Mortgage – What Mortgage?
I have discussed in previous writings and even in some videos many months ago about what we now know regarding the mortgage industry (not that it is a frigging mess, that we ‘all’ know). Instead I am referring to how mortgages have been sold, packaged with others, sold again, split up amongst different pools and sold again and on and on. Your mortgage with a bank is nothing more than a piece of paper (and sometimes there is no paper!) that is traded, sold, and capitalized on by the banks leveraging against your home by such high amounts that even some loan sharks are envious of the banks.
Now that forclosures are hitting our economy in record numbers some are actually now questioning ‘where is my mortgage’?
You say this is silly, you send your monthly check to CitiBank, Bank of America, Wells Fargo or whatever bank. You think that just because you pay ‘them’ they actually have a mortgage note in a vault somewhere within their building. Nowadays chances are that the people you are paying may actually have no idea at all where your mortgage is. It may have been sold to a different institution. And in some cases the paperwork trail is so incomplete or vague (or even missing altogether) that determining where someones mortgage actually is may need CSI-Miami to track it down through intensive forsensic investigations.
This brings me to the case recently reported in the New York Times concerning a forclosure process where a laywer asked the mortgage company to ‘produce the mortgage’, in other words prove they had the right to foreclose on the property. And you know what? They had no clue where it was. The judge threw out the case and said that if a financial institution can’t locate a mortgage (proving they have a financial interest in the property) then they have no right to initate a foreclosure process.
[...]some judges are starting to scrutinize the rules-don’t-matter methods used by lenders and their lawyers in the recent foreclosure wave. On occasion, lenders are even getting slapped around a bit.One surprising smackdown occurred on Oct. 9 in federal bankruptcy court in the Southern District of New York. Ruling that a lender, PHH Mortgage, hadn’t proved its claim to a delinquent borrower’s home in White Plains, Judge Robert D. Drain wiped out a $461,263 mortgage debt on the property. That’s right: the mortgage debt disappeared, via a court order.
So the ruling may put a new dynamic in play in the foreclosure mess: If the lender can’t come forward with proof of ownership, and judges don’t look kindly on that, then borrowers may have a stronger hand to play in court and, apparently, may even be able to stay in their homes mortgage-free.
The reason that notes have gone missing is the huge mass of mortgage securitizations that occurred during the housing boom. Securitizations allowed for large pools of bank loans to be bundled and sold to legions of investors, but some of the nuts and bolts of the mortgage game — notes, for example — were never adequately tracked or recorded during the boom. In some cases, that means nobody truly knows who owns what.
To be sure, many legal hurdles mean that the initial outcome of the White Plains case may not be repeated elsewhere. Nevertheless, the ruling — by a federal judge, no less — is bound to bring a smile to anyone who has been subjected to rough treatment by a lender. Methinks a few of those people still exist.
More important, the case is an alert to lenders that dubious proof-of-ownership tactics may no longer be accepted practice. They may even be viewed as a fraud on the court.[...] (source: NY Times – hat tip butch)
It is my strong view that the only institution that can start a foreclosure process is the institution that actually has the mortgage (electronic or otherwise), not the ’servicer’ of the loan and not the mortgage company that sold it a part of a bundle. In this situation if a bank wants to foreclose on a property then ‘they’ should first be required to buy back the note, even if it means having to dig through the maze of mortgage securtizations to find it. It is only then that a bank or financial institution should have the right to even think about a foreclosure process.
Remember Wendy’s TV commercial from the early 80’s? “Wheres the Beef”! I think we can now establish a new line with the same sarcastic meaning…
“Wheres the Mortgage” ?
Do you ‘know’ where your mortgage is? It may not be where you think it is.
Mortages have been bundled as “invetments” and traded like hot potatoes based on the one more fool theory. This is what made the originators of the loans act irresposnibly.
Chuck, I agree with your view that only the originator of the loan should have the legal authority to initiate a foreclosure proceeding. Moreover, they should be liable to whoever currently owns of the “mortgage” in whatever shape or form, no matter how opague. The whole financial mess has been created by the front-enders who have had no accountabilty. Banks are the main culprits. Bank executives, greedy morons, deserve only the minimum age, not the millions in salaries and bonuses that they have been getting.
There is still some hope in the legal system that the guilty will be punished.
Foreclosure Fraud
During the housing boom, lenders passed around mortgages as if they were whiskey bottles at a frat party. Notes were lost, destroyed, sold into multiple pools. Mortgages were not recorded and exorbitant fees were collected by the big firms on Wall Street.
Now that the bubble has burst, “lenders†are trying to collect on loans they do not own, in most cases never lent a dime on the transaction, have no right to, or were paid 30 times over in bailouts, insurance, credit default swaps, etc.
They are doing this because they can. They are steamrolling the courts rocket dockets because hardly anyone is contesting their foreclosures. Think about it. If you could go into a court and file thousands of foreclosures a week, and only a mere 10% challenged the authority of the foreclosing entity, what would you do if you were the greedy bankster?
The crises is even worse in non judicial states…
In almost every case these pretender lenders do not and did not own the loan. Almost all loans during the boom were securitized and it was investors that put up the money. Not the banks.
Now these “pretender lenders†are trying to steal the homes by filing fraudulent assignments, by the thousands, to process the foreclosures.
Don’t believe me? See for you yourself.
http://4closurefraud.wordpress.com/
See also: http://livinglies.wordpress.com/2008/11/29/excellent-article-sumarizing-many-areas-of-foreclosure-litigation/
4closureFraud