Posted on 1/13/2011, 5:37:51 AM by Kartographer
A day after a report of settlements between banks and Attorney Generals across the U.S. on the issue of foreclosure-gate, the office of Florida Attorney General Pam Bondi released this blistering presentation on the "Unfair, deceptive, and unconscionable acts in foreclosure cases."
It doesn't exactly read like someone is about to give in to a weak settlement.
(Excerpt) Read more at businessinsider.com ...
Wonder where the original paperwork got sent? There surely had to be a deed for the original sale.
There is.
That’s not the problem.
The problem is that the mortgages or liens on the deeds were not assigned properly.
Ok I guess I am not understanding. So the original sale had all the proper documents? Yes? Then as these mortgages got bundled out to 1, 2, 3, or more buyers of mortgages, they did not get the original deeds when the purchase of mortgages took place?
This indeed is a great presentation.
It should finally convince some of these people who keep yelling about “deadbeats” that the banks are not as pure as the driven snow.
And, I’ll remind those who are so hopping mad about “deadbeats” and such:
All of this documentary fraud, while it might mean that someone gets a free house (and that might make those yelling “deadbeats!” mad), also means that if the bank prevails in court... it makes all future buyers of the property subject to large (possibly complete losses) when or if an appeal is filed that the foreclosure was invalid and any title resulting from a foreclosure is not quiet.
In other words, put aside (completely) the issue of whether or not a deadbeat gets a “free house.” Start paying attention to the issue of whether or not the investors in mortgage-backed securities have been defrauded and instead of being sold asset-backed securities, they were sold unsecured debt (akin to credit card bonds) and then start pondering the future of a real estate market in foreclosed houses where the errors in the title are now going to cause substantial risk to investors in foreclosed properties... because you know sure as God made little green apples, the title insurance companies are going to start writing exclusions into their policies to let them walk away from fraud in the foreclosure.
When a bank sells off a mortgage to another bank, investor or places the mortgage into a REMIC, the deed doesn’t go anywhere.
There is a lien or assignment placed upon the deed, saying who has the power or right to foreclose if the borrower who is supposed to pay the note fails to pay.
This assignment is supposed to be recorded on the deed. The banks thought they had created an oh-so-much-more-clever scheme called “MERS” (Mortgage Electronic Recording System) whereby they could transfer the note (the money half of the issue) from bank to bank to bank with lightening speed. However, the mortgage half (the half of the issue that allows foreclosure if the note isn’t paid) was not transferred or assigned with the note.
People need to understand that the deed is merely a recorded description of real property, the name of the owner or person responsible for paying the taxes and anyone who has a lien upon the property.
Assignments of mortgages and notes can happen thereafter, and the nominal owner who is in debt remains the same.
It also means that the original originator of the loan was going to make money even if it bankrupted the borrower. The general understanding of what a mortgage was had changed. Everyone was “qualified.” Just not qualified they way they thought they were and the way their parents were before them. It was the property that qualified for the mortgage and not them.
One other thought comes to mind:
The structure of REMICs complicates this greatly. I don’t know whether or not the collateral of a note that was put into a REMIC could be perfected or not. I’m guessing that without federal legislation, the answer is ‘no’ and that’s going to mean other put-backs or a sudden fire sale on RMBS paper that becomes unsecured beyond a certain loss point.
When you think about the hundreds of thousands of man-hours of tedious work it will take to sanitize the hundreds and hundreds of county property record systems across the country; this whole episode resembles nothing so much as a giant spree of vandalism. And that’s just talking about the *records* aspect.
And of course the economic losses are just staggering. As long as I’ve been following this whole thing, the complete set of implications still amazes me.
There are going to be property owners who have paid their morts faithfully through all this who may “never” be able to get truly clear title. Or, there may have to be invented a “declarative” form of land title; which of course is ridiculously dangerous considering how many instances of bank perjury have already occurred.
And the folks who made and purchased REMIC loans primarily for the tax advantages, who not only don’t have those advantages, they may well not have the loans nor the collateral!
The sheer size of this fraud in all its’ aspects stretches my ability to comprehend large numbers!
And on a different level, it truly seems like the US real estate system has been summarily looted of every dime beyond its intrinsic shelter value.
CORRECT.
That is THE reason why securitization allowed rampant mortgage origination fraud to take place. The lies on the origination documents were rampant throughout the system (eg, “just put down that you make $100,000 per year... no, don’t tell them that you really work at McDonald’s) and were still profitable because the originator could sell off the loan as fast as possible to a securitizing bank, who then often would be the bunch of jokers who bundled these mortgages together into REMICs, CDO/CMO’s and the like then sold the resulting securities. The assignment was broken along the way on the mortgage (recourse) side, which is why the owners of the note are now showing up in court without the legal ability to foreclose.
It is a huge mess, and the depth of the swamp is even now not fully defined.
It has been a few years since I have had any ‘business’ with a mortgage company.
I am struggling to get to the heart of my question.
What prevents the holder of the mortgage half from coming in and claiming ownership of the real property?
Yep. You’ve nailed it.
There’s a reason why I’ve been railing about the banks and bankers here on FR. It is because I understood what the ramifications of this were going to be. I never had the patience to write up a huge expose’ on it the way guys like Denninger have to explain the mess top-to-bottom to people, and I’ve also assumed (there’s that word) that more people who were homeowners actually understood how their mortgages/liens worked. Wrongly, I might add.
One of the advantages I have is that I’ve bought and sold property without any real estate agent or bank involved, which allowed me to see all the paperwork and documentation issues first hand, because there was no one else doing them for me. Contrary to the absurd propaganda put out by realtors and real estate agents, people do not “need” a real estate agent to buy or sell a property, and they only need an escrow banking account and a title company to research the title if they don’t want to.
What EVERY person should make time to do is go down to their county recorder and look up their deed or deed trust in the county files and look at the chain of title from the inception of their property until they bought it. Then look at who is supposed to have a lien. Then they need to find out from their mortgage servicer who currently holds the note, and then find out if the mortgage has been assigned properly. If not, and you go to refi or sell it... well, there could be problems quieting the title.
A declarative type of titling system would be the end of US real estate as an investment. The opportunities for outright theft of real property by fraud in that type of system are staggering. No, we have a good system for proving ownership, we have a good system for transferring ownership. What we have to do is tell the bankers that “No, you don’t get to pervert our legal system or property rights just because you clowns shot yourselves in both of your feet.”
Sadly, I can see Republicans doing some supremely stupid things legislatively in order to curry favor with the banks before the 2012 election. The Republican party has shown themselves to be singularly ignorant of how the financial system(s) and markets actually work, and I can see them extending that ignorance into a clear lack of understanding how mortgage securitization has screwed itself, rather than there being some problem in assigning notes and mortgages.
The single best thing that voters could do now is start pressuring their legislators at the state level to require wet-ink signature transfers of deeds, wet-ink signature assignments on mortgages and notes and requiring ALL such assignments to be recorded at the county recorders’ offices across the country. The bankers will squeal like ruptured ducks, because they’re going to have to pay billions in fees to do this recording, and it will slow down their rampant securitization, but it is long since past time we should be making decisions for the good of property owners and investors and telling the banks that they can go to hell and burn.
bookmark
Well, a) they don’t own it, they own the mortgage on the property, and b) they’ve been paid.
Let’s back up a sec.
There are two halves to what people commonly call a “mortgage.” There’s a mortgage and a note.
The mortgage is what gives the holder of the mortgage the right to foreclose if the note is defaulted upon.
The note is the financial benefit half, ie, what pays a yield as the homeowner pays their monthly payment.
OK, I’m going to construct a hypothetical case here which is the smallest possible representation of what has been happening.
Let’s say that “bank A” originated the mortgage, then they sold it (assigning the mortgage and note) to bank “B.”
Let’s say that bank “B” then securitized the note and sold the note off in the form of some crazy-assed Wall Street security/bond. Don’t worry about exactly what or the tax treatment. They then sell these instruments, ie, they collect money for them from Sucker “S.”
But bank B, when they were creating this security, forgot to assign the mortgage (foreclosure rights) half of the deal into the security.
So Sucker “S” now holds a financial instrument that is supposed to pay him a yield/dividend. He paid up-front a value for this to bank “B.”
OK, so bank “B” still holds the mortgage part, ie, they have the right to foreclose if the borrower defaults. But the pooling/servicing agreement (PSA) has the money from the borrower going to Sucker “S.”
Banker “B” has been paid for the mortgage. They are due NO MORE MONEY. Unless they’re also servicing the loan, they’re out of the picture.
So, why can’t banker “B” foreclose on the property?
Because they’ve been paid. From their perspective, there is no financial condition that gives them the right to foreclose on that property.
They’ve been paid in full. That’s THE issue that makes this a complete shoot-themselves-in-the-foot deal. The banker who is still holding the mortgage has been paid. He has the right to foreclose if he had not been paid, but he has been paid - in full.
Sucker “S” is the one who isn’t getting his money any more. But the mortgage wasn’t assigned to him, so he can’t foreclose because he doesn’t have the right to do so.
He’s outta luck.
In reality, there is sometimes a Banker B1, B2, B3, etc in between the originating bank A and the Sucker, S. The chain can be broken anywhere in there and the result be the same, because all the bankers (B1 through B’n’) have been paid in full. They’re out of the picture.
Who literally owns the ‘real property’? Counties are going to go broke if they cannot collect real estate taxes.
Well apparently it is going to take more than 'rocket science' to sort this mess out. Sure does not sound like some of these transactions got properly recorded. Else we would not even be reading about a problem.
I read the silly report made by the dunce of an attorney general, the summation was that even though there was some bad errors, no one has been charged with fraud are a crime. To have a crime you would need to prove they intended to defraud. The only other thing that was wrong in Fla was where bank of america foreclosed on a house and the agents taking possession pad locked the wrong house. And now the people that own the property are screaming foreclosure lottery.
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