That's not the word around the bank where I work, but perhaps that's because we're not one of the ones in trouble, and can afford to face reality.
As for these failed foreclosures due to lack of documentation, this phenomenon actually started surfacing a few months ago (even an article in the NYT about it), and anyone who was paying attention realized then it would be a big factor in the whole developing mess -- though probably more of a beneficial effect on homeowners, than harmful effect on financial institutions. Why would anyone think that 2nd, 3rd, 4th, 5th, 6th generation buyers of pieces of pieces of pieces of pools of pools of mortgages, who we all know weren't keeping track of the underlying value of the homes or paying ability of the home"owners", would be keeping track of the actual whole-house mortgage documentation?
I suspect the resolution will be a quasi-standard settlement process, in which the home"owners" agree to a new, much reduced mortgage debt (reflecting the actual value of the home, which is all the bank would get for it anyway), in return for signing a new mortgage note that the presumed mortgage-holder would more or less clearly hold (and which would be transferable in the event some other institution turned up able to prove -- with or without presenting the original mortgage note -- that it was the actual holder of the original mortgage). This will save a lot of homeowners from foreclosure, while leaving the banks slightly better off than their present true position in the new real estate market (e.g. the house is worth what it's worth, which isn't what the original paperwork said it was worth, but at least a significant percentage of home"owners" will continue paying at the new reduced amount, saving the banks the time and expense of trying to re-sell the houses in a lousy market).
I doubt it. Some will be able to get the debt writedown, others will be foreclosed. Let’s just say the DB will get the documentation they need.
That’s actually been proposed here on FR, behind screams of “don’t do that for those deadbeats” regardless the implications.
I have no problem with securitizing mortgages but the process needs to be cleaned up. As we all know. Better standards (which has already been done for newly-originated loans,) better accounting (not done yet) and better tracking of ownership and all that stuff.
Thanks for your thoughts, I hope the scenario you outline is a solution. Homeowners will bear income tax on the difference between the original mortgage and the new, lowered amount...a residual problem for the homeowners. Our banks are in such bad shape, I do not know how they can avert bringing Level 3 stuff back on board with the new Basel II rules, and in the US the new FAS 157 rules demanding valuations for opaquely valued derivatives. Our banks seem not to have been in compliance with the international rules.
I think that will be true in the long term, but in the medium and short term this mess will contribute to the global credit freeze up.