Jump to content
House Price Crash Forum

Recommended Posts

Deutsche Bank in ownership court row

An American judge has prevented Deutsche Bank from repossessing 14 homes because the bank could not prove it owned the defaulting mortgages involved. The ruling by Ohio district court judge Christopher Boyko could have serious repercussions for banks and mortgage lenders, for whom the pooling of mortgage securities is a $6,500bn (£3,200bn) industry.

Pooling involves taking hundreds if not thousands of mortgages, putting them in one unit, and then selling parts of that unit to others. As a result, it can often be unclear which bank actually owns the individual mortgages.

Judge Boyko had ordered lawyers acting for Deutsche Bank National Trust Company to prove the lender was the ultimate owner of the mortgages. When it could not do so, he dismissed the cases.

He said: "The institutions seem to adopt the attitude that since they have been doing this for so long, unchallenged, this practice equates with legal compliance.

"Finally put to the test, their weak legal arguments compel the court to stop them at the gate."

Deutsche can still refile the foreclosure cases in a higher court, but the precedent set in this case is now being seized on by those about to lose their homes.

This if true is incredible - The HO can just stop paying the mortgage, and not get their home repossessed as ........

No one knows which bank owns the actual mortgage due to the complexities of the CDO's!!

As Richard Littlejon (sp?) is fond of saying, 'You Couldn't Make It Up!!'

Link to post
Share on other sites
Deutsche Bank in ownership court row

An American judge has prevented Deutsche Bank from repossessing 14 homes because the bank could not prove it owned the defaulting mortgages involved. The ruling by Ohio district court judge Christopher Boyko could have serious repercussions for banks and mortgage lenders, for whom the pooling of mortgage securities is a $6,500bn (£3,200bn) industry.

Pooling involves taking hundreds if not thousands of mortgages, putting them in one unit, and then selling parts of that unit to others. As a result, it can often be unclear which bank actually owns the individual mortgages.

Judge Boyko had ordered lawyers acting for Deutsche Bank National Trust Company to prove the lender was the ultimate owner of the mortgages. When it could not do so, he dismissed the cases.

He said: "The institutions seem to adopt the attitude that since they have been doing this for so long, unchallenged, this practice equates with legal compliance.

"Finally put to the test, their weak legal arguments compel the court to stop them at the gate."

Deutsche can still refile the foreclosure cases in a higher court, but the precedent set in this case is now being seized on by those about to lose their homes.

This if true is incredible - The HO can just stop paying the mortgage, and not get their home repossessed as ........

No one knows which bank owns the actual mortgage due to the complexities of the CDO's!!

As Richard Littlejon (sp?) is fond of saying, 'You Couldn't Make It Up!!'

May be good for the individual homeowners but the impact on share prices and the economy (and hence everyone's pensions, taxes etc) would be pretty devastating.

Furthermore as and when you wanted to sell there might be major difficulties with proving the mortgage had been cleared....

Link to post
Share on other sites
Guest grumpy-old-man

an important point to remember is the fact that the banks/financiers NEVER lose.

they will implement a rule change or new law overnight through the government to protect themselves against any further instance like this imo.

let's wait & see eh ?

nice find though & good post. :)

Link to post
Share on other sites
May be good for the individual homeowners but the impact on share prices and the economy (and hence everyone's pensions, taxes etc) would be pretty devastating.

Furthermore as and when you wanted to sell there might be major difficulties with proving the mortgage had been cleared....

Be interesting if your solicitor said to the lender who has a charge on the property - "right, ready to pay off the mortgage, need you to relinquish the deeds" and they said "we sold the debt 2 years ago and it has since been sliced and diced, repackaged and resold 5 times" .... where on earth would the deeds be?

Link to post
Share on other sites
So if they don't own the loan who does? Surely the originator does? Do they have no interest in repossessing? Who collects the money?? All seems quite odd.

This was one of the things that concerned me when me and my family had the villa in Florida.

It seemed like every fews weeks we were being notified that our mortgage had been taken over by a bank we'd never heard of.

We were glad to sell up and get out of it to be honest.

Link to post
Share on other sites
Deutsche Bank in ownership court row

This if true is incredible - The HO can just stop paying the mortgage, and not get their home repossessed as ........

No one knows which bank owns the actual mortgage due to the complexities of the CDO's!!

As Richard Littlejon (sp?) is fond of saying, 'You Couldn't Make It Up!!'

I find this hard to believe. Surely the issuer of the original MBS owns the mortgage.

Link to post
Share on other sites

Not as it seems.. this is a procedural issue..

" In the opinion, Judge Christopher Boyko said he ordered the representative of the trust to produce an "assignment" showing it held the rights, titles and interest in the mortgages it was trying to foreclose.

But the trust was unable to prove it legally owned the loans before it started the foreclosure proceedings, so Boyko concluded the trust did not have standing in the case, according to the opinion."

Also

http://www.nytimes.com/2007/11/15/business...ml?ref=business

Edited by TimG
Link to post
Share on other sites
Not as it seems.. this is a procedural issue..

" In the opinion, Judge Christopher Boyko said he ordered the representative of the trust to produce an "assignment" showing it held the rights, titles and interest in the mortgages it was trying to foreclose.

But the trust was unable to prove it legally owned the loans before it started the foreclosure proceedings, so Boyko concluded the trust did not have standing in the case, according to the opinion."

Also

http://www.nytimes.com/2007/11/15/business...ml?ref=business

Standing (as I understand it) is the connection that the two parties have in a legal case. There has to be a "fairly direct" link between plaintiff and defendant. In other words, you can't sue the trucking company if they drive a lorry into your neighbours front room, it's literally got nothing to do with you. What it looks like to me is that having sold the good stuff (the rights to interest payments) they have also abrogated their bad stuff (having to collect said interest payments.)

In other words, the CDO model is legally nonsense. You either own something or you don't. You either have a contract with someone or you don't. What it looks like to me is that the home owner owes the mortgage company and the mortgage company owes the bondholder, and these are entirely seperate arrangements. That is, if the homeowner fails to repay, the mortgage company still owes the bondholder. Equally, if the mortgage company fails to repay, it's got nothing to do with the homeowner.

As things stand, if the mortgage companies fold, the bond holders can't collect from the home owner as they have no direct relationship.

Fook me....

(As someone else said, don't worry, the banks will buy someone off for new legals soon enough.)

Link to post
Share on other sites
Standing (as I understand it) is the connection that the two parties have in a legal case. There has to be a "fairly direct" link between plaintiff and defendant. In other words, you can't sue the trucking company if they drive a lorry into your neighbours front room, it's literally got nothing to do with you. What it looks like to me is that having sold the good stuff (the rights to interest payments) they have also abrogated their bad stuff (having to collect said interest payments.)

In other words, the CDO model is legally nonsense. You either own something or you don't. You either have a contract with someone or you don't. What it looks like to me is that the home owner owes the mortgage company and the mortgage company owes the bondholder, and these are entirely seperate arrangements. That is, if the homeowner fails to repay, the mortgage company still owes the bondholder. Equally, if the mortgage company fails to repay, it's got nothing to do with the homeowner.

As things stand, if the mortgage companies fold, the bond holders can't collect from the home owner as they have no direct relationship.

Fook me....

(As someone else said, don't worry, the banks will buy someone off for new legals soon enough.)

Which is why, on a serious note, if people do fall behind on their mortgages - repossession will be swift and ruthless. In days gone by a building society could take a benign, case-by-case, view. Now, if they are having to pay a bondholder every month and they are not being paid by the mortgagee - as I say, repossession will be swift and ruthless.

If I were taking a mortgage out now I'd like an assurance from the lender they won't sell the debt. I like to know who I owe money to. There are rumours that organised crime have been laundering money by buying CDOs. "You've missed a mortgage payment Mr. Jones, pay up within a week or you're dead."

And, even better, in a falling property market "we don't want to repossess your home and take a loss - why would we? Be reasonable! Just pay the friggin mortgage and everything will be okay".

Link to post
Share on other sites
Which is why, on a serious note, if people do fall behind on their mortgages - repossession will be swift and ruthless. In days gone by a building society could take a benign, case-by-case, view. Now, if they are having to pay a bondholder every month and they are not being paid by the mortgagee - as I say, repossession will be swift and ruthless.

If I were taking a mortgage out now I'd like an assurance from the lender they won't sell the debt. I like to know who I owe money to. There are rumours that organised crime have been laundering money by buying CDOs. "You've missed a mortgage payment Mr. Jones, pay up within a week or you're dead."

And, even better, in a falling property market "we don't want to repossess your home and take a loss - why would we? Be reasonable! Just pay the friggin mortgage and everything will be okay".

Well this is it.

The lender can't sell the debt.

It's a simple and rather obvious rule of contracts that both parties know what is going on.

If the bank has acquired money on the markets by borrowing it but tells you it is lending you it's own money, then that is fraud. Just the same as if you sold your neighbours car by "selling " it, then using the cash you got for "selling" to then buy it from your neighbour to pass on.

Regardless, the banks are fooked. if they repossess, the value of ALL their holdings go down. If they don't and they aren't getting payments every month, then they are at risk of defaulting and the value of their holdings go down. because all banks are leveraged, it takes what are apprently small losses to collapse the system.

And this is what is happening.

Link to post
Share on other sites
The lender can't sell the debt.

As I understand it they can. Perhaps not literally in that one minute Bank A owns your mortgage and the next minute Bank B owns it.

But, from what I can make out ...

Bank A has a thousand mortgages. 900 of them are to good risks, 100 are to poor risks at maybe more than 100% LTVs. If everyone pays their mortgage the bank gets, say, 6.75% interest.

They want to lend more money so they package up the mortgages and sell them to Bank B saying "this package of mortgages is secured against assets worth 100 million. Give us 100 million and we'll pay you 6.25% interest. So Bank B acquires what it thinks is a good deal, it hasn't had the hassle of selling mortgages and collecting the money.

Now although Bank A is your mortgagor, every month, come hell or high water, they have to pay the interest to Bank B. So, if you default on your payments, Bank A (who might be a nice, old-fashioned 'we look after our customers' building society) now has to hound you through the courts asap.

If the bank has acquired money on the markets by borrowing it but tells you it is lending you it's own money, then that is fraud.

I've never heard of anyone asking a bank where they got the money from to lend to you!

Link to post
Share on other sites
As I understand it they can. Perhaps not literally in that one minute Bank A owns your mortgage and the next minute Bank B owns it.

But, from what I can make out ...

Bank A has a thousand mortgages. 900 of them are to good risks, 100 are to poor risks at maybe more than 100% LTVs. If everyone pays their mortgage the bank gets, say, 6.75% interest.

They want to lend more money so they package up the mortgages and sell them to Bank B saying "this package of mortgages is secured against assets worth 100 million. Give us 100 million and we'll pay you 6.25% interest. So Bank B acquires what it thinks is a good deal, it hasn't had the hassle of selling mortgages and collecting the money.

Now although Bank A is your mortgagor, every month, come hell or high water, they have to pay the interest to Bank B. So, if you default on your payments, Bank A (who might be a nice, old-fashioned 'we look after our customers' building society) now has to hound you through the courts asap.

I've never heard of anyone asking a bank where they got the money from to lend to you!

No, you cannot sell a contract to a third party without informing and getting agreement from the original parties. Who the hell is going to agree to keep paying their mortgage under this scenario?

Hmm let me see...free house or...lifetime of repayments..... :unsure:

Link to post
Share on other sites
No, you cannot sell a contract to a third party without informing and getting agreement from the original parties. Who the hell is going to agree to keep paying their mortgage under this scenario?

Satyajit Das book Traders Guns and Money covers this subject (page 267-269) . Loans are contracts and they can not be easily assigned or novated without the agreement of all parties. The whole point of MBS. CDO and the other credit derivatives is that they side stepped this problem by creating a separate contract between the originator of the loan and those to whom who they wished to parcel out the debt. The key point is that these instruments were really selling RISK not the original loans (a point made implicit by the fact that Credit Default Swaps form a key element of nearly all these trades).

The holders of these instruments probably do have a case in law for recovering their money but it is against the institutions who sold them the derivatives not the original borrowers.

Link to post
Share on other sites

Join the conversation

You can post now and register later. If you have an account, sign in now to post with your account.

Guest
Reply to this topic...

×   Pasted as rich text.   Paste as plain text instead

  Only 75 emoji are allowed.

×   Your link has been automatically embedded.   Display as a link instead

×   Your previous content has been restored.   Clear editor

×   You cannot paste images directly. Upload or insert images from URL.

Loading...
  • Recently Browsing   0 members

    No registered users viewing this page.

  • 440 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



×
×
  • Create New...

Important Information

We have placed cookies on your device to help make this website better. You can adjust your cookie settings, otherwise we'll assume you're okay to continue.