LF: U.S. Housing Market Foreclosure-gate Doomsday Revolution Erupts

Title: U.S. Housing Market Foreclosure-gate Doomsday Revolution Erupts
Source: [None]
URL Source: http://www.marketoracle.co.uk/Article23629.html
Published: Oct 20, 2010
Author: Chris_Kitze
Post Date: 2010-10-20 17:14:28 by Capitalist Eric
Keywords: None
Views: 6632
Comments: 11

Foreclosure-gate is heating up and the mad scramble for what's left of $45 trillion in real estate is guaranteed to leave homeowners homeless, pension funds unable to pay their pensions and even some of the biggest banks insolvent. A great housing goat rodeo was created when some of the 65 million mortgages on U.S. homes didn't follow proper legal procedures;

Lies, lies, lies and more lies. In this jockeying for position, the only thing guaranteed is Leona Helmsley's Law i.e. "Laws and taxes are for the little people". But the little people are starting to fight back in the U.S. and we'll get to that after we do a quick review of the situation at hand and how we got there.

In the old days, that would be pre-1980's, banks and savings and loans actually knew their customers and wrote and maintained loans on property themselves. Something similar to this scene from "It's a Wonderful Life" where George explains to his depositors, who came to withdraw their money, where it all went:

In those days, the corner bank knew the customer, the house, the depositors, they kept the records in a file cabinet at the bank -- it was where you went in to make your payment. Everyone knew that If you didn't keep up with the payments, the banker would foreclose on your property. That part hasn't changed.

In the 1980's, financial geniuses came up with a new product, a way for the investment banks to make money from a market they couldn't previously tap into in a big way -- the home lending business. As you can imagine, it's a huge market, in the trillions, and the way they approached this market was to convince the originating banks, those who process and write the loans, that they could get more access to cheaper money. This would let them write more loans, generate more fees and make more money by reselling the mortgage. It also eliminated a lot of the risk of the loan, since it was almost immediately resold. But buying an individual mortgage of several hundred thousand dollars wouldn't make sense for the large investors with billions to invest or the investment banks, so they packaged them together in bundles of millions of dollars worth of mortgages.

One problem they had to solve was that many funds have rules on the quality of investment they could invest in; some funds can only invest in AA rated investments or better, others may have more flexibility. The investment banks then carved up these large packages of mortgages into tranches based on the pecking order of who got paid back first and they rated them based on credit score. As an example, the first 20% repaid would be rated AAA, then next 20% might be rated BB and so on. Each tranche represented a claim on the cashflow of the mortgages. The mortgages were supposedly scrutinized and the packaging was complete -- it was called a Mortgage Backed Security (MBS). Here's a little more detail from Wikipedia:

Everyone got in a lather when the housing market completely tanked because the value of the MBS plunged.

There's another very important wrinkle to this story. When the banks resold the mortgages, they didn't just send the paper work to the next bank after George Bailey signed it over to the Cleveland Teacher's Pension Fund. It went into REMICs (the Real Estate Mortgage Investment Conduit). This special entity was set up for tax and accounting reasons and as a vehicle to hold these loans for tax purposes. If a mortgage defaulted, they would need to match the mortgage with the MBS tranche we described above, so they created a system called MERS (the Mortgage Electronic Registration System), which was jointly owned by Fannie Mae and Freddie Mac). This from Doug Ross Journal, a B4IN contributor:

Foreclosures can only be done by the note-holder, who has the legal standing to show up in court and ask the judge to foreclose and evict. In about half the states, they have to bring the ORIGINAL (not a photocopy or electronic version) document with "wet signature", so the judge can see the actual ink on paper. They have to prove the chain of title and that they own the note they intend to foreclose on.

BECAUSE IF THE CHAIN OF TITLE OF THE NOTE IS BROKEN, THEY WON'T BE ABLE TO FORECLOSE.

Once the people going into foreclosure figure this out, they will stop paying and hire lawyers. Some will keep their homes for free.

Once the people who have been paying their mortgages figure out they might not need to pay, they will stop paying.

Once the lawyers figure this out, they are going to be busy for the next five years helping people sue the banks.

Once the shareholders of the bank stocks figure this out, they will sell the shares.

Once the pension funds figure this out, they will also sue the banks and return their now junk MBS.

Once real estate buyers figure this out, they will stop buying anything with the potential for a tainted chain of title. The foreclosures will stop selling (many already have).

Even the sheriff is figuring this out. What happens when the sheriff refuses to do the foreclosure?

The sheriff for Cook County, Illinois, which includes the city of Chicago, said on Tuesday he will not enforce foreclosure evictions for Bank of America Corp, JPMorgan Chase and Co. and GMAC Mortgage/Ally Financial until they prove those foreclosures were handled “properly and legally.”

and this...

“I can't possibly be expected to evict people from their homes when the banks themselves can't say for sure everything was done properly,” Dart said in the statement.

“I need some kind of assurance that we aren't evicting families based on fraudulent behavior by the banks. Until that happens, I can't in good conscience keep carrying out evictions involving these banks,” he added.

Watch this interview for a flavor of what's next - Banks breaking into homes to repo them and homeowners fighting back by taking possession (this is an excellent video):

Hmmm...I wonder if this is and has been planned to be this way . Everyone gets to keep their home and the fucking banks get ANOTHER bailout.

Clinton and Cuomo are the true bandits who lit the fuse to this economic crisis we're now in. All in the name of getting more minorities in houses: http://libertysflame.com/cgi-bin/readart.cgi?ArtNum=12554

If there is no clear title owner, then the house in question cannot legally be owned by anyone. Nothing is free and a house without a title is unowned and unsalable.

Well, [war's] got to do something for attention, his multiple personalities aren't speaking to him any more, and his imaginary friends keep finding excuses not to come over. (Murron)

1982. What I didn't know was that Greenspan had authorized the beginning of the $1.5 Quadrillion Fraudulent Debt Derivatives 'Market'.

IF you take MAD seriously, then you're talking about a devolution to local across the globe.

Note how the local sheriff is becoming more important by the day with foreclosures. ;}

Well, [war's] got to do something for attention, his multiple personalities aren't speaking to him any more, and his imaginary friends keep finding excuses not to come over. (Murron)