The emerging media consensus on the foreclosure fraud scandal is that, well, the banks might have committed some ‘technical’ errors, but the homeowners weren’t paying their bills, so it all evens out. Those technical errors appear to include perjury and fraud.
In the middle of the worst recession in generations, media professionals feel free to talk as if being broke were the moral equivalent of breaking the law, as Diana Olick does in this CNBC video segment where she squares off with Barry Ritholtz:
Unfortunately for the finance industry, (and we’re playing the world’s tiniest violin just for them) the instability they’ve created for ordinary Americans is threatening to collapse real estate and investment markets again, potentially putting them on the hook for massive investor lawsuits:
… The investment banks didn’t mind buying up loans they knew were bad, because they considered themselves to be in the moving business rather than the storage business. They weren’t going to hold on to the loans: they were just going to package them up and sell them on to some buy-side sucker.
In fact, the banks had an incentive to buy loans they knew were bad. Because when the loans proved to be bad, the banks could go back to the originator and get a discount on the amount of money they were paying for the pool. …
As the article goes on to note, the banks didn’t pass either the discount or the information about bad mortgages in their investment pools on to shareholders. They pocketed the money and let investors believe that they were buying safe securities.
Those bundled mortgage securities, about $2.6 trillion worth of them, then went through so many hands that much of the financial sector would be destabilized if they come up worthless.
Meanwhile, many foreclosed homes are now in limbo, with prospective buyers unsure if they’d really own the title purchased from a bank that can’t come up with the original note as required by law. It’s a hard blow to a real estate market that already wasn’t doing well.
Which is to be expected. You can’t have a proper real estate market when it seems as though several large banks have stopped believing in property rights and senior members of the press are closing ranks to support them.
Someone on TV was complaining about the stupidity of the Attorney Generals halting foreclosures. That it will bring house sales to a halt. But, I don’t get it. How can Title Insurance companies insure these titles? How can a home be sold without Title Insurance?
But the guy at Market Ticker seems to think that halting the foreclosures is a tactic to protect the banks from what they’ve done. Or does he just mean that we need to do a lot more than that?
Aren’t housing sales depressed? Why are the banks so determined to foreclose on all these houses? Who is going to buy them? I’m confused about that.
This is actually a long-term tactic by the banks to deplete housing supply. After a time, years of being empty, the empty, foreclosed houses become write-offs. Houses are living things that need maintenance or they just rot, especially these boom-built crap boxes.
The banks do nothing that provides no financial benefit for them.
It’s all in the game…
A couple of very important aspects that are not being discussed:
1. Along with clear line of title, a county or municipality is supposed to get a fee with every transaction. If these
2. If there’s no clear line of title, think of the same box/tranche of MBSs from an investor’s perspective, who is buying these from an investment bank such as Goldman Sachs: What if they were sold not only “toxic assets” but “a bill of goods”? How would you cover future payments for a tranche of Mortgage Backed Securities that are actually full of nothing? With actually no houses as collateral? You underwrite more mortgages for other “houses” for ever-increasing amounts of money. That’s how. It doesn’t matter who signs that mortgage–the dumber and less employed the better, right? It’s a giant Ponzi scheme.
Suze, I’m really confused about a lot a shit these days: mortgage shit, relationship shit, shit shit, and more shit. But the shit that I’m most confused about, Suze, is that shit that has those two dancing, talking shit, selling something white folks who one might think are getting ready to do something serious either with, for, or against anyone who might want to read your blog. Can you help us with this? Thanks.
Can someone actually sell a house, not in foreclosure, when the loan servicer or bank cannot locate The Note?
Any answers?
Assume a copy of The Note which the homeowner held was lost in a flood or other emergency.
Forgot add: Will a title company sell title insurance if no one can locate The Note?
The St. Lucia people (who were driving me nuts, too) appear to have vanished, dandy.
Check out http://www.nakedcapitalism.com for more in-depth coverage of this issue. As far as the lost in the flood question, notes, like mortgages themselves, are supposed to be filed with the county clerk in the county where the property resides. That way it won’t be lost as they are microfilmed or whatever and stored off premises. Regarding the title company insurance question, I have read that title companies are refusing in some cases to provide insurance on some deals, and on others are writing “carve outs” into the policy so they don’t cover the missing note problem. Its a real problem and its only gonna get bigger, and the federal govt can’t just “pass a law” to fix this b/c its a state law issue.
Thank you, YankeeFrank.
Of course, per Susie’s post today on how Congress will retroactively protect the banks by making their illegal actions legal, they’ll get away with the sh*t they’ve pulled on the public and their customers. I figure the Roberts Court will have no problem finding that another area of state law really ought to be federalized.
I mean, Obama voted for legislation making the phone company illegal wiretaps retroactively legal — and that was after he said he would not. He’ll have no problem offering further protection to his bankster buds. Even if they have deserted the Dem Party for the Repubs. That will not affect Obama’s future earning potential….