When will the Foreclosure write offs Turn Critical

[william the wie]

The current foreclosure mess is being presented in the MSM as the following:

Banks trying to foreclose on deadbeats and being obstructed by the courts.

However unless all mortgage data is wrong that is not what is happening.

The overwhelming majority of deadbeat mortgages are owned or at least guaranteed by the Federal government. So the federal government is hiding behind the banks to avoid the public record of foreclosing on its own citizens. This is illegal.

Why does the federal government own the mortgages? The short answer is that the interventions in the mortgage banking system going back to at least the S&L crisis in the late 80s/early 90s have involved the federal government taking on financial risk to avoid a real estate shake out. The long answer involves all the different ways $5+ trillion in BS notes ended up as an unfunded liability of the federal government. The long answer involves several books. Just go to the local library or bookstore (online or not) pick about 10 that suit your worldview and read them the story ain't simple.

So the federal government in various ways is on the hook for the worse loans out there but what makes those loans so bad? Lack of documentation is the biggie. Mortgage originators who were sloppy about who they loaned to were most often sloppy about record keeping as well. If deed, note or other required documents either do not exist or cannot be found then the mortgage claim will most likely not be honored.

GMAC/Ally the first problem child to surface is a subsidiary of the federal government. The relationship of MERS the electronic depository of most mortgage records in question was set up near DC in Reston VA which does sound suspicious even without its admitted ties to fannie mae and freddie mac. MERS has not kept ownership transfers updated at the county courthouses which is just as bad as no documents.

So the federal government is trying to foreclose on its own citizens without legally valid claims to many and probably most of the properties. In fact it may have foreclosed millions of houses already without a defensible claim to those houses, that will be really expensive.

So when does this mess go critical with class action lawsuits out the wazoo?

 

[uscitizen]

Umm a year or so ago.

 

[william the wie]

Umm a year or so ago.

Where are the trillion dollar lawsuits against the US government alleging taking by fraud in violation of the 4th amendment? I haven't heard of them.

 

[uscitizen]

Inertia. Takes a while after something as big as the US economy becomes critical.

then politicians and lobbyists have to decide that there is trouble, all that takes time.

then it takes more time for them to take action in the wrong direction.

 

[GHook93]

Simplistic people will say its all deadbeats. But what happened was in the 90s Clinton with the help of Democrats like Dobbs and Franks brought the Carter era Community Reinvestment Act back to life. This required banks to lend a certain percentage of their CASH to lower income people or face penalties and removal of tax relief. In essense they were forced to lend. The government meddling started the downfall we are seeing today.

The banks are surly at fault also. Instead of listening to matrix that have been proven, then went away from the matrix and started to do no doc, no income, stated, 100%, 125%, ARMs etc. It started with subprime and eventually stated and 100% were given to everyone, good or bad credit! Subprime lenders that made a short-term fortunes (eventually going bankrupt) like Ameriquest and New Century made things worse. Since they not only gave very stupid loans that gauged the VICTIMS. The big banks saw the short-term gains and jumped on board with these even worse loans. They started to give money away to everyone regardless. Loan officers for brokers peddled these loans making them appear to be affordable, because once the ink dried they got paid.

To make matters worse Fannie Mae and Freddie Mac provided a secondary market where these bad loans could be sold and purchased rather easily. Innitial lenders of these toxic loans could sell them on FM/FM nearly right after they wrote the loan. Wall Street investors started to package these terrible loans into groups slap a AAA+ rating on them and sell them also.

All this, SHOT up property values to artificially extremely high levels. 5 years ago (hell just 2 years ago) a person who purchased a home for $500K would be lucky to get $400K for it.

Now the bubble bursted and people are can't sell their homes, nor afford the payments. Its a mess. Its still years away from being fixed.

Percentage Blame Game:
Government (including FM/FM) - 60% (Clinton - 80%; Bush 20%)
Banks - 25%
Wall Street - 10%
Consumers/Mortgagee - 5%

 

[loosecannon]

Umm a year or so ago.

Where are the trillion dollar lawsuits against the US government alleging taking by fraud in violation of the 4th amendment? I haven't heard of them.

that is a huge question, but imo it still pales in contrast to the gross mismanagement of the mortgage originators and secondary mortgage marketeers.

Blundered mortgages were pumped out at record rates then spread across the western world where they ended up primarily as actual banks reserves as securities, and as assets in pension funds and hedge funds. You like to throw around the $12 trillion figure as an estimate of the corrupt mortgage instruments involved.

That could be a conservative figure.

Everybody involved from the originators to the escrow agents, F&F, title insurance firms and ratings agencies deserves to be dechartered.

If this was capitalism then capitalism must be retired as well. For the sake of the 7 billion people who depend on the economy for daily bread and fuel.

This kind of overt fraud is dangerous to the stability of the world and is flatly unacceptable, heads must roll, blood must flow.

Better to kill wall street than to allow them to bulldoze main street. It's us or them.

That the government ended up smack dab in the middle of this.....god save us

 

[william the wie]

Well anger is really building and politicians in all 50 states are seeing this mess as their road to the big time.

 

[KissMy]

[ame="http://www.youtube.com/watch?v=k5GZcVGWc8o"]FORECLOSUREGATE REMIC and MERS[/ame]

 

[william the wie]

Thanks for the video kissmy. I hope this does not sound smart ass but if I could go to my Yahoo bar and get 80% of the same story about two weeks ago then why didn't the MSM?

 

[georgephillip]

In my opinion our ongoing economic train wreck stems from big government/big business collusion that Republicans AND Democrats have taken turns inflicting on at least 80% of Americans over the past four decades.

Whether I'm right or not, why aren't conservatives of all stripes up in arms about how the Wall Street Casino has succeeded in casting doubt on the ownership of American homes across the country?

"Ever since the financial crisis hit, conservatives -- at places like the American Enterprise Institute and the Heritage Foundation, joined by some prominent Tea Party groups -- have fought tooth-and-nail to deflect new regulation of Wall Street’s wheeler-dealers.

"...I note that the Right, following the advice of conservative message-maker Frank Luntz, derided new regulations that Wall Street was fighting hard to kill as a 'second bailout' of the big banks.

"It was a lie so bold that one couldn’t help but be impressed with their chutzpah...

"So there’s a certain amount of irony in new revelations that the banks, in their quest for easy profits, appear to have undermined one of the Right’s most important principles: the sanctity of property ownership."

How Come...

 

[william the wie]

In my opinion our ongoing economic train wreck stems from big government/big business collusion that Republicans AND Democrats have taken turns inflicting on at least 80% of Americans over the past four decades.

Whether I'm right or not, why aren't conservatives of all stripes up in arms about how the Wall Street Casino has succeeded in casting doubt on the ownership of American homes across the country?

"Ever since the financial crisis hit, conservatives -- at places like the American Enterprise Institute and the Heritage Foundation, joined by some prominent Tea Party groups -- have fought tooth-and-nail to deflect new regulation of Wall Street’s wheeler-dealers.

"...I note that the Right, following the advice of conservative message-maker Frank Luntz, derided new regulations that Wall Street was fighting hard to kill as a 'second bailout' of the big banks.

"It was a lie so bold that one couldn’t help but be impressed with their chutzpah...

"So there’s a certain amount of irony in new revelations that the banks, in their quest for easy profits, appear to have undermined one of the Right’s most important principles: the sanctity of property ownership."

How Come...

Extremely well reasoned column. Being a libertarian I tend towards the 100% reserve banking position along with hard money so I am a bigger fan of the diagnosis than the prescription but yeah big business conservatives and progressives betrayed homeowners.

 

[georgephillip]

Is it at all feasible in your opinion that Bank of America or other large mega-banks could go the way of Lehman Bros or Bear Stearns because of Foreclosuregate?

Who would profit in such an end game?

 

[Mad Scientist]

Lack of documentation is the biggie. Mortgage originators who were sloppy about who they loaned to were most often sloppy about record keeping as well. If deed, note or other required documents either do not exist or cannot be found then the mortgage claim will most likely not be honored.
So when does this mess go critical with class action lawsuits out the wazoo?

All, well most, of those mortgages, subprime or not, were bundled and sold. Those bundles were split off and called what, "credit swaps"? So who know who really owns the title?

I'm hoping there are millions of homeowners who end up suing.

Meanwhile, the gubamint won't stop home foreclosures so who's side are they really on?

 

[william the wie]

Lack of documentation is the biggie. Mortgage originators who were sloppy about who they loaned to were most often sloppy about record keeping as well. If deed, note or other required documents either do not exist or cannot be found then the mortgage claim will most likely not be honored.
So when does this mess go critical with class action lawsuits out the wazoo?

All, well most, of those mortgages, subprime or not, were bundled and sold. Those bundles were split off and called what, "credit swaps"? So who know who really owns the title?

I'm hoping there are millions of homeowners who end up suing.

Meanwhile, the gubamint won't stop home foreclosures so who's side are they really on?

Well state and local governments are up in arms over this plus there is a side to this that is being ignored. The people who own the tranches can and will sue for fraud. TARP 2 as opposed to bankruptcy for the too big to fail banks seems unlikely to pass congress.

 

[georgephillip]

I think it's also likely our national government will continue doing what similar institutions have done for thousands of years - socialize the cost and privatize the profit for a select few.

November 2nd brings the entire US House of Representatives into range IF you are willing to FLUSH as many Republican AND Democratic INCUMBENTS from power as possible.

YES! It's a leap of political faith to trust in Greens or Libertarians.

Continuing the "choose" between Republican OR Democrat guarantees a win for the few and economic ruin for the many.

 

[loosecannon]

Is this heads rolling?

Mozilo PaysRecord Penalty For Securities Fraud

The SEC announced on Friday that it had reached a settlement with former Countrywide CEO Angelo Mozilo under which he would have to pay $22.5 million to settle securities fraud charges. The penalty is the largest ever paid by a public company's senior executive.

Mozillo, who was charged along with Countrywide's COO and CFO, was also charged with insider trading for selling his Countrywide stock, worth $140 million, based on non-public information. The former CEO settled those charges too, agreeing to $45 million in disgorgement of ill-gotten gains. Mozillo was also permanently barred from serving as an officer or director of a publicly traded company. That brings Mozilo's payments up to a total of $67.5 million.

According to the SEC, from 2005 to 2007, "Countrywide engaged in an unprecedented expansion of its underwriting guidelines and was writing riskier and riskier loans, which these senior executives were warned might ultimately curtail the company's ability to sell them." In 2005 and 2006, Countrywide ensured its investors that it produced high quality loans, but the SEC claims they were actually engaging in a "supermarket strategy."

"By the end of 2006, Countrywide's underwriting guidelines were as wide as they had ever been, and Countrywide made an increasing number of loans based on exceptions to those already wide guidelines, even though exception loans had a higher rate of default," reads the SEC release.

With banks and insurance companies revamping their securitization and mortgage backed security issuance, Countrywide found its margins being squeezed. That is when, during 2005 and 2006, Countrywide began to lend out more money and lower its underwriting standards, in an attempt to "build and maintain market share."

blowing all to hell conspiracy theories about how Barney Frank and the progressives were forced to sell bogus mortgages

Mozilo PaysRecord Penalty For Securities Fraud - Forbes.com

Under the circumstances being forced to allow a clawback of $67.5 million seems like a butt whacking, not a felony level sentence. But it is targeted at the top and there will likely be significant civil suits riding the tailcoats of this settlement.

Fraud deserves compensation imo. Not just a big penalty with the SEC. What about the actionable cases?

 

[william the wie]

I think it's also likely our national government will continue doing what similar institutions have done for thousands of years - socialize the cost and privatize the profit for a select few.

November 2nd brings the entire US House of Representatives into range IF you are willing to FLUSH as many Republican AND Democratic INCUMBENTS from power as possible.

YES! It's a leap of political faith to trust in Greens or Libertarians.

Continuing the "choose" between Republican OR Democrat guarantees a win for the few and economic ruin for the many.

While I agree with much of what you say how is it politically survivable to vote for a TARP II?

 

[Trajan]

Umm a year or so ago.

Where are the trillion dollar lawsuits against the US government alleging taking by fraud in violation of the 4th amendment? I haven't heard of them.

that is a huge question, but imo it still pales in contrast to the gross mismanagement of the mortgage originators and secondary mortgage marketeers.

Blundered mortgages were pumped out at record rates then spread across the western world where they ended up primarily as actual banks reserves as securities, and as assets in pension funds and hedge funds. You like to throw around the $12 trillion figure as an estimate of the corrupt mortgage instruments involved.

That could be a conservative figure.

Everybody involved from the originators to the escrow agents, F&F, title insurance firms and ratings agencies deserves to be dechartered.

If this was capitalism then capitalism must be retired as well. For the sake of the 7 billion people who depend on the economy for daily bread and fuel.

This kind of overt fraud is dangerous to the stability of the world and is flatly unacceptable, heads must roll, blood must flow.

Better to kill wall street than to allow them to bulldoze main street. It's us or them.

That the government ended up smack dab in the middle of this.....god save us

emphasized for truth.



the auto sign thing isn't really new. Whats new is the huge number of folks who are in trouble and have been reading the internet looking for a way out. If they make the bank take them to court the bank(s) or lien holder has to produce the promissory note and the mortgage deed , original not copies in most state and thats were it gets sticky.

 

[william the wie]

The fraudulent MBS tranches are probably a bigger problem than the foreclosure mess. My guess is that that will run 20 Trillion or higher to settle depending on whether RICO is triggered.

 

[loosecannon]

The fraudulent MBS tranches are probably a bigger problem than the foreclosure mess. My guess is that that will run 20 Trillion or higher to settle depending on whether RICO is triggered.

It is hard to say how many MBS are still unsettled. The Fed bought as many as possible to shield the banks from these kinds of risks......

This save the banks/screw the economy mentality is the MOST obscene corruption evidenced in the whole recession.