Tuesday, March 3, 2009

The next big crisis – proving who owns what for bundles securitized mortgages

US banks lose to deadbeat homeowners

Joe Lents hasn't made a payment on his $1.5 million mortgage since 2002. That's when Washington Mutual first tried to foreclose on his home. The lender failed to prove that it owned Lents's mortgage note and dropped attempts to take his house. Subsequent efforts to foreclose have stalled because no one has been able to produce the paperwork. Judges in at least five states have stopped foreclosure proceedings because the banks that pool mortgages into securities and the companies that collect monthly payments haven't been able to prove they own the mortgages. More than $2.1 trillion of mortgages have been bundled into securities by banks.

Posted by little professor @ 11:44 AM (1232 views)
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10 thoughts on “The next big crisis – proving who owns what for bundles securitized mortgages

  • House of cards. Given this precedent, what would you do?

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  • This seems a bit feeble. Who got the deeds?
    Also, if the bank realised it had problems foreclosing homes as long ago as 2002, why have they been lending in the same manner ever since?

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  • Not only the issue of who owns the loan but also the fact that US home”owners” can just walk away from their debts anyway without too much recourse. So what kind of sense did it ever make to invest in loans orginating from the US? Weren’t UK banks still buying these toxic debts when the US HPC had been underway for over a year? So much for due diligence!
    Talking of lack of due diligence did anyone watch Panorama last night (demise of RBS)?

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  • Help me out with the money trail. Tax payers money is pouring into companies that wrote and sold CDSs, AIG being the main operator. Presumably these billions are being used to pay off the the buyers of these products. So some people/organisations are doing pretty well. Who are they?

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  • 5 years living in a $1,500,000 pad rent free! I have to admit tht I’m a bit jealous.

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  • Requiring banks to produce the paperwork at a foreclosure hearing is a nuisance, said Jeffrey Naimon, a partner in the Washington office of Buckley Kolar LLP. “It’s a gigantic waste of time,” Naimon said. “The mortgage may have transferred five, six, eight times.

    A lovely little vignette there hinting at a much bigger problem, wouldn’t you agree?

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  • bidin'matime says:

    This is going to get much worse as more people think “If they can get away with it, why should I bother paying my mortgage..?”

    Run for the hills!

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  • disillusioned says:

    This is deflationary isn’t it? (all be it by an insignificant amount in the grand scheme of things).

    Banks loans man money to buy house. Man stays in house becasue bank can not prove the loan. Loan effectively gone? Deflationary?

    Feel free to correct me – it was just an idea.

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  • bidin'matime says:

    disillusioned: Central bank prints money to pay off the bank – loan effectively back again! Hey Presto!

    I suppose it depends on what happens to the house eventually – presumably he’ll struggle to sell it, so no one can raise a new loan on it right now, but unless it is demolished, then sooner or later it will be used to secure more lending => another loan => inflationary…!

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  • mark wadsworth says:

    @ Bidin’, shouldn’t that be “Hey Pesto”?

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