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)

[redskins59]

No, no. It's not $10 billion for all banks. It's $10 billion for every major bank. And it will actually be a lot more. They can't survive that without a bailout.

That 10 billion is very easily managable. For example, BAC has 2.3 trillion in assets. They can easily sell some of those assets. China Construction Bank(which BAC owns 10% of ), for example, ALONE is worth 22 billion right now. Add to that their blackrock investment.

[Hubbs]

That 10 billion is very easily managable. For example, BAC has 2.3 trillion in assets. They can easily sell some of those assets. China Construction Bank(which BAC owns 10% of ), for example, ALONE is worth 22 billion right now. Add to that their blackrock investment.

So why was Bank of America "saved" with a mere $25 billion?

You're right that it has trillions in assets. What you're missing is that it also has trillions in liabilities. And the difference between the two is very, very slim. Moreover, BOA's "asset prices" aren't real. The mark-to-market regulation that required BOA, and every other bank, to list real estate assets at their market value was suspended when the crisis hit, and hasn't been reinstated. The assets aren't worth anything close to what banks claim they're worth. Anything close. That $2.3 trillion is closer to $1.5 trillion.

[redskins59]

So why was Bank of America "saved" with a mere $25 billion?

You're right that it has trillions in assets. What you're missing is that it also has trillions in liabilities. And the difference between the two is very, very slim. Moreover, BOA's "asset prices" aren't real. The mark-to-market regulation that required BOA, and every other bank, to list real estate assets at their market value was suspended when the crisis hit, and hasn't been reinstated. The assets aren't worth anything close to what banks claim they're worth. Anything close. That $2.3 trillion is closer to $1.5 trillion.

Well then, you short BAC, and I'll go long BAC. We'll see who makes money within a year. That mark to market regulation news is old news. This has been know for what, 2 years now already?

[Hubbs]

Well then, you short BAC, and I'll go long BAC. We'll see who makes money within a year. That mark to market regulation news is old news. This has been know for what, 2 years now already?

Of course it is. But do you think Bob from Ohio knows that when he blindly puts part of his paycheck into a mutual fund that's long BOA?

I don't care who makes money within a year. The markets can remain irrational longer than you can remain solvent. I care who makes money over my entire lifetime. And I'm reasonably sure that the markets won't remain irrational that long.

[Fergasun]

If all the people here making investment advice are so smart, than shouldn't you all be rich and chilling out on Cabo right now or something?

I think there's some fire here.

The banks can't foreclose on the house because they didn't go to the courthouse and properly record the title and mortgage claims. They did it all through MERS.

If a county records department does not have original documentation, then under state laws property title and mortgage claims against that property are not legally valid. This is especially so if it is not clear in the record who the mortgagee is, and also if the mortgagee is not the same party listed as the party of interest in a note evidencing indebtedness. This latter point has been an incontrovertible element of constitutional law in the US, and much earlier in England, from the 19th century on. What MERS has effectively claimed is the ability to overturn and undermine both the tradition and US Supreme Court rulings which have time and again made clear that property cannot change hands if it is not clearly stated who has ownership rights, who is buying the property, who has a mortgage on the property, and what the financial interest of all these parties is in the transaction.

But I think they can prove that they loaned money, however that loan becomes something like a credit card loan, that is... unsecured.

[Hubbs]

If all the people here making investment advice are so smart, than shouldn't you all be rich and chilling out on Cabo right now or something?

I think there's some fire here.

But I think they can prove that they loaned money, however that loan becomes something like a credit card loan, that is... unsecured.

But you can't answer this question: Who, ultimately, even if the money has to be passed through a dozen banks, is owed?

They can prove that money was loaned. They can't prove who needs to be paid. And that's the problem. Proving that money was loaned is irrelevant if you can't also prove who needs to be paid back.

I'm the guy on the board who would tell people to put a hefty percentage of their portfolio - something like 30-40% - in precious metals. Seems like I'd be pretty rich right now if I happened to have earned the money necessary to buy in 2007.

[DjTj]

I'll never make a timing prediction. Like you said, that's McD's territory.

I'll predict that major banks will crash, and that will lead to a Tea Party Congress not bailing them out, but also lead to Ben Bernanke deciding that he will bail them out. I won't predict the timing of these events. That's not my territory. Hell, it could happen in slow motion. But it will happen, because the only alternative is to pass a law saying that because it can be proven that homeowners owe "somebody," that means they owe Bank of America. Lobbyists almost convinced the federal government to pass this law with HR3808, which would have forced states to recognize robo-signed electronic records. Enough people became really pissed off about the bill to force Obama to veto it. Banks have already shot their wad. There won't be another HR3808.

Bernanke's bailout will come in the form of additional "quantitative easing," by the way. He'll print more money to buy bonds. On the surface, it will have nothing to do with banks. But who has been the primary buyer of bonds since the financial crisis hit? US banks.

It'll be a bailout to compensate for the losses banks take due to the foreclosure mess. But Bernanke won't call it a bailout. And anyone who doesn't understand the mechanisms of the banking industry won't realize that it's a bailout. You know how China has a reputation for buying US government debt? The Fed is already following through on a program that will make the largest holder of American debt not China, but the Federal Reserve. It's buying the debt from banks. And that's how they'll be bailed out, unless enough public pressure arises to make Bernanke extend direct lines of credit to banks, like he did in 2008. Personally, I don't think that will happen, because the people who got mad about HR3808 aren't also the people who understand how the Fed works. There's a disconnect there, and that disconnect will allow the bailout to happen through quantitative easing. Get ready for what financial websites are already calling QE2. A fresh trillion or three in cash. If Bernanke doesn't do it, that means he's betting on the financial industry being able to survive this. My prediction, which I hope satisfies your request, if that he will be wrong, and an initial decision to not go through with QE2 will ultimately lead to a reversal of that decision. The only way I can see that not happening is if the legal process moves so slowly that investors also move just as slowly. But investors don't move slowly.

meh, that's not really a prediction that we can use to point and laugh at you later, so it probably doesn't satisfy my request. :pfft:

QE2 is going to happen. Not just because of this foreclosure problem but because of many other issues in the economy. It will be hard to say you're right or wrong when Bernanke starts making moves.

As someone already pointed out, after the precedent has been set, everyone will know the precedent. PeterMP will realize that he really, really doesn't want to hold bank stock. And everyone like Peter will be trying to sell all at once.

The precedent isn't the cases which have been concluded without questioning bank documents. The precedent is Patrick Jeffs. He's living in his home, and he isn't making any mortgage payments. What happens to the banking system when everyone is Patrick Jeffs?

I think this is where you are wrong. Jeffs is the exception. The banks will learn from his case and avoid the same mistakes - they're not going to commit outright fraud anymore. HR3808 was an attempt to put a band-aid on the problem. The banks will keep trying to find band-aids and they're going to find some success. Maybe in some states where the laws are more favorable or the legislatures are more friendly, they will make things easier for themselves. In other cases, they'll find ways to perfect the documentation, and in other cases, they'll offer the homeowners settlements where they can mitigate their losses.

It will be expensive, but it won't be catastrophic.

[twa]

If all the people here making investment advice are so smart, than shouldn't you all be rich and chilling out on Cabo right now or something?

I think there's some fire here.

But I think they can prove that they loaned money, however that loan becomes something like a credit card loan, that is... unsecured.

Ya drug me back....a lien or mortgage is NOT property....it is a instrument

http://homebuying.about.com/cs/mortgagearticles/a/deedoftrust.htm

Most of us are accustomed to calling our home loan a mortgage, but that isn't an accurate definition of the term. A mortgage is not a loan, and it is not something that the lender gives you. It is a security instrument that you give to the lender, a document that protects the lender's interests in your property.

[Hubbs]

meh, that's not really a prediction that we can use to point and laugh at you later, so it probably doesn't satisfy my request. :pfft:

QE2 is going to happen. Not just because of this foreclosure problem but because of many other issues in the economy. It will be hard to say you're right or wrong when Bernanke starts making moves.

Sure it is. Feel free to point and laugh if QE2 doesn't happen within the next 20 years. I'll provide that much timing. Granted, it's a long time to wait for the pointing and laughing, but the Internet is pretty good at digging things up. :pfft:

Yes, QE2 is going to happen because of lots of things. But it would happen because of this alone if all of those other things weren't true.

I think this is where you are wrong. Jeffs is the exception. The banks will learn from his case and avoid the same mistakes - they're not going to commit outright fraud anymore. HR3808 was an attempt to put a band-aid on the problem. The banks will keep trying to find band-aids and they're going to find some success. Maybe in some states where the laws are more favorable or the legislatures are more friendly, they will make things easier for themselves. In other cases, they'll find ways to perfect the documentation, and in other cases, they'll offer the homeowners settlements where they can mitigate their losses.

It will be expensive, but it won't be catastrophic.

Exactly how will banks "avoid" the mistake of destroying their own documents? Hop in a Delorean and time-travel back to before the destroyed them?

[mojobo]

Hubbs, I know you've said that they can prove that people owe money but not to who... do you see the courts making a judgement that people who still owe on their mortgages pay to a trust fund that the courts would set up? That way if they can figure out who owes what they get paid and that no payments are missed in the meantime. I see that as the best possible solution, but it would be a little tricky if someone can't pay and then the trust ends up owning the house. There would still be a problem figuring out who bought the debt but at least it would buy some time.

[techboy]

But do you think Bob from Ohio knows that when he blindly puts part of his paycheck into a mutual fund that's long BOA?

Is Bob from Ohio running the mutual fund? Then why does it matter what he knows?

[techboy]

I'm the guy on the board who would tell people to put a hefty percentage of their portfolio - something like 30-40% - in precious metals. Seems like I'd be pretty rich right now if I happened to have earned the money necessary to buy in 2007.

And again...

Sometimes the worst thing that can happen to an investor is a little success. Don't confuse strategy with outcome.

And now...

I think this is where you are wrong. Jeffs is the exception. The banks will learn from his case and avoid the same mistakes - they're not going to commit outright fraud anymore. HR3808 was an attempt to put a band-aid on the problem. The banks will keep trying to find band-aids and they're going to find some success. Maybe in some states where the laws are more favorable or the legislatures are more friendly, they will make things easier for themselves. In other cases, they'll find ways to perfect the documentation, and in other cases, they'll offer the homeowners settlements where they can mitigate their losses.

It will be expensive, but it won't be catastrophic.

Adding DjTj to Predicto and PeterMP makes me a little more comfortable about agreeing with zoony.

[Hubbs]

Hubbs, I know you've said that they can prove that people owe money but not to who... do you see the courts making a judgement that people who still owe on their mortgages pay to a trust fund that the courts would set up? That way if they can figure out who owes what they get paid and that no payments are missed in the meantime. I see that as the best possible solution, but it would be a little tricky if someone can't pay and then the trust ends up owning the house. There would still be a problem figuring out who bought the debt but at least it would buy some time.

Like the Resolution Trust Corporation? Yes, I think that's eventually what will happen. But it won't happen for a long time. And I'd rather buy the stocks of individual banks when it happens - because they'll be much cheaper - than buy them right now.

Is Bob from Ohio running the mutual fund? Then why does it matter what he knows?

Because someone was saying that the news about the mark-to-market rules has been factored in. Most people aren't factoring it in because they don't know about it, and the mutual fund managers are buying bank stocks anyway. I'm saying that they're being stupid.

And again...

And now...

Adding DjTj to Predicto and PeterMP makes me a little more comfortable about agreeing with zoony.

So I'd expect DjTj and Predicto and PeterMP and you to be able to tell me who any given homeowner ultimately owes. I'd also expect you to be able to refute the letter sent by Alan Grayson, a Florida lawyer and Congressman who would be very aware of the consequences of misleading the FBI as a mere political stunt, to the FBI.

Why can't you?

[techboy]

Most people aren't factoring it in because they don't know about it, and the mutual fund managers are buying bank stocks anyway. I'm saying that they're being stupid.

If you're saying that you are smarter and better informed than the legions of professionals on Wall Street who analyze these events and their effects on stocks for a living, then I guess there's not much else to be said.

Please don't use leverage.

[Hubbs]

If you're saying that you are smarter and better informed than the legions of professionals on Wall Street who analyze these events and their effects on stocks for a living, then I guess there's not much else to be said.

Please don't use leverage.

Oh, I'd never say I'm smarter. Hell, I criticize Ben Bernanke all the time, and I think he's smart as hell. Probably smarter than me. (I realize that I've called him stupid before, but I suppose I should clarify and say that he was taught something stupid, and all of his actions are based on what he was taught. It's not his fault that he was taught those things, although I would partially blame him for not fully investigating the things that say something other than what he was taught.)

When you say "better informed," however, I'm going to quibble. I'm not better informed than Wall Street professionals when it comes to individual parts of the economy. If it's Jim's job to trade, say, commodities, I would expect him to know more than me about commodities. But most of the "legions of professionals" currently believe what the banks are saying about the foreclosure mess. That it's just a clerical paperwork issue that they can clear up. And when it comes to this story, yes, I'm more informed than they are. It's not their job to be digging to the bottom of the Patrick Jeffs case. It is, however, my job. I'm a freelance reporter, and I generally stick to the economics beat. I've spent nearly every waking hour of the past two weeks investigating cases like Jeffs'. And what I've found out is that very soon, we're all going to be Patrick Jeffs. I've spoken with bank lawyers who, when I explain what I've discovered to them, say nothing at all. Nothing. "No comment." They know what's up.

Let's perform a very simple mental exercise. Pretend - just pretend - that you think I'm right. If I am, what would you expect the PR departments of major banks to say? That they're committing fraud? Or that they stopped foreclosures because of a minor paperwork issue? Now pretend you're a member of the legions of Wall Street professionals. Your job is to trade stocks. Who are you going to believe when it comes to the foreclosure thing? The major banks you trade all the time, or some freelance reporter?

I'm not smarter. I am better informed. The banks are toast on this one.

[brandymac27]

Posted by Hubbs

Oh Jesus Christ, my advice to you would be to put your money in anything but bonds. Again, never accept my advice on blind faith, but you might want to at least listen in case I'm right.

I don't understand why you're getting frustrated. I know NOTHING about this kind of stuff. I told you I am totally willing and want to hear what you have to say and any information you have. Me (someone who knows nothing) would be stupid not NOT listen to anyone who knows more about this than I do.

[PeterMP]

So I'd expect DjTj and Predicto and PeterMP and you to be able to tell me who any given homeowner ultimately owes. I'd also expect you to be able to refute the letter sent by Alan Grayson, a Florida lawyer and Congressman who would be very aware of the consequences of misleading the FBI as a mere political stunt, to the FBI.

Why can't you?

1. I'm not claiming that I can tell you who ANY single home owner owns. My point is very simple, the home owner isn't in the free and clear if it isn't clear who owns their mortgage. The title is going to say that there is a mortgage out there for which that house and property are collatoral and that is NEVER going to go away. Home owners that go this route are NEVER going to be in the free and clear. There will always be concerns that laws will change in "old" "documentation" will become valid or somebody will come forward with new documentation that shows they hold the mortgage.

2. I'm not claiming that the there hasn't been massive fraud with respect to foreclosures. Law companies working for banks have given the courts affadavits saying they have looked for documents and couldn't find them that they never looked for. People that were supposed to deliver summons for banks didn't. BUT the main contention, which if true, the banks would be in trouble is that the banks purposely destroyed large numbers of documents for which you have presented no evidence. As I've already pointed out, even a bankrupt company like Countrywide is sitting on paper files that they want to get rid of, but the courts aren't letting them.

I've seen some comments on MERS so a couple of comments. MERS has been challenged several times, and it has won every case, except one, and even in that case the home owners haven't won a dismisal of the foreclosure (and even if they do there will still be a recorded mortgage with respect to the title).

http://en.wikipedia.org/wiki/MERS

In addition, even with MERS the orginal loan should have been recorded with the local government. MERS was used by banking institutions with respect to transfers amongst themselves. If the MERS transfers are considered invalid, then the company that originally issued the mortgage is going to end up being the legal holder of the mortgage.

Essentially, those companies are going to come forward and say, I have the mortgage here are the local government documents to prove it, and nobody is going to be able to supply documentation that they are wrong (because the MERS documents won't be legally valid). They are then going to be considered the legal holder of the note/mortgage.

[Hubbs]

Posted by Hubbs

I don't understand why you're getting frustrated. I know NOTHING about this kind of stuff. I told you I am totally willing and want to hear what you have to say and any information you have. Me (someone who knows nothing) would be stupid not NOT listen to anyone who knows more about this than I do.

Ha, sorry, wasn't clear with the "Jesus Christ" part. I was trying to say, "Holy crap, no, not bonds, anything but bonds," but I can see how that would appear to be frustration, not an exclamation of fear.

Bond prices depend on the interest rates of the bonds in question, and those interest rates have a very obvious limit, which is 0. Not many people are going to pay you for the privilege of lending you money. Price is the inverse of the interest rate. The lower the rate, the higher the price of the bond. This seems counterintuitive at first - who pays more for a bond that pays less? - but that's because bond prices are determined when the interest rate is set (the secondary market is another story), and a low interest rate merely reflect the fact that someone was willing to loan that institution that much money at that rate, which in turn means that they bid for the bond at that rate, and that in turn means that the price of the bond is reflected at whatever the interest rate is. (Google "price is the inverse of yield" to learn more about this.)

Right now, bond interest rates are the lowest they've ever been, which mean prices are the highest that they've ever been. You generally don't want to buy something at its highest price ever. (I realize the same can be said about gold, and I advocate buying that, but I advocate for reasons unrelated to its current price. Based on price alone, I'd never tell you in a million years to buy gold.) Moreover, not only are bond prices at their highest ever, but they can barely go higher, because the interest rates can barely go lower. If I had a stock that was listed at $98, and you knew for a fact both that it had never been that high before and that the price could never go above $100, would you buy that stock? I doubt it.

The Greater Fools are buying bonds right now. The smart people are the ones selling the bonds.

[brandymac27]

Ok Hubbs, thanks for the response. And thanks for clarifying and breaking that down for me.

[techboy]

The Greater Fools are buying bonds right now. The smart people are the ones selling the bonds.

You're making two basic mistakes here:

1. Bonds can have a negative Yield to Maturity, just as currently people are buying TIPS with a negative real yield. If there's nothing better available, investors will and do accept a negative return in order to avoid one that is even worse. Your premise that interest rates cannot go below zero is flawed.

2. You are considering the asset class in isolation. Even if you were correct that bonds were at a floor they could not pass through, the fact is that part of modern portfolio theory is that when one holds asset classes with low or negative correlations, and rebalances between them, it is possible to increase one's overall returns with a class that has a lower return individually than the portfolio one is adding it to. From an interview with Larry Swedroe, two excerpts:

So you have to look at an asset not in isolation, but how its addition impacts the overall portfolio risk. In my book I show that the S&P 500 returns through 2007 were 11.4%, with a 17% standard deviation, while the S&P GSCI returned a lousy 6.8%, with a much higher standard deviation. They have much lower returns, with a much higher risk. If you're making the argument on an isolated basis, you'd ask, "What moron would buy the GSCI?"

But if you added 5% of your portfolio to the GSCI, you actually get higher returns, with about 6% less risk. And this is a period where commodities had lousy returns!

commodities had lousy returns!

Crigger: How does that relationship hold up in today's numbers?

Swedroe: I just ran the data from 1970 to 2008. Through 2008, the return was 9.5% with a standard deviation of 18.2%. If you added a 5% GSCI allocation, the return becomes 9.7%, and the standard deviation drops to 17.3%.

So, even though the added asset had much lower returns than the piece it was added to, it ended up raising the overall returns of the portfolio due to low correlation.

This can even work when the asset added has zero return:

Right. You have to rebalance, period. While commodities themselves have no positive expected real return, commodities in a portfolio may or may not have a positive expected real return. Let's take an example.

You put $100 into two different commodities: A and B, so we have a $200 portfolio. At the end of year 1, portfolio A is at $150, meaning commodity A went up 50%. Commodity B dropped 50%. So you still have your same $200.

But we're not in balance. We need to rebalance our portfolio. Many of these commodities futures investments, like the indices, have rebalancing mechanisms.

Commodities naturally have low correlation to each other - there's no reason to think, for example, that wheat and zinc should be highly correlated. Weather affects wheat, but not zinc, and so on. So if they have low correlation to each other, this will dampen the volatility if you rebalance. It's the same reason why you add small caps and value, etc. And we also know they're highly volatile, so you're going to get a deep rebalancing bonus.

So let's sell $50 of A to buy $50 of B. We'll end up back with $100 in each to restore our equal weighting. Now we have two units of B, and 2/3 a unit of A.

Now let's say the reverse happens, and B goes back up to $100 and A drops to $100. Portfolio A is now worth $67 and portfolio B is now worth $200. So I got $267, even though the commodities themselves produce an individual real return of zero. The individual commodities have no expected real return, but clearly a portfolio that rebalances multiple commodities has a lower volatility than each of the individual parts, and even though the individual components' return was zero, the portfolio had a high return.

We took an extreme example. Erb and Harvey found that you could get a diversification return of several percent. This is the same benefit you get from the earlier example of adding 5% to the GSCI; even though it had a lower return, it dampened the swing of the whole portfolio. It narrowed the gap between the average return and the annualized return, and so you pick that diversification return up.

I have even seen strange cases where adding an asset with a negative return increased the return of the overall portfolio,

In short, bonds have a low correlation to stocks, and an investor makes a huge mistake in avoiding them as an asset class, regardless of current prices.

[Hubbs]

You're making two basic mistakes here:

1. Bonds can have a negative Yield to Maturity, just as currently people are buying TIPS with a negative real yield. If there's nothing better available, investors will and do accept a negative return in order to avoid one that is even worse. Your premise that interest rates cannot go below zero is flawed.

I only said that the "natural limit" is 0. Sure, rates can technically go below 0. But when that happens, I have absolutely no ****ing clue what the investors buying at those rates are thinking. Would you buy a bond with a rate below zero? If so, why? The only thing I can think of is that the buyers think they can flip them to other investors, which makes the whole thing a giant game of Bad Bond Hot Potato.

2. You are considering the asset class in isolation. Even if you were correct that bonds were at a floor they could not pass through, the fact is that part of modern portfolio theory is that when one holds asset classes with low or negative correlations, and rebalances between them, it is possible to increase one's overall returns with a class that has a lower return individually than the portfolio one is adding it to. From an interview with Larry Swedroe, two excerpts:

Yes, I'm aware of this. What I'm saying is that modern portfolio theory becomes absurd when a situation arises in which the theory would tell you to pay to lend someone money. Is it "un-absurd" in most cases? Sure. We're not in the land of "most cases" right now. Keep following modern portfolio theory when it tells you to pay Uncle Sam to lend him money. I'll go ahead and do something that will actually earn me a profit.

(And yes, I know that the guy's data suggests what you're doing will earn you a profit - within a standard deviation. I'd love to see what his data would say if he only ran the past two years through his computer. We're not in Standard-Deviationville anymore. Or Kansas. Which, incidentally, happens to be where the small firm that the SEC says caused the flash crash is located. The SEC says that Waddell and Reed caused the crash by selling slightly more S&P futures than it normally does, and the SEC has no explanation whatsoever for the flash crashes that have occurred over and over again in individual stocks. Damn you, Waddell and Reed! Stop selling slightly more S&P futures than you normally do from ****ing Kansas and making these flash crashes happen! Also, for ****'s sake, stop doing things like shooting JFK and flying planes into skyscrapers!

This has been your daily Sarcastic Mocking of a Financial Entity of Some Sort, which I included for, well, really no reason at all other than to amuse myself. We now return to your regularly-scheduled post.)

So, even though the added asset had much lower returns than the piece it was added to, it ended up raising the overall returns of the portfolio due to low correlation.

Unless you happen to have a not-so-standard deviation.

This can even work when the asset added has zero return:

Zero return and negative return are two very different things.

I have even seen strange cases where adding an asset with a negative return increased the return of the overall portfolio,

In short, bonds have a low correlation to stocks, and an investor makes a huge mistake in avoiding them as an asset class, regardless of current prices.

Ah, there's the negative return bit. Sorry, I'm chalking that up to random chance. When you say the negative return added to the return of the overall portfolio, exactly what are you comparing that return to? Investing in other things, or simply holding the cash over the length of time in question? And do you mean that they added to the return of the portfolio when they were sold off, or held to maturity? (I'm assuming you're talking about some sort of debt instrument.) Because I'm pretty sure that a negative return, held to maturity, ain't gonna produce a better result than straight cash, homie.

[Fergasun]

The charge is that the banks relied on MERS and destroyed the original paper.

Here's a paper written by someone who is more expert than me in this.

In the mid-1990s mortgage bankers decided they did not want to pay recording fees for assigning mortgages anymore. This decision was driven by securitization—a process of pooling many mortgages into a trust and selling income from the trust to investors on Wall Street. Securitization, also sometimes called structured finance, usually required several successive mortgage assignments to different companies. To avoid paying county recording fees, mortgage bankers formed a plan to create one shell company that would pretend to own all the mortgages in the country—that way, the mortgage bankers would never have to record assignments since the same company would always “own” all the mortgages

Can I highlight one part. To avoid paying county recording fees...

Both the MERS-as-an-agent and the MERS-as-an-actual mortgagee theories have significant legal problems. If MERS is merely an agent of the actual lender, it is extremely unclear that it has the authority to list itself as a mortgagee or deed of trust beneficiary under state land title recording acts. These statutes do not have provisions authorizing financial institutions to use the name of a shell company, nominee, or some other form of an agent instead of the actual owner of the interest in the land. After all the point of these statutes is to provide a transparent, reliable, record of actual—as opposed to nominal—land ownership.

Conversely, if MERS is actually a mortgagee, then while it may have authority to record mortgages in its own name, both MERS and financial institutions investing in MERS-recorded mortgages run afoul of longstanding precedent on the inseparability of promissory notes and mortgages.

Furthermore, the banks have been mis-representing themselves in court by using "robo-signers" on their affidavits who aren't even examining any of the paperwork.

I imagine the reason banks have been getting away with this is that the homeowners don't believe that banks would be so stupid, or nefarious and simply didn't fight the foreclosure. What this scandal is doing is sensitizing some number of people to make sure they fight the foreclosure. I guess my next question would be, is there any favorable status in BK if you are a homeowner?

How would things play out if...

a) No one can foreclose on the house due to paperwork.

Loan is now unsecured.

c) Debtor files bankruptcy.

If the home is protected in BK and no one can foreclose, does that mean someone could trade taking a credit ding for the next 7 years and end up with the house for "free"?

[Fergasun]

I'm convinced the people getting rich on Wall St. aren't the people who have owned stocks and see that go nominally up. They are the people who own stocks and then buy protection on those stocks in the form of options or other protection. They don't get rich from their stocks going up, they get rich when the stocks crash and their protection has been poorly mis-priced by the market. Just some food for thought.

[Hubbs]

The charge is that the banks relied on MERS and destroyed the original paper.

Here's a paper written by someone who is more expert than me in this.Can I highlight one part. To avoid paying county recording fees...

Furthermore, the banks have been mis-representing themselves in court by using "robo-signers" on their affidavits who aren't even examining any of the paperwork.

I imagine the reason banks have been getting away with this is that the homeowners don't believe that banks would be so stupid, or nefarious and simply didn't fight the foreclosure. What this scandal is doing is sensitizing some number of people to make sure they fight the foreclosure. I guess my next question would be, is there any favorable status in BK if you are a homeowner?

How would things play out if...

a) No one can foreclose on the house due to paperwork.

Loan is now unsecured.

c) Debtor files bankruptcy.

If the home is protected in BK and no one can foreclose, does that mean someone could trade taking a credit ding for the next 7 years and end up with the house for "free"?

You're right in your reasoning. Now come to the conclusions that rely upon your reasoning. Banks can't foreclose. Because they can't foreclose, they can't affect homeowners' credit scores, because credit rating companies will eventually say, "Hey, can you prove that these people owe you any money whatsoever?" Once they do so, banks will have absolutely no power to make you pay up on your mortgage. When banks lose that power, people will stop paying their mortgages, because there are no consequences for doing so. And when that happens, that banks are ****ed. Really, really, really ****ed.

I'm convinced the people getting rich on Wall St. aren't the people who have owned stocks and see that go nominally up. They are the people who own stocks and then buy protection on those stocks in the form of options or other protection. They don't get rich from their stocks going up, they get rich when the stocks crash and their protection has been poorly mis-priced by the market. Just some food for thought.

You're right. They are.

Insiders are currently selling at more than a 1000:1 clip. Mutual funds have seen outflows for 23 of the past 24 weeks. What do you think is going to happen to the stock market soon? Sunshine and daisies? Or Armageddon?

The people who say everything is fine are the people who believe that insiders selling at 1000:1 is irrelevant. Just like they believe that bonds reaching their lowest interest rates since early 2009 is irrelevant. Just like they believe that the fact that the 10-year Treasury yield is tanking as stocks stay afloat, despite the fact that virtually every instance of the 10-year Treasury yield plummeting is followed by stocks crashing into the ground, is irrelevant.

Keep listening to those people if you want. I'll sing you a much different tune.

[twa]

You're right in your reasoning. Now come to the conclusions that rely upon your reasoning. Banks can't foreclose. Because they can't foreclose, they can't affect homeowners' credit scores, because credit rating companies will eventually say, "Hey, can you prove that these people owe you any money whatsoever?" Once they do so, banks will have absolutely no power to make you pay up on your mortgage. When banks lose that power, people will stop paying their mortgages, because there are no consequences for doing so. And when that happens, that banks are ****ed. Really, really, really ****ed.

But didn't you say the banks have been paid?

Your scenario simply lends justification to legislative or regulatory intervention to protect the system(especially since Fannie and Freddie are holding the notes on a large percentage)

I would look for something along the line of they sold/transferred the right to the note/lien...but details rarely matter in such cases...incentive does:silly:

Meanwhile govt liens on unpaid property taxes will begin to pile up

http://www.nypost.com/p/news/business/ben_and_tim_can_end_fraudclosure_237dPpqQN7YZq8WdHtc4QK