Posted on 10/26/2009 10:58:19 AM PDT by FromLori
In Part I, “Scam in the making”, I explained how Wall Street created the U.S. housing-bubble and its concurrent Ponzi-scheme – with the full assistance of its accomplices: U.S. rating agencies and U.S. regulators. I also explained why it had to be obvious before they started creating this bubble that it would end with an unprecedented wave of foreclosures.
Because a big part of the bubble/Ponzi-scheme was “mortgage securitization” (which meant the bank originating the mortgage no longer held title to the mortgage), and because the U.S. financial crime syndicate knew there would be a huge wave of foreclosures, it had to invent an entity which could serve as a proxy in foreclosure proceedings – representing all of the players in these debt “daisy-chains”.
This was why MERS was created in 1995. As I wrote in Part I, MERS is nothing more than a confidential electronic registry which exists only to “track mortgages and the changes of servicing rights and mortgage ownership”. In other words, it has no proprietary interest in these mortgages.
The reason why that last fact is so important is because of the fact that Wall Street had created such convoluted chains of “ownership” that even in court proceedings the banksters are unable to show any party in these chain of transactions as having clear title to the mortgage. Wall Street's plan was to send MERS (nothing but a glorified, electronic clerk) to all these foreclosure proceedings and allow MERS to act as if it was the mortgage-holder in these proceedings.
However, it is one of the oldest principals of our Western legal system that in civil proceedings any party wanting to bring an action before the court has to have “standing”. Typically, this is defined as a direct, proprietary interest in the subject of the trial. Clearly, MERS has no proprietary interest – and thus in several legal decisions it has been found to have no right to initiate foreclosure proceedings.
As I pointed out in Part I (via an article by Edward Harrison), one of these court cases has already been upheld on appeal – setting the stage for courts to broaden the previous rulings. Until now, judges who have ruled that MERS has no “standing” have only done so narrowly, on a case-by-case basis. The next step in this natural legal evolution (the law always moves in “baby steps”) is for courts to rule that MERS has no standing, period!
When that day occurs, it will immediately create two, huge legal ramifications. First of all, there would be no further point in the bankers even showing up to a trial over a foreclosure unless the bankers can sift through the deliberately complicated maze of transactions and clearly identify a party with genuine, legal title over a mortgage. Otherwise, not only would the bankers face a summary dismissal of their action, but it's very possible that the judge in question would simply nullify the entire mortgage – as recently happened in a case in New York.
What this means is that any American homeowner whose mortgage has been “securitized” must take their case to court if/when a foreclosure proceeding is commenced against them. The worst-case scenario is that the foreclosure proceeding is dismissed and the homeowner can stay in his home, and not even bother with making any more payments. Why send cheques to a bank when you can live in your home for free – and never have to worry again about foreclosure?
However, once MERS is found to (broadly) have no legal “standing”, this will effect far more people than those about to be foreclosed. Another important concept in our legal system involves the concept of “discovery”. Its relevance in this particular situation is as follows.
If Americans who have already lost their homes to foreclosure “discover” today that the party who was officially behind these foreclosure proceedings (which in many cases is MERS) never had legal standing to foreclose on their property (whether that took place five days ago or five years ago), this means that the foreclosure proceeding was legally invalid.
What this means is that courts will very likely find that these “foreclosure victims” are still the legal owners of their homes. This not only is a crippling blow to the U.S. financial crime syndicate, but an even more serious blow to people who have been buying these “foreclosed” properties.
If the bank who “sold” them the “foreclosed” property never had legal title then obviously that bank had nothing to sell to the “buyer”. In other words, many (if not most) of the people who have bought “foreclosed” properties in the U.S. over the last few years may own nothing.
This becomes a double loss for the banks. Not only do they end up with nothing with respect to the original mortgage they claimed to own, but the subsequent buyer who is stripped of their purchase will then sue the banker for the full purchase price, all of their related costs (moving costs, furniture, etc.) plus the judge will very likely tack on some steep “punitive damages” to punish the banks for creating this legal nightmare and attempting to “foreclose” and “sell” properties they never owned.
As I pointed out a few weeks ago (see “Bankster Sues Bankster – AGAIN”), even if Wall Street banks can survive the massive losses they are incurring as their Ponzi-scheme unravels, there is no possibility of them surviving the tidal wave of litigation which is just beginning.
On a related subject, it was recently reported that the huge stash of money which Wall Street has in a “savings account” with the Federal Reserve now exceeds $1 trillion. Doesn't it seem odd that with Wall Street banks regularly bragging about how much money there are making with their own, in-house trading that they would leave a trillion dollars sitting in a savings account during this fantasy-rally in U.S. markets (which they helped to engineer)?
Obviously the banksters dare not admit to their shareholders or the media that they have stockpiled a trillion dollars as a down-payment for all the pay-outs they will be forced to make in future litigation. Instead, they just hide this money with the Federal Reserve and pretend it doesn't exist. Meanwhile, as I also pointed out in a recent commentary, U.S. banks are holding at least 5 million already-foreclosed homes off of the market. No point in trying to “sell” these properties if they don't actually own them.
There is one potentially serious consequence for average Americans as a result of this crucial legal precedent. If millions of Americans suddenly discover they have essentially “free homes” (and with actual housing inventories at least three times greater than what the NAR pretends), this could be the catalyst for another huge drop in house prices. A homeowner who loses his job, but then suddenly ends up with a “free home” will be willing to accept a much lower purchase price (as he down-sizes to a smaller residence) than a homeowner with an “underwater mortgage” desperately trying just to break-even.
In short, we could be heading for utter chaos in the U.S. housing market. Millions of people who thought they had purchased a foreclosed property could find they own nothing - and have to vacate those premises, remaining in “limbo” until they have successfully sued the bankers responsible for their problems. Millions of homeowners who thought they had lost their homes may suddenly have the keys returned to them. Perhaps most importantly, all “foreclosure sales” will essentially dry-up – since no buyers could be foolish enough to hand a banker a six-figure cheque when that banker may not even have title to the property.
Can you imagine desperate bankers trying to show “clear title” to potential buyers when they can't even demonstrate that in a court-room – armed with a team of lawyers? The only thing which is absolutely certain at this point is that the U.S. housing sector cannot possibly be close to any “bottom” given that the pain is only beginning in this market.
All the more incentive for banks or other holding companies to keep better records.
Above my pay grade, what think you?
No and I think we the taxpayers will end up eating this don’t you?
"Wall Street created the U.S. housing-bubble"
A stupid, unsupported, and factually incorrect statement. The author does not even understand what bubbles are.
"Because a big part of the bubble/Ponzi-scheme was “mortgage securitization” "
Securitizations have reduced the risk by pooling risky assets. That's all they do. As such they cannot contribute to bubbles."
"(which meant the bank originating the mortgage no longer held title to the mortgage)"
What does ownership have to do with bubbles creation? Absolutely nothing.
"because the U.S. financial crime syndicate"
Does this form of writing make it unclear that it is nothing but cheap propaganda?
Is this why do enjoy posting such garbage so much, Lori? Since the article lacks any content, one is certainly unable to learn from it.
I don’t read only what I want to hear and surveys show most conservatives are open minded guess your not among that bunch. I think we can learn plenty from these types of articles and really then why are the courts upholding this?
If you do not care to participate in the articles I post pass them by.
Neither do I.
One can and should be interested in articles that, starting from factually correct premises, arrive at conclusions by means of reasoning. The conclusions may differ from conservative point of view of course, and reading is useful and informative.
This does not include outright propaganda, which this article clearly is. No reasoning article resorts to name-calling, which this one does openly from the start. It has, in fact, nothing but name-calling.
While your statement is correct, of course, it does not apply to this post.
By repeating leftist propaganda, you play into their hands. "I think we can learn plenty from these types of articles and really then why are the courts upholding this?"
Upholding what, the freedom to publish?
"If you do not care to participate in the articles I post pass them by"
No, sorry. This forum is dedicated to upholding conservative ideals, and broadcasting leftist propaganda is not one of them.
If everything this author describes comes to fruition as he describes it, then there will certainly be massive chaos in the home ownership sector. Nobody will know who owns what or who owes whom how much. It will only be a matter for support to build for for the banana republic solution: a mortgage cacnellation act and declaration that home owners own their homes free and clear.
The real problem here is that the state didn't keep up with electronic advances in the system.
It’s worse then leftist. It’s a blog written by some gold bug that pimps a newsletter.
Hmm. I don’t think “clear title” is the correct phrase as used above - that refers to ownership of the land, not the loan. “Holder in due course” (of the original promissory note) is what the foreclosing lender needs to prove itself to be. Many jurisdictions require that the original signed note be deposited into the registry of the court before foreclosure action may proceed.
No and I think we the taxpayers will end up eating this don’t you?
ping
I agree with your assertion. Greedy attorneys are looking for a new growth industry. If there is a loophole in the securitization of home loans, massive chaos will result. Banks and other holders of mortgage will fail in waves. Money for home loans will not be available. Investors will not buy securitized debt. However some lawyers will get rich and some individuals will acquire free homes.
You are correct as far as the foreclosure action itself is concerned. However, the ‘clear title’ issue arises when the bank tries to sell the foreclosed house, a very necessary final step for the bank.
The Doomsday scenario in my mind is this: foreclosures become so chaotic that Congress halts them and voids the mortgages on distressed properties. Homeowners who have been making their payments cry foul - and political pressure become unbearable. In response, Congress voids their mortgages as well. Now nobody has to make a mortgage payment on a dwelling they actually reside in (vacation homes and rental properties are excluded).
Now Congress is faced with an opportunity of historic proportions. Millions of people across the country no longer have to make mortgage payments, but the debt and deficit are through the roof. So, in exchange for voiding all mortgages, Congress slaps a massive federal property tax on all homes. The politicians will say that the home owner’s federal property tax bill will be less than their mortgage payments, so the owner comes out ahead. But that tax rate somehow keeps inching up over the years to the point that Congress will have effectively replaced, dollar for dollar mortgage payments to banks with taxes to Washington.
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