Monday, Sep 28, 2009
For 'tis sport to have the engineer / Hoist with his own petard
Web of Debt: Landmark decision promises....trouble for banks
Securitisation itself was complicated, then there were lots of secured parties and the parcels kept changing hands, Eventually Mortgage Electronic Registration Systems (MERS) kept track of these changes electonically, facilitating the rapid turnover of mortgages and MBSs. MERS became a proxy for the security holders, registering mortgage loans in its name and bringing foreclosure proceedings. But now a court has decided that MERS doesn't have the legal standing to foreclose - and there's no other party with such standing. Not MERS, not the lender who packaged and sold on the securities, not the securities holders because they weren't signatories to the original contract. And there's more...oh dear!
Posted by icarus @ 08:11 PM (394 views) Add Comment
5 Comments
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1. Redcellar said...
The US has had the same problem for a while. However it requires the mortgage holder to challenge the bank to produce the appropriate paper work. 9 times out of 10 they can't and then they are up the creek without a paddle. Doesn't mean you walk away from the debt though. Just that they can't foreclose. Oh what a tangled web we weave.
2. nomad said...
I loved reading this.
So 60 million flawed mortgages that could be bounced back to the original lenders, by purchasers of CDOs and CDSs - many overseas, and at their original market value.
The lenders have hidden behind businesses that register all the derivative transfers and then undertake the foreclosure work. Increasingly judges are saying this is not on because it doesn't allow legal representatives of the mortgagees access to records of the original transaction.
Ultimately, Ellen Brown argues that power could be restored to Congress and the people while wrenching it away from investment bankers, in particular Goldman Sachs who routinely supply all the top financial personnel to the administration.
POWER TO THE PEOPLE!
3. mountain goat said...
I enjoyed reading it too, but not sure how this will work out. Who will take the hit when these mortgages default? Currently the banks are liable (as they were last year) but big brother has protected them and probably will continue to do so. At least the losses will mean that the loose lending that caused this bubble in the first place are unlikely to return for some time.
4. jonb said...
This won't work here in case anyone is wondering. Here, the company listed on the Land Registry as the mortgage holder can repossess. This is most likely the bank you are supposed to send your repayments to every month.
5. icarus said...
jonb - MERS is the company listed in the US equivalents of the Land Registry. Is there no MERS equivalent in the UK?