While the MERS debacle has many borrowers thinking that they may be getting a free house soon, the biggest threat to the banks/servicers comes from the investors who purchased the securities on Wall Street. Thanks to Kingside, here’s a link to a big class-action suit in the works:
While these investor lawsuits may seem far-removed from Main Street, they could be big trouble….especially for taxpayers, if another bailout is in store:
From cnbc.com:
The study referred to in the video is included in this story: BofA could be liable for $60B
Oh,man. I just found this one:
http://www.msnbc.msn.com/id/39674290/ns/business-real_estate/
“Those on Wall Street, however, are largely unsympathetic, insisting that possible errors in the foreclosure process are beside the point, that the process begins only when a borrower starts missing mortgage payments.
“If you didn’t pay your mortgage, you shouldn’t be in your house. Period. People are getting upset about something that’s just procedural,” said Walter Todd, portfolio manager at Greenwood Capital Associates.”
Granted, they have a point, but this is exactly the kind of attitude that is going to bring the pitchforks and torches out. If they were looking for a way to dramatically increase trash-outs, lawsuits and strategic defaults, this should do it.
I can tell you the courts do not like being lied to. Perjury can and should have serious repercussions. I could see monetary sanctions, but the courts will take the funds.
” Just Procedural”. The only proper response to that is a fair trial and a life sentence. THAT is Hubris worthy of Louis 14th.
Jim,
I’ve been saying this every since I started posting here. We have become a gangster nation, essentially from top to bottom.
This criminal housing Ponzi scheme is so wide and deep, it’s swept up innocent people of all kinds. People legitimately out to buy a house to live in (how quaint), respectable real estate agents, smaller banks and credit unions that wanted to follow old fashion lending requirements.
All of them have been thrown into the pot with the flippers, “investors”, Wall St. and commercial banks, foreign investors, narco/terrorists and foreign nations who bought these mostly worthless CDO’s.
Over the last 25 years all of the restraints on finance and lending were thrown out the window under the philosophy of deregulation. None of the deregulators considered that fools and criminals might get hold of the system and drive all of us over a cliff.
“People legitimately out to buy a house to live in…”
I should also add, that they could afford.
Somewhere in the future there will be a divide. The people who believe they should get to keep `their` houses. The ones who feel the governments job is to arrange for them to get reduced principal and/or reduced intrest rate. And others who played by the rules and made their payments or did not buy a home at all because they recognized they could not afford it. With the country headed to an inflation economy, those who feel entitled will line up against those who want more personal responsibility. Coming to politics near you soon.
swm-The problem with this particular scandal is neither side really played by the rules. The former home owners didn’t make the payments required of them, and the foreclosing banks faked the paperwork required of them to foreclose on the deadbeats. It’s a total clusterfuck. I just home that none of the foreclosures that had deficient paperwork get overturned after the houses have already been resold as REOs. The size of that disaster would be apocalyptic.
I think Geotpf is on it here. Neither side has “clean hands”. And as between a bank that ignores procedures for expedience and a borrower who may be in financial distress (due to job loss, etc.), I’m going to side with the borrower. Every time.
The solution, of course, isn’t that they get a free house. The solution is that the banks are compelled to either follow the rules and demonstrate that they have standing to foreclose. And, in the instances where they can’t, they’ll probably be more willing to do a loan mod. At best, you end up with a house that has an unenforcable mortgage on the title, which can’t be cleaned up easily.
RE #8 there is a way to clean up the title, but its risky, stop paying taxes. In Ca people should push the counties to move the tax sale process more rapidly. If you go to a tax sale then the whole prior mess is extinguished. If a bank is concerned stop paying the taxes, let it go to a sale, and then buy the property at the sale, presto a clean title.
Geotpf – I agree about both sides being `dirty`. Imagine being a judge deciding between a lender who broke the law by faking legal documents versus the lendee who lied on legal documents on declared income. Enentually this mess has to go to the Supreme Court.
If you really think about it a free house might be the best thing that could happen to potential home buyers. All of the sudden there’s a bunch of homes out there where the seller stands to make a profit and then price becomes much more negotiable. Ever buy something second hand from somebody who got it for free. Usually you can get an under market price because they don’t care that much about the value, they made money.
Jim,
Thanks for the link to the MBS Class Action. This is why I love to read your blog, to get a heads up before I read these items in the general press. This legal mess will drag on for at least another 5 years.
I disagree with another post here about the “inflationary economy.” The FED is in a panic about DEFLATION. . .Japan style. However as the Financial Times this morning said, “deflation in Japan for those who are retired and have savings isn’t a bad thing.” Some 44% of Japanese felt deflation was actually good. Since salaries are flat, lower homes prices will actually be good for those wanting to buy. . .but bad for those of us who own.
If the MBS investors sue and force the banks to buy back the failed mortgages at par, there could be many more insolvent banks (again). This time it will be more difficult to find a political solution; the public is still infuriated over the first bank bailout, and the outcomes of legal proceedings in the state courts are far too unpredictable for a simple solution. The MBS investors can afford a legal offense that can match any the banks can assemble (unlike Joe Sixpack facing his foreclosure). I’m not sure if it’s tin foil hat time, but it’s sure starting to look that way!
Thieves getting robbed by thieves. This is what you get for cutting every corner possible.
Yes Mark, they fear 1930`s style deflation. But when you see gold rise (it is really the dollar buying less) and the U.S. dollar index falls that is inflation – it just hasn`t hit the local economies yet.
@lyle, Sure, not paying a lein that has preference (like taxes) will work, but you’re looking at it from the point of view of the property or the bank. I’m looking at it from the point of view of the buyer. If they pay the taxes but not the invalid mortgage, then they end up with a house they “own” subject to a recorded lein that would need to be extinguished somehow.