Black is praising MERS, which hid most of the mortgage securitiztion mess. It is a computer program, Danny, not an entity… but typical of you to praise how it “streamlines.” There were also vast numbers of notes not properly conveyed.

…And Y2k says it is necessary for banks to break the law in order to oust the owner expediently by whatever means possible.

There is no longer a justice system in America. It and the Government seems to have been captured by the bank.

Thank Goodness for Credit Unions!

Here is an excerpt from the book, The Monster: How a Gang of Predatory Lenders and Bankers Fleeced America, and Launched a Global Crisis
http://www.alternet.org/story/148577

http://www.fhfa.gov/webfiles/22606/Lawsu itStatement9611.pdf

via Alea.

And the longer period for securites issued after September 2, 2005 is clause (II): the period applicable under State law (6 years since the MBS was issued), not clause (I) as the press continues to say.

The clause (I) should apply if there was a security issued before September,2005, because the longer the period would have been the 3-year anniversary of Conservatorship.
But there aren’t securities issued before September 2005 sued. All those fraudulent securites, because of the statute of limitiations in the 2008 Law, now can’t be sued because we will be 3 years after Conservatorship on Thursday!! Neither the clause (I) nor (II) can be applied after 3-years of Conservatorship.
We know that the bad mortgages were originated from 2004-2007.
The FHFA has just one day left to file the lawsuits in court for the fraudulent securities issued before September 2005. The FHFA must do its duty.
Could you please investigate this issue?

I can see something like that coming out of all of this, where an improper signature or the lack of one would create a title flaw that would call a transfer into question. Any thoughts?

It is pretty unlikely to cause title issues because foreclosure is pretty final for exactly the reason you said, which is that otherwise their would be worries about title.

In virtually all cases there is not issue about title. Lawyers feeding stories to muppet reporters may lie about the state of affairs but the facts don’t back them up. The percentage of foreclosures being thrown out due to title issues is trivial and I suspect in most cases that issue is easy to cure.

As for building falling down, none of the trusts have failed to my knowledge. The appropriate analogy would be with the number of buildings that have plugs that don’t work or AC which breaks down.

The above may sell newspapers but I am old-fashioned enough to think one of the aims of news is to give people who are not in the know about a field accurate information.

Because there is no alternitive after the fact. Forclosure gate is a very big but very simple math problem desguised as a legal problem. Let us assume that in 10% of all forclosures because of poor document management, poor record keeping, whatever the banks can’t meet the steep legal requirements to forclose.

10% of 2,000,000 forclosures/year = 200,000 unlawful forclosures. If we assume an average unpaid balance of $200,000 then we stand at a nice round number of 40billion in annual losses… a dollar amount which flows to people who for whatever reason could not meet their obligations. Can we agree that the financial system cannot support that level of annual losses.

@ DannyBlack: I don’t think banks should cut corners. I work at an extreemly well run bank. We are the gold standard of customer service and compliance and all that… I’d love to see the big banks punished for their sins as ErnieD does…

…What I think ErnieD (and most of the public) dosen’t see is that the banks have been punished. WaMu failed… along with 41 other banks with assets greater than 1 billion dollars since 2008. All those shareholders lost +90% of what they invested. Many if not most of those bankers have not found another gig since the entire industry has contracted (and will continue to contract for years to come.)

The banks acted as if MERS was the law of the land. Unfortunately, property law is a “states’ right” per the US Constitution. The banks will need to get property law changed in all 50 states plus DC in order to make MERS the law of the land.

MERS is still playing out in various states’ courts with varying verdicts. It appears that MERS was not a valid way to transfer property and note ownership in a number of states. This is likely to cause future title issues.

I don’t think that there is any question that the vast majority of the people who have been foreclosed on should have been foreclosed on. The big question is : by whom?

A future homebuyer wants to know that the title is clean and liens are extinguished. If there are significant questions out there about whether or not the entities that foreclosed had the legal right to foreclose, then title is in doubt. Banks cutting corners is not a valid reason to have a signficant percentage of titles in this country potentially in doubt.

Because the banks “industrialized” the process, it is likely that errors would be systematic and widespread. In enginering, we generally try to keep errors small and non-systematic with adequate factors of safety to absorb some potential defects. That is why you rarely see structures in North Amarica and Europe fail if they are properly maintained.

BTW, the $100B lawsuit by FHFA may be the first major step in blowing up the securitizations. I hope that the banks and trust companies have not engaged in such egregious business practices that a fundamental underpinning of a major portion of the bond markets becomes undermined. Unfortunately, the past several years have shown me that the financial sector has engaged in poor business practices with reckless abandon.

I don’t agree with Y2kurtus that the banks should be allowed to cut corners. It is important to remember what is going on here. In virtually every single case the person being foreclosed on is rightfully being foreclosed on. Nobody is having their property taken away wrongfully in principle. We went through this on a previous post and the number of cases where a completely current borrower – or a non-borrower – was being foreclosed on was tiny. From recollection, after extensive searching some 4 cases. The number of people being foreclosed on due to some error by the banks handling payments is bigger but similarly tiny. The vast majority of these cases it is people pulling a Clinton and quibbling over the mean what “sex with that woman” means. This is what really is swamping the banks. People demanding to see the original note when there is simply no dispute they signed the mortgage, but simply to ramp up the time and cost for people they know are on a meter.

As for making mistakes in securitisation, the number of trusts that have fallen apart due to these claimed errors is, as far as i am aware, currently zero. You have the odd loan here and there put back and this is with people crawling all over them trying to find a way out of taking a loss. I stand by my original estimate of the number of errors made in MBSes being in the low single figures percent and probably not even a percent by value. This for sure was a storm in a teacup.

I remember there was a treasury report that found some sort of error in up to 10% of foreclosure documents they surveyed. It maybe the case that over 90% of all work you have done is utterly perfect but in that case I have never come across a building you designed because every single one has some sort of flaw.

The real solution to this is streamline and automate more of the process a la MERS.

Why is there a NECESSITY to break the law?

This was cost-cutting without thinking about the consequences, plain and simple. They wanted to securitize, didn’t bother to staff up to make the necessary steps happen, and then falsified documents in order to catch up. Adequate staffing by the banks through the mortgage boom would have allowed for them to execute the necessary steps. They booked profits based on these cost-cutting measures and now expect to book more profits by breaking the law.

Danny Black – when did perjury and forgery become a civil issue only? Try that one on a judge if you are asked to testify in a trial. My guess is that he would simply tack on 60 days in the clink just for the fun of it for even suggesting it. Hell, they are going after Roger Clemens on a criminal basis for potentially perjuring himself in a Congrssional hearing on whether or not he used steroids.

I have zero sympathy for people who bought too much house. However, the fact that there was amass hysteria by homebuyers and the financial sector does not mean that we should throw a few centuries of property law out the window. Property law is one of the basic pillars of civil society and capitalism. Suspension of property law due to “necessity” is one of the first steps in fascism and communism.

The banks need to staff up and thake those costs onto their books. If their legal problems are so big that even that won’t fix it, then we may be staring at a Sweden solution where we take over those banks, do an RTC, and throw miscreants in jail.

BTW, I am a professional engineer. I can’t even conceive of doing to my reports what these lawyers and notary publics are doing to their affadavits. I would expect to get hammered by both civil and criminal charges if I made stuff up, forged documets and signatures, handed my stamp around the office willy-nilly, and lied in affadavits to the court when I do expert witness work.

As for the foreclosures, I agree that the people who defaulted on their loans need to be out of those homes yesterday. I think the banks should be punished for shoddy work but most of this noise about notes and robo-signing is coming from lawyers dragging out a process that sooner or later, cheaply or more expensively ends in someone losing their home due to default. Personally I think you do no one any favours by racking up legal bills and putting off the inevitable but then again I am not a lawyer talking my book to a journalist who then uncritically regurgitates it.

As for cutting corners, this is solely because they are driven by investors to do the foreclosure in a certain time period at a certain cost. The biggest and most aggressive of them was…. Frannie.

I would also be shocked if less than 25% of forclosures in the hardest hit areas suchs as Florida or Nevada involved robosigning and intentional shoddy paperwork.

Where I disagree with ErnieD, Hsvkitty, and most others, probably including Felix, is WHO CARES?

Who cares that banks are cutting corners and breaking the law on a massive scale trying to seperate delinquent borrowers from collateral. It is not possible for banks to process two million forclosures per year without tens of thousands of mistakes being made.

As we discussed in Felix’s most commented blog up to that time, 0.0% of “wrongful” forclosures involve banks trying to evict people who were current on their mortgages. We found 1 guy who got locked out of his 2nd home wrongly and got it flooded with fish juice… did anyone follow up to find out how much cash he got from BofA for that desaster.

The simple truth is that banks are breaking the law out of necessity and the goverment is not going to do anything substantive about it because the administration and the courts understand that society needs to efficently seperate collatteral from those who have defaulted on their loans.

Do I wish all banks had their act togeather like mine does. YES. Do I wish mistakes were never made and the right forms were filed in the right order at the right time. YES we all want that. Sadly this is the real world, and if you start handing out houses to people who don’t pay for them every time a bank makes a mistake with the loan then banks stop making loans. That means depression.