MUST READ: 2 Law Professors Are Scaring The Shite Out Of Wall Street Saying Millions Of Mortgages Could Be Rendered Invalid Due To Securitization Errors
Video: Erin Burnett & Mark Haines -- Earlier today
Industry hack, Tom Deutsch of the American Securitization Forum, says nothing is wrong, please don't look over here, everything is legal, would you like a slice of pie?
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By Floyd Morris
New York Times
Was the great securitization machine that made hundreds of billions of dollars in mortgage loans based on a legal foundation of sand?
That possibility, raised by two law school professors, has begun to scare many jittery investors, causing bank stocks to plummet, although they recovered a little Monday.
If they are correct, the best outcome for lenders would be a prolonged delay in completing foreclosures, raising costs still further and paralyzing an already depressed housing market.
- The worst outcome would be a conclusion that errors by financial institutions had decoupled the payment promises made by borrowers from the mortgages they signed. In that case, the mortgages would be invalid. Homes could be sold without paying off lenders. There also could be heavy tax consequences for lenders, both in terms of federal income taxes and in payment of back fees for mortgage registrations to local governments across the country.
The arguments involve MERS, the Mortgage Electronic Registration Systems, which was created to smooth the securitization process and, in the process, to allow lenders to avoid paying registration fees to counties each time the mortgage changed hands.
Several state supreme courts have chipped away at MERS. But none has gone nearly as far as the professors, Christopher L. Peterson of the University of Utah and Adam Levitin of Georgetown, say is possible.
At least one title insurance company has gotten a bank to agree to indemnify it if the securitization process causes problems for titles. Without title insurance, the real estate market would grind to a halt.
And earlier this month a federal judge in Oregon issued an injunction blocking Bank of America from foreclosing on a borrower’s home. United States District Court Judge Garr M. King said that under Oregon law, the borrower was likely to prevail on the argument that the use of MERS had invalidated the mortgage.
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More detail on this scenario:
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Further reading:
Uh-oh.
Oct 19, 2010 at 10:04 PM
Reader Comments (10)
Furthermore, what kind of pie?
http://whatreallyhappened.com/WRHARTICLES/wildbankers.php
Pitch...funny thing about needing to hold that title huh...?...
Those mortgage-backed securities with multiply-assigned mortgages ARE the "Toxic Assets" Congress was screaming about when they forced the Troubled Asset Relief Program through Congress in the fall of 2008, despite overwhelming public opposition. The mortgage bundlers had stuck key financial institutions with fraudulent mortgage-backed securities, and Congress voted to loot the public to purchase the useless paper and hide it from public scrutiny.
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But having swindled the American people out of trillions of dollars to buy back and conceal the fraudulent non-collateralized mortgage securities, the US Government is now clearly an accessory to the crime, if after-the-fact. The original fraud with the mortgage-backed securities was covered up ahead of the 2008 election, and it appears Obama is trying to do the same for the 2010 elections, announcing a Federal criminal investigation which will supposedly look into the bankers' possible illegal activity, but in reality is intended to block criminal investigations already underway in all 50 states. CNBC reports that Congress may simply retro-actively declare the fraud to be legal, ending all investigations and indemnifying the bankers from criminal prosecutions.
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Is that really plausible? That Bernanke et al. bought $1T worth of MBS so as to cover up fraud? I did have this thought a while ago: Will the Fed join suit with other investors, or just eat it?
It appears as though many loans and other mortgage-related assets have been double and even triple-pledged to various constituencies"
http://globaleconomicanalysis.blogspot.com/2010/10/smoking-gun-new-evidence-of-how-wall.html
“We’re talking about addressing the disparity of income where the wealthy people continue to get wealthier and some other people are falling out of the middle class, when we want to bring many more people into the middle class. But that disparity is not just about wages alone, that disparity is about ownership and equity. It’s all about fairness in our country.”
--Nancy Pelosi, speaking to the United Steelworkers of America, this past Monday ...
The only good news may not be so obvious.
http://letthemfail.us/archives/6143
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And how is that criminal investigation going so far? Just like all five or six SEC investigations into Bernie Madoff:
"We are not finding any evidence of underlying structural issues that would make [mortgage] securitizations suspect or otherwise."
--HUD Secretary Shaun Donovan, Oct. 20, 2010
http://www.cnbc.com/id/39759248