Banks foreclose on homes that they don’t own [warning, Grayson]
“So...the $$ to buy these houses came from where exactly? “
If the loan was sold your question is irrelevant. In fact the loan was probably sold dozens of times so you have to show that you own it.
What you have to understand is that the securitization process broke apart two halves of the mortgage contract which everyone is still assuming are whole.
Let’s back up.
A mortgage used to be a secured loan on a piece of property. A bank would loan you money to buy real property, and in return, you would pledge the title/trust/deed to said property as collateral to the lender, which they could take as partial or whole payment in the event you ceased to repay the lender per the terms in the mortgage contract. The pledge is a lien upon the property, an encumbrance upon the right to sell or transfer the ownership of said property - if you want to sell said property, you needed to pay off the party who held the lien on the property, and when you did, they would clear the lien off the title/trust/deed and your sale would go forward.
Enter securitization and MERS. The banks wanted to bundle/slice/dice/mix/puree mortgages into RMBS-backed “securities” (like CDO’s, CMO’s and more conventional REMICs) to allow them to peddle more and more mortgages to the secondary market, which would allow them to keep the cream of the crop, sell off the crap, or, keep the fees for origination and servicing and transfer the risk of actual lending to someone else.
The trouble is that while these whiz kids on Wall Street were thinking about how to transfer the monetary benefits one way, and the risk the other way, they forgot that a mortgage instrument carries a whole ‘nother component to it: the lien transfer and the right to foreclose upon the property as remedy for default of the borrower.
This deficiency of transfer of the lien assignee and chain of right to foreclose has come to light, starting in early 2009.
The net:net is this: Just because you’re the company receiving the check (or missing the check) from the borrower doesn’t mean that you have the required documentation and chain of title/lien succession which gives you the right to foreclose as a remedy for the default by the borrower.