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Improper Mortgage Documents May Bust Major Banks
The Massachusetts Supreme Court had a great day today. It confirmed that a bank which wants to foreclose on a house has to have proper documentation that shows it has the right to do so. What a novel concept!
During the housing boom mortgages were sold, sold again, bundled up and put in some trust and then sold piecemeal to some dumb investors. Along the chain the proper handling of the ownership documentation was often not done or done in ways that are not legally binding.
Now when the investors, or the servicer of the trust in the name of the investors, want to foreclose on a property because the mortgage is not getting paid back, they find that they are lacking the documentation that they own the borrowers IOU paper, the note, and the deed, the mortgage, on the house.
Some kangaroo foreclosure courts, especially in Florida, have carelessly allowed foreclosures to proceed despite such improper behavior and despite doubts of who actually owns the loan. The Massachusetts Supreme Court today set the old new standard. Unless you prove that you have the proper documentation and you can not foreclose.
The inproper documentation issue may be curable in cases where a chain of ownership can be reconstructed and documented. But many of the original originators of those mortgages do no longer exist. Others have changed ownership. There is also the small issue that the relevant New York trust law does not allow for late assignements or transfers of the relvant papers to the trusts.
This will create a shit-storm in the banking system. Many investors will now try to put the loans back to the banks that sold them. They likely have a right to do so as the contracts assured them that the loans were correctly owned, which seems not to be the case.
This is a several hundred billion must-buy-back problem the banks who bundled and sold the mortgages have. There is likely more money to pay for the buy-backs than the capital of the banks involved in this.
Get ready for the big bank rescue part II, or if the Republicans prevent that, the big banking bust that may actually be needed to clean up the banking system.
For more details check Yves Smith's blog. She has been all over the issues for month and years and now has a copy of the Massachusetts Supreme Court decision.
It may be that this is the sign of an early renaissance, a rebirth, of the rule of law. That would be nice. It has been thouroughly missed.
If you’re some random-guy borrower and you don’t have your paperwork and you’re behind by $0.01 on your payments, then what fate befalls you in court?
Not directly towards you Enoch Root, but rhetorically, I guess, I have just seen too much wrong, as my friend lizard spoke of above. The system is so fucked it will never be fixed, mostly because it was never broken. In other words, it has never worked. What most don’t realize is you never out right own your home, at best you only ever own a bundle of dynamic assets. Assets that can be taken from you at the whim of a all knowing, all powerful authority, with out so much as a kiss before it fucks you.
That authority is known as the State.
However, the State has an interest in keeping the illusion intact, at least for a little while longer. The illusion that you own anything, is a facade that keeps the everyone in a trance. It’s very much like Zappa said in that, “The illusion of freedom [in America] will continue as long as it’s profitable to continue the illusion. At the point where the illusion becomes too expensive to maintain, they will just take down the scenery, they will pull back the curtains, they will move the tables and chairs out of the way and you will see the brick wall at the back of the theater.”
Further, I don’t know if anyone has noticed, but the State and it’s minions, the banksters, has become exponentially brutal in the last few decades, try not paying your payments and someone(many) someones will come with a stick and a gun and a cattle prod and make you pay, or put you in on the street as another said, “The brutality of the police is not incidental to the nature of the state, it is essential to it.” As Monolycus eludes to it’s about sheer power not civil society.
Meanwhile the public good, the civic infrastructure has drastically decayed. Only the poor or working poor worry about petty things such as mortgages. It’s hard to worry about such high things as house payments when you are just trying to eat.
The wealthy elite worry about nothing but more power, mere money means nothing to them they make it out of thin air, it’s the power of the continued illusion they crave.
The power of the illusion. We are not, in fact, merely no ‘longer citizens’ but we never were.
We have always been consumers. Consumers under the illusion that we are autonomous, and sovereign, have upward mobility, can be part of a civil productive society; we never have been. In fact, you are the property. The less wealthy pay mortgages on you.
IDK, I’m just ranting, now, but I have come to accept at 48 yrs of age, I will never own a home, never be part of the dream. I have seen to many broken homes, broken families, broken people to ever believe in the system, we the poor, know it’s all a scam, or most of us do, it’s the ones that don’t that keep the game afloat.
Posted by: Uncle $cam | Jan 8 2011 8:15 utc | 10
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