Foreclosuregate is About to Explode

Black Listed News ^ | 10/11/2010 | Michael Snyder

[ex-Texan]

If you work in the mortgage industry or for a title insurer, you might not want to make any plans for the next six months.  Foreclosuregate is about to explode.  It is being alleged that many prominent mortgage lenders have been using materially flawed paperwork to evict homeowners.  Apparently officials at quite a few of these firms have been signing thousands upon thousands of foreclosure documents without even looking at them.  In addition, it is being alleged that much of the documentation for these mortgages that are being foreclosed upon is either "improper" or is actually "missing".  As lawyers start to smell blood in the water, lawsuits challenging these foreclosures have already started springing up from coast to coast.  In fact, some are already calling Foreclosuregate the biggest fraud in the history of the capital markets.  JPMorgan Chase, Ally Bank's GMAC Mortgage and PNC Financial have all suspended foreclosures in the 23 U.S. states where foreclosures must be approved by a judge.  Bank of America has actually suspended foreclosures in all 50 states.  Now, law enforcement authorities from coast to coast are calling for investigations into this controversy and it could be years before this thing gets unraveled.

This thing just seems to escalate with each passing day.  It is being reported that the attorneys general of up to 40 U.S. states will be working together on a joint investigation into this foreclosure crisis.  Lawmakers in both houses of the U.S. Congress, including Nancy Pelosi and Christopher Dodd, have called for an investigation to begin on the national level.  U.S. Attorney General Eric Holder said last week that he is looking into the issue.  Things are certainly getting very serious out there.  Never before has there ever been such a national focus on foreclosure paperwork.

But apparently there are good reasons for such scrutiny....

*One GMAC Mortgage official admitted during a December 2009 deposition that his team of 13 people signed approximately 10,000 foreclosure documents a month without reading them.

*One Bank of America employee confessed during a Massachusetts bankruptcy case that she signed up to 8,000 foreclosure documents a month and typically did not look them over "because of the volume".

But the "robo-signing" aspect of Foreclosuregate is just the tip of the iceberg.  Apparently there is a whole lot more going on than just a bunch of bad signatures. 

Peter J. Henning, a professor at Wayne State University Law School in Detroit, was recently quoted by MSNBC as saying the following about Foreclosuregate....

"You've got so many potential avenues of liability. You don't even know the parameters of this yet."

The sad truth is that potentially millions of foreclosures across the United States could potentially be invalid because the securitization process has muddied the chain of ownership.  In fact, an increasing number of judges from coast to coast have been ruling that the "owners" of the mortgage have no right to foreclose on a property because they lack clear title.

At the core of this title controversy is MERS - Mortgage Electronic Registration Systems.  MERS is based in Reston, Virginia and it was created by the mortgage industry to enable that big financial firms to securitize and swap mortgages at high speed.  MERS allowed these big financial firms to largely avoid the hassle of filling out more forms and submitting new filing fees every time that a mortgage was traded.

But now MERS is facing some very serious legal challenges.  A recent article in Businessweek described the situation this way....

A lawsuit filed on September 28th in federal court in Louisville on behalf of all Kentucky homeowners claims that MERS was part of a conspiracy to create false promissory notes, affidavits, and mortgage assignments to be used in mortgage foreclosures. Similar class actions have been filed on behalf of homeowners in Florida and New York. Karmela Lejarde, a MERS spokeswoman, declined to comment on any pending litigation.

The reality is that as millions of U.S. mortgages have been bunched together and traded around the globe at lightning speed, it has become increasingly unclear who actually has title to them and who actually has the right to foreclose on these properties.

Title insurers have backed the titles of millions of these foreclosed properties and now potentially find themselves in a heap of trouble.  Some of the biggest title insurers have already begun circling the wagons in an attempt at damage control.  For example, one of the biggest title insurance companies in the United States, Old Republic National Title Insurance, has already declared that it will no longer write new policies for homes that have been foreclosed on by JPMorgan Chase and GMAC Mortgage.

So what happens if nearly all title insurers start avoiding foreclosed properties? 

Won't that make it much more difficult for the banks to sell the massive backlog of foreclosed properties that they have accumulated?

In addition, Americans that have purchased foreclosed homes may now be facing some serious problems themselves.  Millions of Americans may now "own" homes that they do not have clear title for.  When it comes times to sell those homes, many Americans may find themselves unable to do so. 

Needless to say, this is a complete and total mess.

Already, U.S. banks have a record number of foreclosed properties that they need to clear out, and now all of this scrutiny on foreclosure paperwork and all of these lawsuits are going to grind the process of getting these homes sold off to a standstill.

In fact, the true legacy of Foreclosuregate may be the massive amount of bank failures that it causes.

It would be difficult to understate how much of a nightmare Foreclosuregate is going to be for U.S. mortgage lenders.  Having to go back through the paperwork of millions of old mortgages is going to be a complete and total disaster.  If banks end up being unable to foreclose on a large number of bad mortgages, it could potentially be enough to put many banks out of commission for good.  Not only that, but the legal fees that many of these banks will accumulate defending lawsuits related to Foreclosuregate will be astronomical.

The U.S. mortgage industry was already on the verge of death, and Foreclosuregate may just be the straw that broke the camel's back.

The reality is that U.S. banks are drowning in foreclosures and this current crisis is just going to make things a lot worse.  Back in 2005, there were approximately 100,000 home repossessions in the United States.  In 2009, there were approximately 1 million home repossessions in the U.S. and RealtyTrac is now projecting that there will be an all-time record of 1.2 million home repossessions in the United States this year.

For the U.S. mortgage industry, Foreclosuregate must feel like someone has dropped a bomb on them after they have already been beaten up and doused with gasoline.

Attorney Richard Kessler, who recently conducted a study that found serious errors in approximately three-fourths of court filings related to home repossessions, says that foreclosuregate could haunt the U.S. mortgage industry for the next ten years....

"Defective documentation has created millions of blighted titles that will plague the nation for the next decade."

While it may be easy to beat up U.S. mortgage lenders and say that they deserve all this, let us not forget that this is going to impact a whole lot of other people too.

It is going to become much harder to get a mortgage.  It is going to become much harder to buy a home.  It is going to become much harder to sell a home.  The U.S. housing industry is likely to suffer a significant downturn due to all of this.  There is even a good chance that the entire U.S. economy could be dragged down for an extended period of time.

So no, Foreclosuregate is not good news for anyone. 

Well, except maybe for lawyers. 

But for virtually everyone else this is really bad news.  Any hope that the U.S. housing industry would experience a quick recovery is completely and totally gone.

[ex-Texan]

First the mortgage lenders created the housing bubble. Next they sliced and diced mortgages into very complex securities so they could peddle them on Wall Street. And made $$$ Hundreds of Millions in crooked bonuses for themselves.

Hundreds of thousands of innocent people were suckered into buying this worthless garbage in their 41(k)'s. Then Wall Street banksters decided to go "all in" and gambled that they could sell rotten subprime garbage to the whole world. Then these garbage securities were sliced and diced and bundled again and again and sold and resold again and again. In essence, $$$ Trillions in forged securities were sold to the entire world. And Banksters made $$$ Billions in crooked bonuses for themselves.

They created all sorts of exotic derivatives and used supercomputers to do automated transactions electronically. Quicker that a blink of an eye the bastards would do speedy transactions worldwide. Thereby again profiting with generous bonuses.

Greedy crooks like this famous former CEO of Countrywide made millions

Click the image . . .

Now the truth is finally coming out: Illegal foreclosures. Forged signatures. Bogus bookkeeping. Shredding millions of payment checks. Fake property recording documents. Foreclosure Mill law offices. And far worse including illegal break-ins, illegal wiretaps -- and an active conspiracy to cover it all up.

IMPO -- Any body who saw or had personal knowledge of mortgage lenders using these devices to create forgeries belongs in prison:

Click the image to learn more

It does not matter if you were not aware of the full scheme and all the multiple ramifications of fraud. If you knew about fraudulent activities and did not blow the whistle -- you are a co-conspirator. Far better to blow the whistle now or even years later. By taking that action you may help put the criminal bastards behind bars.

[ex-Texan]

*Ping*!

[RobRoy]

Is this our Black Swan?

I think this may be prove to be the biggest fraud in human history. If so, it will not merely go away harmlessly.

[ClearCase_guy]

The banking industry probably should have collapsed in Sept 2008. But it was all too big to fail, and they propped it up. Since then, Obama has continued to prop it up in a number of ways. QE2 appears to be coming along as another attempt at this.

One way or another, I think the banking industry is going to collapse. It appears to be riddled with disease.

[netmilsmom]

>>First the mortgage lenders created the housing bubble.<<

Did they?

http://www.youtube.com/watch?feature=iv&v=1RZVw3no2A4&annotation_id=annotation_918789

[bolobaby]

Truth is, the vast majority of these foreclosures ARE for deadbeat borrowers. They’re just going to use this loophole to screw the banks, which is BS.

[stephenjohnbanker]

” Lawmakers in both houses of the U.S. Congress, including Nancy Pelosi and Christopher Dodd, have called for an investigation to begin on the national level. “

Fox, meet henhouse LOL!!!!

[RobRoy]

Is this our Black Swan?

I think this may be prove to be the biggest fraud in human history. If so, it will not merely go away harmlessly.

Now that I think about it, this can NOT be a Black Swan. A black swan is unanticipated. This was brewing a couple years ago when a few foreclosures were thrown out because of missing paperwork. Even then there were lots of folks speculating that those were the equivalent of barely scratching the surface and this could be the fraud of the millennium.

[RobRoy]

Add this to the existing problems, and the republicans taking the congress and there could be some serious civil unrest this winter.

I’ve said that I feel like I am living in an equivalent of the world in August of 1939.

Is this September 1st of 1939?

[ntmxx]

Anyone notice the Mud Hen Barney Frank has not been heard from or seen lately; must be laying low in the weeds until safe to come out from the vault to run a new DNC scam.

[ltc8k6]

http://www.powerlineblog.com/archives/2010/10/027435.php

[netmilsmom]

>>Truth is, the vast majority of these foreclosures ARE for deadbeat borrowers.<<

I don’t know of a single person who is up to date or one payment off their mortgage who has been foreclosed on. In fact, I know of a man who lost his home but has all the latest gadgets and toys. I-Pad the whole lot. All gotten since his home went into foreclosure.

I’m tired of paying for my mortgage and the mortgage of those who remodeled their kitchens and went on vacation. We’re eating hot dogs for heaven’s sake!

[Gabrial]

“But for virtually everyone else this is really bad news.”

Chris Dodd and Franklin Raines have already snuck out the back door with their millions. I guess Barney Frank is just not smart enough to cut and run.

[Brookhaven]

Truth is, the vast majority of these foreclosures ARE for deadbeat borrowers. They’re just going to use this loophole to screw the banks, which is BS.

---

Everyone is equally entitled to the full protection of the law.

[rrrod]

I first read of this a couple of months ago and now its getting main stream. This will no doubt have a horrendous affect nationwide. To my knowledge Florida has all ready started to go after slimey title cos lawyers and realtors(redundant I know).

IIRC a judge had ordered a review for the last 5 yrs.

I have one home/condo I just bought from an estate...best way to buy...but my advice is not to buy anything in the entire state of Floriduh unless you really are knowledgeable.

Do not believe a word a realtor sez......

[RobRoy]

I just learned last week that a relative of mine has not made a mortgage payment in over two years. She’s still living there...

[Moonman62]

Banks will get the laws they need sometime after election day, and foreclosures will resume.

[justsaynomore]

I do not think it will go away, and I also don’t think banks will just hit the reset button with borrowers across the board.

I believe what will happen is that the government will step in and take over. If that happens, get ready to make your mortgage payments to uncle sam. Scary huh?

And I believe every bit of this was by design. You can’t get any more “cloward piven” than what is going on with the banks right now. Overwhelm the system and crash it...and the big banks were willing participants in this fraud.

[Future Snake Eater]

And yet we’re supposed to think that the “strategic defaulters” are scum-of-the-earth who take advantage of the poor little banks...

[IamConservative]

Makes you wonder if legitimate homeowners should immediately seek a refinance with a lender that guarantees not to sell your mortgage..??..

My lender stills holds my mortgage, but there is nothing in the agreement that says they can’t sell it.