claims of incompetence. Afterall the banking committees have asked Bernancke about his time as CEO of Goldman Sachs when he has never worked at the place. The confirmation of Bernancke and Geithner during both the Bush and Obama administrations makes the Senate especially suspect.

 

[loosecannon]

I did have to ask but except for Wells Fargo being at least three separate boxes I think the graph missed more steps than it duplicated. For example a CDO is a Special Investment Vehicle not technically part of Wells Fargo as was shown. But in order to be legal all the boxes cover about three pages in really small print. What was left out were some of the boxes that only crop up at the beginning and the end of the mortgage process. But he never did find out who held his mortgage because there are multiple people who own various parts of his mortgage.

I loved the black hole at the end of the flow chart.

Went over it three times and didn't see that but there are three such mechanisms:

Mortgage guarantee or insurance

Title insurance

CDS

Because the note and fractions of notes are not properly accounted for in public records any of these three insurance companies can claim violation of covenant and refuse to payout. Title insurance also protects the mortgage insurer and CDS issuer in most states. So far that has not been a major public scandal but it may come.

far right, middle of the page. It basically says what you said, despite the maze of flow chart he still couldn't pin down who owned his mortgage.

That was kind of the whole point of drawing up the chart, it is an impossibly complex a scenario.

The foreclosure courts are probably lawyering up.