Skip to comments.The Great Mortgage Mystery
Posted on 10/08/2010 3:28:48 PM PDT by Palter
The big question from the mortgage meltdown isn't why so many distressed homeowners are defaulting on their loans.
It's why any of them are still making payments.
In the worst-hit areas millions have no equity left, and little hope of seeing any anytime soon. The market value of their homes is far below the size of the mortgage.
If they just stop paying, what is going to happen to them? In many cases they may get to live in the home rent-free for months, even years, until the bank gets around to seizing it.
If Frank Abagnalethe con man played by Leonardo DiCaprio in the film "Catch Me If You Can"were operating today, he'd probably be living rent-free in a super-luxury high-rise in Miami.
Consider the latest revelations. The big banks are so backed up with foreclosures that some of them resorted to hustling through repossessions without the proper paperwork. Some of themincluding Bank of America, J.P. Morgan Chase and Ally Financial's GMAC Home Mortgagehave announced a temporary freeze in some states on further foreclosures while they sort through the mess.
In one case, a bank employee said she was approving 8,000 foreclosures a month. By my math, that's roughly one for every minute and a half. No, she wasn't reading all the documents thoroughly. (As one wit observed, the banks paid about as much attention to foreclosing on the loans as they did to making them five years ago.)
In many cases, thanks to the fallout from securitization, it's not even clear who owns the mortgage. The payments may be due to different financial institutions around the world, some of which have gone the way of all flesh.
No wonder a fair number of borrowers have simply gone on strike.
(Excerpt) Read more at online.wsj.com ...
These deals were so bad I would just stay until they Foreclosed and then rent a house. At least with stock you can sell out quick just before the crash.
You borrowed the money, and agreed to pay it.
If the house went up in value, the bank was not entitled to a cut. Now the house has gone down in value instead.
But you still must pay what you borrowed.
Because they’re “homes,” not “houses.”
Amazing that most of these attempted foreclosures pertain to loans for which the foreclosing banks have already been reimbursed at least once, sometimes twice or three times.
How many times do these banksters need to be reimbursed for these loans?
In Houston back in the 80’s several mortgage brokers went to prison for selling the same mortgages to different investors. People would make their payment then get calls from other servicers wanting the payment.
I do have to wonder if a lot of these banks haven’t been paid more than once. I have a feeling the fraud runs very deep.
Finally, let’s say you owed a small, private bank that went under. Who owns the house?
This is interesting. So if my church pays off my loan, the bank can continue to pursue me because I did not pay off the loan. The taxpayers have paid off the loans. Now the banks want the mortgage holder to also pay it off. Make sense?
When your car gets repoed, do you still pay back? Or that rent to own couch or TV? They get the house back. There is some reason for still paying on a presently sunk house. Moving costs, credit wrecked, also coming inflation from the Federal Reserve.
Wouldn’t it be nice if the banks ran up the price of houses, made a boatload. Then got bailed out. Then foreclosed, then had the Fed cause inflation taking that say 150K house and running it up to 250, make money off the sale, and finance it again for the next generation.
Rinse, lather, repeat.
( Who wants to wait around for 20-30 years for 5 percent when you can flip/churn the entire market every 10 years.
Not that that would ever happen.
Credit ratings should place much more emphasis on character. A person with bad character may fail to repay a loan that they are able to repay, simply because it's advantageous for them to default. A person with good character will repay all debts, if they are able to do so. We are seeing that this can be more important than "ability to pay".
Character also doesn't tend to change much with time. Character adjustments to credit ratings should last for a very long time.
Sounds like mortgage holders may have a hard time conveying clear title to your house even if you pay off the mortgage. How can you tell if your mortgage was ‘’securitized?’’
sun tzu: always give the enemy an exit.
these people live in their homes, not a house, so their escape is to say current and avoid the bank mess.
In the end I think the banks will have to “yield” accross the board.
South Florida is becoming a ghetto, more people moving out than in. Middle and upper middle class are leaving. Retirees are finding safer spots enjoy life. Middle/Upper middle class Latins are retiring to the OLD country.
Jamacians and Haitians are moving in.
Ans if you cannot they can foreclose and take the house back and add it to their bloated overvalued portfolio of other homes they took back.
Look, folks are not stopping payments for fun, Obozo and the others who made all the green have destroyed the job market and many have lost their jobs. So what do you suggest they do?
Leave the keys in the mailbox, move on and let the bank collect another relic to their greed and everybody is made whole and life goes on.
Unless of course your stock portfolio is heavily laden with banks....
I think it's worse - or better - than that.
I think their original documents are defective. They bought the loan but not the mortgage - that is, they don't own the property, only the loan.
They can do whatever they can to collect - but they can't foreclose.
at what point does the bank lose its charter and become a holding company?
I wish journalists and others would stop perpetuating this myth. A person or entity that bought a mortgage backed security has no claim on your house if your mortgage was part of the MBS package. None. We must not confuse an MBS with an actual mortgage, any more that we should confuse any object with that object's reflection in a mirror. Not the same.
Would that be because they didn’t bother with paying the fees to the county’s recorders? My understanding is this was one of the ways that corners were cut. In fact, I think that was the attraction with MERS. No fees at the county!!!
The blindness of their greed is breath taking.
And it is crashing our COUNTRY!!!!
Simple answer, many people are honest. They know they borrowed the money to buy the house, and agreed to pay it back, so they will.
Many people have figured out that the servicer they mail their checks to cannot name the lender , if the lender is the true lender or how much of various TARP/BAILOUT/INSURANCE/Credit Default Swap AIG money , etc. has been credited against their balance ... The answer is $0 when the answer should be many tens or hundreds of thousands of dollars... many people are paying on a mortgage to a dishonest bank that has already been paid in full for that mortgage when the “tranche” defaulted and all mortgages in the tranche were paid off by some form of insurance or the taxpayers.
I think their original documents are defective. They bought the loan but not the mortgage - that is, they don’t own the property, only the loan.
They can do whatever they can to collect - but they can’t foreclose.
It looks more like they have the deed and the note/mortgage but they sold the note (it’s paid off) and created a bond in it’s place that the original borrower has no obligation to pay and they have no right to foreclose as it is not linked to the property.
Then who owns the mortgage????
Those MBS’s were made to be streams of income for investors and pension plans. They are interwoven across the entire financial services “world” of the US and the world.
It seemed to me that this rush to foreclose was a rush to keep the “balls” in the air, and keep the system from crashing.
Besides, the banks weren’t planning on keep the liar loans because they KNEW that they were bad, they were hot potatoes, to be gotten rid of quickly.
So, I ask again, Then who owns the mortgage????
I have tried to keep up with all of this, but I’m no “insider”.
So, alot of people might just have had their notes paid off with TARP,
we keep paying because nobody told us what was really going on. That we are really only paying on a bond, with no title attached to it.
Do you have a link? Is this at Market Ticker?? Thanks!!
Certainly worth repeating.
You pay back what you owe and keep in living there or you stop paying and give the house back.
Part of the deal is that after the borrower pays-off the loan, they get clear title to the property.
If the lender can no longer provide a clear title to the property, the borrower should return the property to the lender, the lender should return all payments made to that point, and make no adverse notations on the borrower's credit record.
The lender can then resell the house once they can straighten out the title.
If they can't straighten out the title, "sucks to be them".
This is old news but it’s only now beginning to be accepted by the public at large .. it is undeniably true ... my only question is how it will be resolved..
You might want to start reading at the various websites that fight foreclosure..
and many others ...
What if the loan has already been repaid ,, I don’t care if it’s your Aunt Clara or an insurance policy that paid the loan.. Do you still give up the house because you personally didn’t write the check?
Sorry, not how it works...
People agree to pay...When they stop paying, they can just give the house back.
The simple answer is: Who do you send your mortgage payments to? When I bought my home I got a mortgage from "Company A". At that point, "Company A" held the paper. A few years later, they sold my mortgage to "Company B". Now "Company B" holds the paper. After "Company B" feels that they've made enough interest off my loan, they'll no doubt sell it to "Company C".
I haven't said anything about securitization, because to me it's meaningless (except in a macroeconomic sense). I don't care if Companies A, B, or C sold mortgage backed securities with my mortgage as part of the package because my mortgage stayed put. I don't owe money to the Singapore Housing Authority, or to the Sovereign Bank of Bahrain, or to anyone else who bought that stuff, and never will. That's not how it works. The mortgage backed security is based on the income stream from the mortgage, not the mortgage itself. Purchasers of MBS have no claim on me, only on the issuers of the MBS.
I ran into something similar over a car loan.
I missed one payment, was late on the next, made a double payment including late fees that were never properly credited...and entered a nightmare.
The bank “sold” my (actual)loan balance to a collection agency, but apparantly did not include the title in the transaction.
My credit rating was shot, but even if I paid the collection agency, I still would not acquire the “title” to my car (according to the collection agency).
So why would I pay a collection agency an amount I do not dispute I owed on the loan balance, when I would still never “own” the car?
Are these mortgage buyers in the same catch 22?
That any payments they make now will not be credited to their account?
This situation is bad now.
Christmas is going to be quite a season this year, and next. Well, for the foreseeable future.
The economy is seizing up.
“Who do you send your mortgage payments to? “
Well, that is the interesting part. We had an original loan with one company. A few refinances, not HELOC’s, just rate reductions. No second mortgages. In 2007, we get a letter from company A saying we don’t service your loan and pay company B, who is your new servicer. Almost three years later, Fannie sends us a letter saying that our loan from company C - yes a completely different company that we have NEVER been with - has transferred our loan to Fannie (company D, if you will). Now we need to pay the company we have been paying since 2007, company B. We were already paying that company!!!! For three years even.
Well, it gets even stranger. We call company B, they say Fannie owns our mortgage. Fannie says to ignore the letter they sent, it’s bogus, company C has it wrong. Uh???
So, you see, it does matter because we pay a servicer, NOT the mortgage company. I truly wonder if the title even exists anymore.
“A person or entity that bought a mortgage backed security has no claim on your house if your mortgage was part of the MBS package. None. We must not confuse an MBS with an actual mortgage, “
And now you know why I posted to you. I have no way of knowing who has our actual mortgage. Thus the question.
The simple answer is: Who do you send your mortgage payments to?
Simple, but not necessarily correct.
It's quite common to send your payments to a "servicer", who keeps 1/4% or so for their trouble, and passes the balance of the payment on to the actual owner of the mortgage.
bingo, we have a winner. The real delema has yet to be explained in the media. Chain of custody of these documents was not preserved properly through these transfers such as resale or bundling. You can’t forclose a mortgage you can’t prove you have title to. This is a massive issue.
Still, my explanation of MBS is technically correct. It's "originate to distribute" that is the cause of your confusion.
That really is the kicker - who knows how many homeowners will find themselves without clear title even though they’ve made all the payments!
You did give me a good giggle imagining the lender returning you all your mtg payments “mid-loan” in exchange for the property because they can’t deliver clear title - that was a good one! ;-)
Let me know if it works ... ;-)
Do you realize that things are so screwed up that the banks cannot produce the original papers showing that they have the right to foreclose? Do you also realize that this means that if people pay the full amount of the mortgage they likely will NOT be able to obtain a clear title? Those who lack the proper papers to foreclose lack the proper papers to deliver your title when the mortgage is paid out. I wouldn’t continue to pay in such a situation. I might move out of the house but I would NOT pay.
A person or entity that bought a mortgage backed security has no claim on your house if your mortgage was part of the MBS package. None. We must not confuse an MBS with an actual mortgage,.....
I don’t know what an MBS is but I do know that I have a 6.5% mortgage and when we went to re-fi at a lower rate the paperwork read “Deed of Trust” instead of “Mortgage”.
According to the title person, DoT is a mortgage but makes it easier for “the bank to re-po in 90 days if you default”.
We cancelled the re-fi. Not that we plan on defaulting but if something happened, we would lose our home without the benefit of a court hearing. Be aware of this bank scam that bypasses the courts.
There is still a legal out called “bankruptcy.”
Paying off the loan to the servicer is a clear event. Now it isn’t the home owner’s worry about where that money will go — let the financial instruments fight over it with the servicer as much as they want.
What is less clear is walking away from the loan. The structure is so keystone-kopped that it could be months or years before a valid “owner” appears.
Haven’t tried it; don’t anticipate a lot of success even if I do try it.
Do believe, though, that if standard contract law were followed, that should be the case.
Standard disclaimer - IANAL.
And if the banks made loans to people unlikely to pay them, the banks are entitled to be screwed. Plus, if they can’t find the proper paperwork, they don’t get to foreclose. After all, they wouldn’t cut you a break, if you didn’t follow the proper procedure.
Interesting site, thank you!
These are not minor clerical errors. The statutory timeperiod to reconsile problems on these loans have passed and therefore are fatally defective.
But it gets worse. Having defrauded who knows how many home loans with no clear titles, the Goldman Sachs have taken those loans, bundled them as CDOs, claimed they were securitized, and sold them to your retirement fund. A minor clerical problem..I think not. This 'mess' is so tangled that it cannot be untangled as the law is written now.
So Goldman Sachs (We took the money selling defective CDOs). Goldman Sachs (We didn't know of the clerical error)..they could not help but know....it had to be engineered. Goldman Sachs (We did not even look to check even though the law requires it). These are the smartest people in the world, they tell us, and they are that incompetent...I don't think so. They are that nefarious and evil and morally corrupt as well as criminally liable. They should be tried, convicted, and jailed for the remainder of their lives. It is worse than any 7-11 store robery. They have done it millions of times. and each time more than a street thug would get if he robbed a 7-11 store. They have taken down the banking system with thier vacuous imorality. They are common theives which conducted difficult to understand theft. If Americans knew the depth of this criminality those banks would not exist. As it is the taxpayers are going to pay off their theft, and they will live like kings, having made sport of decent peoples work produt.
During the go-go years 2002-2005, character was completely irrelevant.
Because NO ONE made a loan with the intention of holding the mortgage while it was paid back.
ALL these bad loans were flogged off to a series of third parties within days of being signed.
You want to see character count for something again? Require the originator of a loan to hold the paper for five years.
Please watch this ,, it’s long (38 mins) but well worth it ,, oral arguments in fromt of the Mass. Supreme Court ,, a major bank blunders through trying to explain the indecipherable and then the lawyer for the homeowner clobbers him with clear concise fact for 25 minutes. This gets to the heart of the matter. The banks that created this mess are going down HARD... http://www.suffolk.edu/sjc/archive/2010/SJC_10694.html
Here’s a great clip ,, FUNNY! http://www.thedailyshow.com/watch/thu-october-7-2010/mortgage-bankers-association-strategic-default
Eric Holder is gonna lead the federal inquiry. The inquiry should not be made 'into foreclosure data' but into fraudulent lender practices. Get ready people. You heard it here first.
Click image to learn more . . .
REMIC kick in the nuts bump.