>>These are not isolated incidents and Greed played a role in more than a few of them.<<
And if this becomes common knowledge and this decision is just the beginning of a tsunami of like decisions - what does this portend for the future?
Portends what I have said for a long long time, the size and scope and cost of the housing issues is going to be bigger than ANYONE has predicted to date... it is going to make the S&L crisis look like a day in the park.
Nothing this country has had to deal with in the past 70 years comes remotely close the mess that’s out there. The question is simply how fast will it unwind. The faster it unwinds the uglier it will be.
What it means in the short term is that banks and others are going to have to do what they should have been doing all along, get their paperwork in order. No judge should have ever accepted an option agreement to buy a note as proof that a bank or other entity actually owns the note and the mortgage. Only the holder of the mortgage legally has the right to foreclose if they cannot prove they are the owner they have ZERO standing before the court to foreclose, and if they do foreclose without proof of ownership they have engaged in fraude and I would think would be subject to legal ramifications from it.
What it will mean for the homeowner is a slower foreclosure, they will still wind up foreclosed eventually in most situations, but it will take longer. Secondly when blatant fraud becomes apparent, where the same note was sold in 2 seperate packages.. who can foreclose? If anyone... who’s legally culpable for this screw up, and what if anything will be done to them?
What it surely will do is further unravel the laughable construct of the CDO.... If your CDO you thought was backed by 10MM in assets, you suddenly find out the assets backign it are only 7MM due to property value decreases.. but then find another 1-2 MM of it are out and out fraud as the properties are in other CDO’s as well.. you now have what you thought was 10MM worty 5MM or less.
CDO’s at a basic level were ok, but when you are using CDO’s to back bigger CDO’s, etc etc etc.. you wind up with the mess... the reality is the only real Collateral you can have to anything is REAL PROPERTY... everything else is paper pipe dream. If you bought or invested in a CDO that was made up itself of nothing more than other CDOs... or of debt obligations backed by other CDO’s all you created was a giant house of cards.
When you take 1MM in debt based on real property, and then wind up leveraging it into 10 or 100 MM in debt by these silly things.. when it finally falls down... you only have 1MM of real assets backing all of that leveraged house of cards, so when it collapses, a whole lot of paper wealth evaporates, and the only people smiling are the brokers who made the commissions selling people the nonsense, and the fraude folks who knowingly took advantage of the exuberance.
You cannot seperate risk from lending... and that’s exactly what these people blindly did. They assumed that risk had been mitigated, and of course it hadn’t, just obvuscated and now its all coming home to roost, and they can’t even tell how bad it is going to hurt them because they had no damned idea what they were buying into.