Daily Caller: One Nation, Under Fraud (Friendly Warning: The Foreclosure Mess is About to Get a Lot Worse, and That Will Affect You) (New Update in Post #508)

[Larry]

I don't understand what the other problem is that you are talking about.

Are the buyers now going to sue the bundlers for fraud?

Do they have any chance of winning?

Either way, how does that turn into a more general problem?

Speaking only for myself, I can certainly think of ways whereby things will become enormously more complicated.

Bank 7 claims that John Doe is in default, files foreclosure.

Court rules that Bank 7 can't prove that they hold the mortgage.

Bank 7 claims that they bought the mortgage from Bank 6. Demands that Bank 6 produce paperwork proving that Bank 7 bought the loan.

What happens if Bank 6 says "no"?

Now we've got a lawsuit between two banks, fighting over which of them owns the loan.

What happens if both of them demand that John Doe send payments to them? Further, Bank 6 observes that John Doe hasn't made a payment to them for three years.

Let's make it more complicated. At one point, the loan was owned by Bank 4, who went under and got bought by Bank 4B.

I can see things getting a LOT more complicated, more expensive, and more confrontational, REALLY quickly.

[Larry]

Request for comment:

Should there be a law stating that when a mortgage is sold, the transfer of mortgage must be recorded down at the courthouse? (Possibly also require that a court officer serve a copy on the homeowner?)

[twa]

Request for comment:

Should there be a law stating that when a mortgage is sold, the transfer of mortgage must be recorded down at the courthouse? (Possibly also require that a court officer serve a copy on the homeowner?)

That is standard practice here I believe.

added

That is one of the main issues with the foreclosures,it seems some skipped that a time or two in.

yet as long as the initial mortgage/lien was filed it then is simply a matter of jumping through the right hoops to rectify it(the buyers do not lose,though they certainly could be out some money)

[Larry]

deleted post.

[Hubbs]

I think everyone generally agrees except for this one statement.

You can't prove a negative. Maybe you can wait out the statute of limitations, but a court is not going to hand you a declaration saying that you own the house when all the evidence you have is a mortgage agreement saying that you own the house unless you fail to make payments, and you are not making payments.

That's exactly what the courts are now doing. Why do you think Bank of America suspended foreclosures in all 50 states? Because it doesn't think there are consequences for what it claims are just an undotted i or an uncrossed t? How would that make any sense at all? If the i and the t don't matter to courts, why suspend foreclosures? For ****s and giggles?

Maybe nobody else will be able to show that they own the house in one particular lawsuit, but you will still be vulnerable to future lawsuits. And to Peter's point, you will have a hard time selling your house when there are possible creditors out there.

Why? Nobody has explained this. If it's determined that you own the home, then it's determined that you own the home. There's no uncertainty. There's no inability to sell. The country recorder will have to write down that you own the home. That's the end of the discussion. You might throw in that a different bank might sue, but I'm telling you that the other bank won't win, either, because it has to have a piece of paper that says "mortgage" somewhere, and none of them do. It doesn't matter if they can prove money was borrowed. They have to prove that a particular bank needs to be paid bank. They can't.

Is a bank going to be willing to give a mortgage to the buyer of your house? How much is your house really worth if you can't sell it?

If it's determined that you own the house, why can't you sell it?

The best solution for all parties is probably a refinance or a short sale where the documentation can be corrected and everyone's roles are clear. Homeowners would also probably be more comfortable with that kind of amicable solution where you get to stay out of the courtroom. If everyone tried to lawyer up to take advantage of the situation, I think you're right that a major collapse could happen, but that's not how the vast majority of people act in the real world.

You want to refinance your mortgage with a bank you don't have to pay? Why?

There will be greatly increased legal costs in the foreclosure process going forward. Lawyers should have a field day, and banks will be hurt by the increased outlays of cash.

All this stuff about the next great depression is alarmist bull****. I'm sick of it. Get out and get some fresh air for chrisakes.

I don't think you understand what the first part of your post means in relation to the second part of your post. Banks don't have the ability to endure "greatly increased" legal costs of every foreclosure, especially if they lose the cases anyway. They're levered up, 20:1, 30:1, in some cases 40:1. Fannie and Freddie are levered up 80:1. Good luck getting money from them if they have to pay "greatly increased" amounts of cash to lawyers.

I was not aware that it was impossible for a bank to win a quiet title action (against a homeowner or against another bank) without the original documents. The civil preponderance of the evidence standard is rarely interpreted that way.

In other words, just because things are snafu'd doesn't automatically mean that there is no enforceable mortgage.

So why do I have an email from a paralegal who just told me that a case which was correctly interpreted was dismissed with prejudice? That bank can't ever sue the homeowner again. Just a happy coincidence for what I'm saying? Or is that what's about to happen across the country? Is that why Bank of America isn't foreclosing anywhere anymore?

My head is spinning from how you were able to put some blame on the government for all these "efficient" private companies failing to do the proper work necessary to secure their interests.

All you have to do is say the magic words "Fannie and Freddie" three times and click your heels together, and the private sector magically is absolved of any responsibility for anything.

Whoa whoa whoa, time out. I'm absolutely not saying that only the government is to blame. I'm saying that the argument that the government is completely blameless is just as stupid as the argument that the government is the only entity that should be blamed. It seemed as though Peter was saying the former when he said that Republican arguments about the government were ridiculous.

Yeah, I don't quite see where people could think that they're Immune From Mortgage.

At least here in Florida, down at the courthouse, there are two documents on file.

One says that John Doe owns this property.

The other says that Bank X holds a mortgage (and a lien) for $200K. (Or whatever.)

Seems to me that no matter how messed up the paperwork gets, from that point on, no matter what, Bank X can always prove that you owe them money.

I'd say that if things are really, really, FUBAR'd, the court's ruling is going to be "OK, we know that Bank X holds this mortgage. Is there anyone in the courtroom who can prove that they bought the mortgage from Bank X?"

Okay, again, I'm going to try to figure out how to convey this properly: The documents showing that Bank X is owed money were destroyed. Furthermore, Bank X isn't even owed money anymore, because it sold the debt to someone else, and the documents showing that this sale happened were destroyed too, but the proof that Bank X is no longer owed money wasn't. Nobody can prove if Bank X, Bank Y, or Bank Z is ultimately who is owed money.

I work in loss mitigation for one of the big banks. We are not halting foreclosure proceedings. In 4 years, I've never came across a loan that went to foreclosure for no reason. Due to investor agreements, securities and transfers of servicing it may be difficult for some banks to locate the paperwork. This is not the case w/ my company. Hard up attorneys and politicians are trying to latch on to technicalities to prevent foreclosures, but at the end of the day, everyone should know when you don't pay your mortage, you lose your house.

And I've come across a loan that went to foreclosure for no reason. Patrick Jeffs, the first person in the article, was foreclosed upon even though he was current on his payments.

When you don't pay your mortgage, you lose your house, unless the bank can't prove it should be receiving your mortgage payments. Peter keeps saying that Bank X can prove you owe it money. But Bank X isn't owed money at all.

He's not right. So, say you buy a home with a 500K mortgage. The bank gives you 500K (just assume nothing down) and in return you agree to pay them back a monthly fee AND THAT LOAN IS SECURED BY YOUR PROPERTY.

This is a very specific type of loan, but in general it is called a "secured interest loan." By taking a mortgage you are agreeing that if you fall behind they can collect their debts by collecting your house.

Now, I would be shocked if that meant that they don't have any other means to repayment. That is, they may not be able to get your house, but they could sue the **** out of you for regular breach of contract, and in the end you may have to sell your house to cover your losses.

So, is Hubbs' theory possible... yes. It is possible that you could own your house free and clear if your bank did not secure your mortgage correctly so that it could assert its interest in your property when you default. But, its highly unlikely that they'll remain with no recourse against you for failing to pay, as you agreed.

Its much more likely that the rebundled mortgage securities were not actually sold which causes a bigger, but different problem.

No. They can't. Stop trying to say that the original bank that created the loan is the bank that's owed money in the vast majority of foreclosure cases.

Chase created the loan for Patrick Jeffs. Deutsche foreclosed on Jeffs. That's how it works for virtually every case. And Deutsche can't prove it can foreclose. Which is why Jeffs is still living in his house, and hasn't made a mortgage payment this year.

I think that's pretty much right. You still owe the money. They may not be able to win a foreclosure action, but they will have reason to collect the debt you owe them.

Please explain how Chase would be able to get any money from Jeffs at all.

Request for comment:

Should there be a law stating that when a mortgage is sold, the transfer of mortgage must be recorded down at the courthouse? (Possibly also require that a court officer serve a copy on the homeowner?)

There's already a law which states that every mortgage sale has to be notarized. (I know that's not quite being recorded at court, but it's damn close.) Banks didn't get the sales notarized. Now they're using backdated notary stamps to try to pretend that they did. Judges are starting to realize this. Even if they get the proper notarization, the trust companies that hold all of the mortgages that have been pooled into mortgage-backed securities can't acquire the mortgages anymore. The only way they could is if the government, running a trillion-and-a-half dollar deficit, looks at a bunch of income and says, "You know what? I don't want that money. You can have it." How likely do you think that is?

[AsburySkinsFan]

You're right about the "loose thread" part. You're not right about what the government is going to say. The government is going to say what it's always said - that borrowers owe money to who they borrowed from, and who they borrowed from owes money to who the loan was sold to. Well, the bank money was borrowed from is no longer owed money. And nobody can prove that the bank that's no longer owed money owes money to Bank X. So the lending bank won't be forced to pay, unless you think judges are going to pass a law saying that lending banks owe money to a different bank picked completely at random.

Ok, what? Say that one time in English plz.

[Hubbs]

Ok, what? Say that one time in English plz.

Sorry, that was a little opaque.

What Peter and others keep saying is that, at the end of the day, the original bank that created the loan will be able to prove that it's owed money. What I'm saying is that's not true. The original bank would only be able to do so if it's forced to buy back the loan. How could other banks force the original bank to buy back the loan if they can't even prove that the original bank should be sending them the mortgage payments made by the homeowner?

There will still be forced buybacks, yes, because there will be other evidence of sales of mortgage-backed securities that shouldn't have happened. But the buybacks stop with the banks, not the homeowners. The "other evidence" isn't good enough to foreclose on homeowners because, as we're seeing now, it already isn't, and it's not a mere technicality like banks are trying to claim right now. I cite a letter written by Congressman Alan Grayson to the FBI:

When it comes to foreclosures, there is mounting evidence of a state of rampant lawlessness in Central Florida. There are increasing signs that big banks routinely evade laws meant to protect homeowners, in many well-documented cases of ‘foreclosure fraud’. Despite the demonstrated existence, for instance, of ‘robosigners’ signing affidavits attesting to documents that they have never seen, the parties engaging in such misconduct are not being brought to justice. Big banks are mischaracterizing this as mere “technical problems,” and apologizing only where there is clear and very public evidence of harm.

It is not enough for big banks only to apologize for fraud, perjury, and even breaking and entering – when they are caught. It is time for handcuffs. Fraud does not become legal just because a big bank does it.

On September 20, 2010, after my office found evidence of systemic foreclosure fraud perpetrated by big banks and foreclosure mills, I called for a halt to illegal foreclosures.

Since then, big banks such as Bank of America, JP Morgan Chase, GMAC, PNC and others have suspended foreclosures or foreclosure sales. These banks are still claiming that the massive fraud they have perpetrated amounts to nothing more than a series of technical mistakes. This is absurd. This is deliberate, systemic fraud, and it is a crime.

"Deliberate, systemic fraud." Grayson was a lawyer in Florida before he was elected, by the way. He knows his stuff. Don't believe me. Believe him. The "other evidence" isn't enough. Homeowners are getting completely and royally screwed because of mistakes made by banks during the housing bubble. So are pension funds. I'm sure people wonder why I seem so upset about this issue as long as they think that the banks are right when they say they're only experiencing some technical errors. They're not. They're experiencing the act of committing fraud. Over and over and over again. That's why I'm upset.

[PeterMP]

What Peter and others keep saying is that, at the end of the day, the original bank that created the loan will be able to prove that it's owed money. What I'm saying is that's not true. The original bank would only be able to do so if it's forced to buy back the loan. How could other banks force the original bank to buy back the loan if they can't even prove that the original bank should be sending them the mortgage payments made by the homeowner?

Except that's not what I'm not saying.

What I am saying is that the home owner will never be able to prove they paid the mortgage..

If they don't pay the mortgage, they'll never be able to prove that the property isn't collateraol on some loan that is outstanding (because it will be).

And issuing a new title won't change that. Titles have problems because of things like duplicate claims on properties (which is why we have title insurance) (but you haven't posted anything where anybody has suggested issuing new titles anyway).

And nobody is disagreeing with the claim that there has been massive fraud. That doesn't mean that people that don't their mortgages will ever be in the free and clear.

[PeterMP]

With or without prejudice probably won't make too much of a difference unless the problem is simply that they can't FIND the documents. If they actually didn't file them, then the dismissal without prejudice is basically a dismissal with prejudice.

Except there are legally valid ways for the banks to reproduce the documents.

One of the ways that banks have gotten in trouble is that they've said they looked for documents that they didn't actually look for.

If they look for them and can't find them, they have a legal recourse, but the "perjury" they committed by claiming they looked for them when they didn't has gotten to them.

Essentially, the banks tried to take the easy way out and got their hands slapped by having the cases dismissed without prejuidice in all but a few cases.

[Hubbs]

Except that's not what I'm not saying.

What I am saying is that the home owner will never be able to prove they paid the mortgage..

If they don't pay the mortgage, they'll never be able to prove that the property isn't collateraol on some loan that is outstanding (because it will be).

And issuing a new title won't change that. Titles have problems because of things like duplicate claims on properties (which is why we have title insurance) (but you haven't posted anything where anybody has suggested issuing new titles anyway).

And nobody is disagreeing with the claim that there has been massive fraud. That doesn't mean that people that don't their mortgages will ever be in the free and clear.

I'm saying that we'll have to create new titles.

No, the homeowner won't be able to prove that they paid off the mortgage. I'm not saying that they will. I'm saying that according to the law, they don't have to pay a mortgage anymore to own the house. The property records held by the county say that they're the owners.

There are three ways to eliminate debt: Pay it off, default, or be lucky enough to have the debt forgiven. When banks tear up everything signed by the homeowner with the word "mortgage" attached to it, they happen to be forgiving the debt at the same time. Lucky you.

Except there are legally valid ways for the banks to reproduce the documents.

One of the ways that banks have gotten in trouble is that they've said they looked for documents that they didn't actually look for.

If they look for them and can't find them, they have a legal recourse, but the "perjury" they committed by claiming they looked for them when they didn't has gotten to them.

Essentially, the banks tried to take the easy way out and got their hands slapped by having the cases dismissed without prejuidice in all but a few cases.

Why would they look for them? The documents have been destroyed. What's the point?

Also, there aren't legal ways to "recreate documents." You can ask a court to deem recreations to be legal, but you have to meet a lot of standards in order to do so, and "I tore up the documents on purpose" doesn't meet those standards.

The perjury committed is what's gotten to them so far. The cases have been dismissed without prejudice so far. Just like in 2009, there hadn't been a foreclosure freeze due to false documentation so far. I'm telling you what's going to happen, not what happened so far. And like I said, I have an email from a paralegal who says that a case she worked on in which the documents presented by the bank were called into question was dismissed with prejudice. The bank hasn't even appealed. You never tried to offer an explanation as to why (I believe my question was directed to you). Happy coincidence? Or a preview?

(To clarify, I'm not asking you to read my mind about what case I'm talking about. I'm just asking if you think a case like that meets some sort of special circumstances, whatever those circumstances happen to be.)

[Fergasun]

Economic Populist: What's Behind the Foreclosure Crises

Tempted to start a new thread but I'll throw it in here.

Terms like “technicalities” and “document flaws” are meant to sound innocent and minor, when the truth is that the foreclosure problem is just one part of a much bigger crisis that is still out of sight for the media, and apparently being downplayed by the industry and its political apologists. This crisis at its core revolves around an attempt by banks, mortgage brokers and other financial institutions to privatize and usurp the government-run county record system that for over 200 years has guaranteed the property rights of American citizens. The long term question is whether this private usurpation, which was implemented without review or approval from any elected representatives of the people, should be allowed to stand. The short term question is whether use of this private records system has irrevocably corrupted the unbroken chain of title to property that existed in government records, and in so doing fatally undermined American confidence in private property rights (rights which are guaranteed to Americans under the Fifth Amendment to the Constitution). The following series of initiatives by the banking industry will explain what transpired, and it will be seen that these initiatives from the start were plagued by false legal assumptions, misrepresentations, shoddy record keeping, and loss or deliberate destruction of critical original real estate documents such as deeds, titles, and notes.

[AsburySkinsFan]

Ok, yep this is still way over my head, and I like to think of myself as someone who has a pretty good grasp, but it just seems that there really isn't any real consensus about what is going to happen here, I just wonder how it will play out, a) silently to preserve public confidence, loudly drawing fire from all sides until it becomes a political football.

[Fergasun]

I work in loss mitigation for one of the big banks. We are not halting foreclosure proceedings. In 4 years, I've never came across a loan that went to foreclosure for no reason. Due to investor agreements, securities and transfers of servicing it may be difficult for some banks to locate the paperwork. This is not the case w/ my company. Hard up attorneys and politicians are trying to latch on to technicalities to prevent foreclosures, but at the end of the day, everyone should know when you don't pay your mortage, you lose your house.

Was it one of the big 9 that were first in line to get half of the TARP money that was doled out?

I'm not so sure that people will get "free houses", from the article it posted it seems like people will get civil lawsuits, will lose their lawsuits; however the banks may become unsecured creditors rather than secured creditors. I agree right now that the Democrats support foreclosure halts, however the fact that 50 AGs are now looking into this is not good for the banks. Let's just say, perhaps the states might be a little pissed off at the Federal largesse towards the banking system and this may provide them the opportunity to get back at them for the people. Or the states will find some smoke and get some decent settlement money that will allow them to plug up some budget holes that they have.

A really evil thought would be that the reason Paulson wanted to buy all the MBS is because he knew there was a problem with MERS and if the banks had dumped the problem on the government, no one would care? $700B was about half of the MBS market in 2008.

[Fergasun]

ASF,

It's going to play out quietly. I already see the banks talking points, "just a paperwork problem", "no big deal", and finally "remember these are all greedy borrowers who bought a home they couldn't afford." I don't know what percent of foreclosures are due to greedy borrowers, but I know a lot of them are also because folks have lost jobs. Foreclosures are 1/10th of the housing market? (8 million out of nearly 80 million? just throwing out numbers from my head).

The biggest problem is if the folks who have gotten hosed on buying MBS are going to go after the folks who sold the MBS. That's out and out fraud. That will be very messy and expensive litigation. I don't know if it could be a shareholder derivative's lawsuit or if there is some trustee who has that power and when they bought MBS they gave up the right to sue... if the trustee is a banker fat chance on him filing... although does he have a fiduciary duty? Wow... that is complicated and not sure it's even out there yet. Wonder who will bring a case up.

[AsburySkinsFan]

ASF,

It's going to play out quietly.

Yeah, that's my guess too, the banks want it quiet because that way no one looks to hard at it. The gov't wants it quiet because of consumer confidence in the system.

Wow... that is complicated and not sure it's even out there yet. Wonder who will bring a case up.

Yeah, I've actually had to stop thinking about it because every time I start tracing it out I feel like I'm trying to follow all the roads leaving a city on a map at once.

[brandymac27]

I think the scary thing is that there are people who are paying their mortgage every month but maybe aren't keeping up w/ records of their payments who could ultimately get screwed in this whole process sort of like the guy in the article. If the banks/mortgage companies/etc are all claiming they sold the mortgage to Bank X, but bank X has no proof, and for whatever reason, the courts declare that bank Z shows the proof that is required to show ownership of the mortgage, yet the whole time the person in the house has been paying Bank X (who doesn't have proof) then Bank Z can say the person has never made a payment etc and essentially have grounds to foreclose.

Of course, this is assuming the person has not kept up w/ any of their payment receipts/checks/bank statements/etc. But I see this whole thing being more of a problem for the individual homeowner than anything. I also don't understand how in the hell all this paperwork can just vanish. Somebody, somewhere, has to have something. There has to be a paper trail.

[Hubbs]

ASF,

It's going to play out quietly. I already see the banks talking points, "just a paperwork problem", "no big deal", and finally "remember these are all greedy borrowers who bought a home they couldn't afford." I don't know what percent of foreclosures are due to greedy borrowers, but I know a lot of them are also because folks have lost jobs. Foreclosures are 1/10th of the housing market? (8 million out of nearly 80 million? just throwing out numbers from my head).

Do you mean now or in normal times? I believe foreclosures are 1/3 of the market right now, but maybe I was looking at different numbers.

The biggest problem is if the folks who have gotten hosed on buying MBS are going to go after the folks who sold the MBS. That's out and out fraud. That will be very messy and expensive litigation. I don't know if it could be a shareholder derivative's lawsuit or if there is some trustee who has that power and when they bought MBS they gave up the right to sue... if the trustee is a banker fat chance on him filing... although does he have a fiduciary duty? Wow... that is complicated and not sure it's even out there yet. Wonder who will bring a case up.

It's going to take years and years to figure everything out.

[zoony]

ASF,

It's going to play out quietly. I already see the banks talking points, "just a paperwork problem", "no big deal", and finally "remember these are all greedy borrowers who bought a home they couldn't afford." I don't know what percent of foreclosures are due to greedy borrowers, but I know a lot of them are also because folks have lost jobs. Foreclosures are 1/10th of the housing market? (8 million out of nearly 80 million? just throwing out numbers from my head).

The biggest problem is if the folks who have gotten hosed on buying MBS are going to go after the folks who sold the MBS. That's out and out fraud. That will be very messy and expensive litigation. I don't know if it could be a shareholder derivative's lawsuit or if there is some trustee who has that power and when they bought MBS they gave up the right to sue... if the trustee is a banker fat chance on him filing... although does he have a fiduciary duty? Wow... that is complicated and not sure it's even out there yet. Wonder who will bring a case up.

And what about legal precedent? You really think that after the first several cases get sorted out, every case going forward will be a legal mess? And you don't think the courts will act pragmatically?

[Hubbs]

And what about legal precedent? You really think that after the first several cases get sorted out, every case going forward will be a legal mess? And you don't think the courts will act pragmatically?

When the courts finally figure out the ultimate answer to this thing, no, every case won't be a legal mess. Figuring out the ultimate answer is what's going to take years.

By the way, a major bank (I forget the name, which I saw in a story I read hours ago) was advised today to raise its reserves for litigation regarding this foreclosure mess from $6 billion to $10 billion. The $10 billion dollar amount was suggested by someone who doesn't know the full scope of what's going on.

Still think the people talking about a depression are, as Basil Marceaux.com would say, "nutcakes"?

[Fergasun]

And what about legal precedent? You really think that after the first several cases get sorted out, every case going forward will be a legal mess? And you don't think the courts will act pragmatically?

Different states may have different rules. The precedent isn't going to be set at the Federal level; it will be set at the state level...

[SkinsHokieFan]

So, I think I'll just keep saving money and wait a while before joining the world of "home ownership"

[Hubbs]

So, I think I'll just keep saving money and wait a while before joining the world of "home ownership"

Join the club.

[AsburySkinsFan]

Different states may have different rules. The precedent isn't going to be set at the Federal level; it will be set at the state level...

And they're gonna have to go through the same process 50 different times...my conspiracy nerves are going off on this, but that's probably just because I'm worried that the pragmatic solution will be to advantage the banks rather than sorting this out correctly.

[twa]

So, I think I'll just keep saving money and wait a while before joining the world of "home ownership"

Just waiting for the crash to pick up a new one myself.

[TMK9973]

So this peaked my interest more and I was reading up on it.

First - Those saying 1/3 homes are in foreclosure are smoking crack! It under 5%!

http://www.floordaily.net/Flooring-News/Percentage_of_Homes_in_Foreclosure_Fell_in_Q2.aspx

(And I think it was about another 5% of homes are falling behind...but thats still then 10%.)

2nd - Big article in the post yesterday about Florida judges doing these foreclosures, most are still going thru unless there is proven fraud. Judges are basically ruling that if the paperwork was done in good faith - Good enough.

Even the ones with fraud are usually simply being required to go back and getting the paperwork completed. This seems like it is going to delay foreclosures, and bring down home values even more as Banks are pushed to settle, short sale, and forgive loan amounts faster then they would have liked to....but everything else sure seems to be nothing but alarmist.....