Rebel Traders – Analysis Without The Hype

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.

Oh, this should go over real well. The Senate to investigate fraud.. LOL

WASHINGTON — A Senate panel has subpoenaed financial institutions, including Goldman Sachs Group Inc. and Deutsche Bank AG, seeking evidence of fraud in last year’s mortgage-market meltdown, according to people familiar with the situation.

The congressional investigation appears to focus on whether internal communications, such as email, show bankers had private doubts about whether mortgage-related securities they were putting together were as financially sound as their public pronouncements suggested. Collapsing values for many of those securities played a big role in precipitating last year’s financial crisis.

According to people familiar with the matter, the Senate Permanent Subcommittee on Investigations also has issued a subpoena to Washington Mutual Inc., a Seattle thrift that was seized by regulators in last year’s financial crisis and is now largely owned by J.P. Morgan Chase & Co. It appears likely that several other financial institutions also have received subpoenas. Subcommittee investigators declined to comment. A Goldman Sachs spokesman declined to comment on the subpoena. Deutsche Bank declined a request for comment.

The subpoenas are the latest in a series of moves by Congress to trace the roots of the financial crisis. Goldman has been a favorite target for criticism in Washington.[...] (Source: WSJ)

You mean that after all this time Congress still has no clue how this happened, they really are clueless in Washington.

This story just goes to show how messed up the entire mortgage industry is. Even after being bailed out by the tax payers (through Bank of America), this slimy and very irresponsible mortgage company just does not know when to just stop their crap.

From MSNBC News:

Defending lawsuit, mortgage company mocks loan modification assurances…

In marketing, advertising and testimony before Congress, Countrywide Home Loans has said repeatedly that it is working hard to modify the mortgages of financially strapped borrowers caught up in the subprime meltdown. But in a New Hampshire court, attorneys for the lending giant are singing a different tune, describing such assurances as “mere commercial puffery.”

Saying the modification offers are “only Countrywide’s vague advertisements,” attorneys for the lender are asking the court to throw out a lawsuit alleging breach of good faith, fraud, negligence and misrepresentation, which was filed on behalf of a family that was refused a loan modification by the California-based company.

(read more…)

Housing Wire reports:

Citing “a rapid deterioration of U.S. Alt-A RMBS performance,” Fitch Ratings again took the hatchet to its previous assumptions for Alt-A mortgages on Monday morning, revising its surveillance methodology and updating loss projections for all U.S. Alt-A RMBS.

The rating agency said it now expects average cumulative losses on 2005, 2006 and 2007 vintage Alt-A transactions to hit 2.72, 6.78 and 9.58 percent, respectively, up dramatically from expectations at the agency earlier this year.

Fitch cited a “rapid increase in 60+ day delinquencies experienced over the past six months,” despite servicers’ collective efforts to hold off on actual foreclosure sales [...]

Full article