The U.S. Mortgage Clusterfuck

[Tee&A]

I find it funny that nearly 2 years ago so many called Marcy Kaptur a "kook" when it has now been verified that many banks really didn't have the documentation to prove they had the rights to the homes they foreclosed on (therefore making the foreclosures void until investigated). Once again, the voice of reason is seen as a voice of inanity--especially if the voice belongs to a Democrat :tired:. And before anyone asks, no, I'm not a Dem.

 

[B_New End]

I find it funny that nearly 2 years ago so many called Marcy Kaptur a "kook" when it has now been verified that many banks really didn't have the documentation to prove they had the rights to the homes they foreclosed on (therefore making the foreclosures void until investigated). Once again, the voice of reason is seen as a voice of inanity--especially if the voice belongs to a Democrat :tired:. And before anyone asks, no, I'm not a Dem.

I kind of like Marcy Kaptur. She was one of the most vociferous opponents of the bailouts, but in the en, she is just a partisan. she voted to bail out GM, and for the cash for clunkers program, both of which I think were ridiculous.

The first one because GM is hardly an American company anymore, and the second because it is replacing real working wealth with paper wealth.

 

[bananaclubcock]

The thing about CDO's though is junk paper was being sliced up and turned into AAA paper, which was then sold across the world...it was fraud on an international scale. Where did the bailout money go? Mostly Europe. Mortgage backed securities are pretty much backed the US government. When, for whatever of the many reasons, millions of people in the US stopped making their house payments, the feds had to step in and make payment on the debts of certain companies.

The securitization of mortgages has been the largest driver of cash in/outflow in America the last 30 years, and until the issue is resolved, our country will most likely remain in its current state for years to come

Mortgage-Backed Securities

Issue one: sliced and diced. Junk paper is sold all the time, as long as it sold as such no harm is implied. At least two things might be at issue though. One if the underlying mortgages were crappy than advertised, there is a fraud. What most people mean with "sliced and diced" junk paper is that the less senior bits of various CDOs, say the BB or BBB tranches would often be held by the bank and then re-bundled into another CDO (aka a CDO-squared or if you do it again, a CDO-cubed). This is an attempted to achieve 'diversification', which in some theories would reduce the risk. This has unfortunately proved to demonstrably false.

Issue two: people not paying their mortgages. This is IMPORTANT. The claim is the people suddenly didn't pay them. I find this hard to believe. To me, the synchronization suggests fraud on the corporate side. The current mess with foreclosures points to all kind of document irregularities. If you don't know what was agreed to between the parties, how can you know who is at fault? Maybe people did stop paying, but I think there is a real chance that the originators and banks thought they could get away with something egregiously wrong.

I am with you on everything else you wrote.

 

[B_New End]

Issue two: people not paying their mortgages. This is IMPORTANT. The claim is the people suddenly didn't pay them. I find this hard to believe. To me, the synchronization suggests fraud on the corporate side. The current mess with foreclosures points to all kind of document irregularities. If you don't know what was agreed to between the parties, how can you know who is at fault? Maybe people did stop paying, but I think there is a real chance that the originators and banks thought they could get away with something egregiously wrong.

I actually think the entire bubble popped because of the sudden spike in gasoline prices. To me, it seems everything can be traced back to a vast amount of American spending power being soaked up by the oil companies.

the rise in gas prices caused a consumer level rise in all prices. This caused Americans to cut back spending, which caused companies to feel a pinch and lay off, which further degraded the job market and consumer confidence.

Gas prices have always been a very sensitive issue because of this. So when gas was hitting $4.00 a gallon, I was thinking back to the days when a 20 cent increase had economists scared, now, it was like it was being ignored.

Iraq was supposed to pay for itself with oil revenue. In 2004 it was obvious that was not going to happen.

Of course, all this just ended the ponzi scheme, as all ponzi schemes eventually crash when there is no more new money to be pumped into them.

The thing is the banks did think they would get away with it, because all their models predict a fairly stable economy and inflation. Also, as in so many other aspects of businesses, over inflating expectations will get you promoted, while uncovering risks or cynicism gets you fired.

 

[bananaclubcock]

I really appreciate breaking this down into laymans terms. When I was writing my understanding, I thought CDS was the insurance stuff, I just didn't know what the CDO's were called. But it's funny, now when compared to each other, the names make perfect sense and explain quite nicely what is going on with those financial instruments.

CDS are basically insurance on debts(bonds). What gets weird is that Credit Default Swaps (CDS) can be bundled into what are called synthetic Collateralized Debt Obligations.

A fuzzy version of that goes like this: cash from the party paying for insurance gets treated like payments on a debt. If debt the CDS 'insures' fails, the remaining money put into the synthetic CDO goes to the party who was originally acting like it was paying a debt. Sorry if this a tad messy, this isn't easy to follow.

What I would like you to know is that the big fraud case against Goldman Sachs involved a similar transaction. There is both the issue of can the buyer of the synthetic CDO really understand how it works AND does the seller, like Goldman Sachs, have to let the buyer know the debt the synthetic CDO is 'insuring' (actually referencing) is awful crap, like maybe a shitty mortgage CDO that it knows is going to fail.

It is my pleasure to explain this. I am no where near the world's biggest expert, but if this is anywhere near as serious as it sometimes sounds, we need to sort out a lot of scary stuff. This isn't just about being technically correct, but being clear about what we want as a society. Having an engaged populace counts for a lot in a pickle like that.

 

[bananaclubcock]

Big dicks must = big brains, because this thread is the only thing I've read on the subject that I understand.

I have a couple questions: when courts rule against these improperly documented foreclosures, does the homeowner "win"? If a judge rules that no legitimate mortgage note exists, what happens to the house? Is it just assumed then that the current resident owns the house outright?

And won't the most likely ultimate solution be for Congress and/or the Supreme Court to basically say, "We're going to let the faulty and missing paperwork slide. Resume foreclosing as usual"? Obviously that would crap all over state laws and people would call it an unprecedented federal power grab, but wouldn't it be a more palatable option than another bank bailout, if it came to that?

I am not a lawyer, so I really don't know how the courts will rule. I just know that the messy documents throw a lot of wrenches into things and make the process less clear. In fact, I would imagine that the magnitude of this means that while say, property and securities lawyers that are going to be getting lots of work, even they won't know how this gets sorted out. Something to consider, if this really is in the main a case of intermediaries screwing both home buyers and investors in mortgage securities, those two groups might be fighting over the carcases of banks and mortgage originators.

Which brings me to your Congress/Supreme Court point. Again, I don't know for sure and can't see the future, but I wouldn't be surprised if something big and political happened to remedy this situation. That is a lot of the reason I care enough to engage folks on this. I don't know the final answer, but I'd be surprised if the political mood didn't have an enormous influence. I'd like to see the banks dealt with fairly harshly, perhaps temporary nationalization, major losses for bank investors, a break of up of their businesses into smaller units, and going after the executives and board members in any legal way (prosecution, civil suits with major disgorgement, etc.). I think one thing that won't happen again is another arrangement like the fall of 2008.

Stay tuned!

 

[bananaclubcock]

I think it means that no one really knows who the fuck the lender is. ...

Not going to quote you in entirety, but I agree with you. If this was a massive scam, the uncertainty about chains of ownership and the lies told to many parties would have created enough damage to render much of the so-called growth moot. Others have stated that the U.S. might have to revise down its GDP for a few years, just like the USSR did. I don't know how the rest of the world looks,but the UK, Spain, and Ireland all had similar bubbles. Scary stuff.

 

[cruztbone]

Well , my FICO is about 770, and i had no problem refinancing with my bank a year ago, lowering my payment to $1620 a month, from $1990 a month. I listened to the words of my President, Barack Obama, and took his advice. I am glad i did. This crisis is just one more example of the failure of Corporate Capitalism and the GOP mindset of our economy. The banks were bailed out; most of them have repaid their debt with interest, yet they still believe that mortgages can be handled as if they were groceries on bar code scanner at the supermarket. This is why America does not need the GOP. Vote Democratic and piss off the big banks!!!!!!!!!!!!!

 

[B_New End]

So, that bill that Obama pocket vetoed would give banks retroactive immunity for their fraud.
Note a pocket veto is not a veto, it just means he is not signing it... right now.
Now Bank Of America is resuming their foreclosures, even though they know it is illegal.
Why?
Because they know, within two months after the elections, the bill giving them retroactive immunity will be signed by president Obama.
That's right, they are going to start breaking the law with impunity, knowing that Obama (and the congress that passed the law) will give them a complete and full pardon.

This is such bullshit.

 

[Penis Aficionado]

So, that bill that Obama pocket vetoed would give banks retroactive immunity for their fraud.
Note a pocket veto is not a veto, it just means he is not signing it... right now.
Now Bank Of America is resuming their foreclosures, even though they know it is illegal.
Why?
Because they know, within two months after the elections, the bill giving them retroactive immunity will be signed by president Obama.
That's right, they are going to start breaking the law with impunity, knowing that Obama (and the congress that passed the law) will give them a complete and full pardon.

This is such bullshit.

Yes, it is. Which party in Congress offered the banks this big, wet, slobbery blowjob?

H.R. 3808: Interstate Recognition of Notarizations Act of 2010 (GovTrack.us)

Oh ... both of them. The "pardon the banks" bill passed the Senate unanimously, and the House by "voice vote," meaning it was such a done deal they didn't even bother recording votes.

 

[B_New End]

and the House by "voice vote," meaning it was such a done deal they didn't even bother recording votes.

Didn't record the votes? Gee, I wonder why.

 

[piercedjobbie]

On a slightly different note I'd welcome some comments regarding my PAYING OFF my mortgage and how long it will take to get my title. Any thoughts? I'm told 90 days....but I'm not holding my breath.

 

[Drifterwood]

I am in Asia at the moment and there is virtually nothing about this in the media either here or back on the BBC (there was one piece on the BBC that I saw online).

I, perhaps naively, find this a little odd given that it could cause a second run on the banks as it were.

Does this surprise you, or are we making too much of it? Seems like a real clusterF to me.

 

[FuzzyKen]

Today it was stated on the News that B of A was going to resume the foreclosures, while yet another announcement was made that all of this foreclosure work was being sent overseas to be be processed by people who did not have English as their first language.

In yet another brilliant move, the news here related a story of an elderly woman thrown out of her home in Florida because some Financial Institution had transposed numbers on foreclosure paperwork. Police came to the door, broke down the door, threw her and her belongings out on to the lawn when in fact the woman owned the property free and clear and there was no lien whatsoever against the title of that property.

Let's see, I think that might call this one of the many joys of "outsourcing".

We can guarantee that this one will be silenced up quickly!

 

[B_talltpaguy]

^That has happened several times in Florida in recent years, which is why there have been scattered instances of judges wholesale throwing out entire dockets of foreclosure cases from certain lenders.

There have also been cases of people getting foreclosed on after catching up, and all kinds of other screw ups by the banks.

 

[bananaclubcock]

On a slightly different note I'd welcome some comments regarding my PAYING OFF my mortgage and how long it will take to get my title. Any thoughts? I'm told 90 days....but I'm not holding my breath.

I've really got no idea. It sounds like the lawyers and advocacy groups in Florida are popping up everywhere, but I think they are focusing on the foreclosures.

Good luck on getting things paid off. I think you are smart to be a little concerned about the paperwork.

 

[bananaclubcock]

I am in Asia at the moment and there is virtually nothing about this in the media either here or back on the BBC (there was one piece on the BBC that I saw online).

I, perhaps naively, find this a little odd given that it could cause a second run on the banks as it were.

Does this surprise you, or are we making too much of it? Seems like a real clusterF to me.

Yes, even here in the US this has been underreported. I think their is a tendency among the authorities and the news media to take the banks' word at face value. We are starting to see wider coverage in the U.S., many judges are raising objections to recent actions by banks and many lawyers are looking into suits against the banks, with both homeowners and investors in the bonds as plaintiffs.

You are right this might lead to a run on the banks. Various banking analysts, Chris Whalen of Institutional Risk Analytics comes to mind, have said just that. Though the more 'conventional' wisdom is just for more litigation and losses for the banks.

 

[bananaclubcock]

Matt Taibbi: Courts Helping Banks Screw Over Homeowners | Rolling Stone Politics

If anyone wants a funny/sad description of the ridiculousness in the U.S. foreclosure mess, Matt Taibbi's would be among my top choices.