My point is that while anecdotal examples of a few instances where the “paper work questions” have wrongfully, in financial terms, attempted to foreclose on properties, I continue to see no evidence, in their numbers, that they DO constitute the exception, not the VAST majority; that I do expect will - the majority, at the end of the day, prove to be fully justified, on financial terms and their paperwork issues cleared up.
Due diligence by the regulators and the industry WILL clear up the paperwork issues, and when all is said and done the VAST MAJORITY of these houses that are now in question due to the paperwork issues, will either still, or again, been in foreclosure.
Clearing up the paperwork is not, to me, the bigger problem (BECAUSE IT IS SOLVABLE), which is instead, the time, the delays in settling all these foreclosures, to get to the bottom of the fall-out of the burst housing-bubble sooner rather than later.
The biggest problem they have isn’t the foreclosure. The deadbeats can be foreclosed upon today, tomorrow or next week. Most of them ain’t gonna start paying anytime soon, so they’ll keep.
The issue of what the investors in the crap paper are finding out is the most serious issue, followed by the frauds committed upon the courts. The investors are going to discover that they’ve been scammed, and not a little bit, and the put-backs will start. The banks don’t have the money to survive a large number of put-backs.
Who is going to demand these put-backs? FHA, Fannie/Freddie, pension funds, other banks. In other words, people with money. How big is the issue?
It ain’t a few isolated cases:
http://www.businessinsider.com/bank-of-america-mortgage-report-2010-10
That’s just BofA.
Then there’s the fraud issue. The numbers of fraudulent affidavits is not small. JP Morgan is reviewing over 110,000 foreclosure affidavits. We’re talking 10’s of thousands of fraudulent affidavits that will have to be withdrawn, and then, if the courts and AG’s decide to do so, they’ll go back and examine foreclosures already done based on fraudulent affidavits. A judicial decision of foreclosure can be vacated upon appeal if the appellant has evidence that the judge was making a decision based upon a fraudulent affidavit. There’s plenty of fraudulent affidavits around. This means that people who are buying previously foreclosed properties might have titles that need remediation to quiet them. That will cost investors in foreclosed properties some money.
That the majority of these cases involve a person who has defaulted on the loan isn’t in doubt. But that’s the small issue now. That’s simple, straightforward and easy to fix: produce the correct documentation, with true affidavits and proceed with a foreclosure. You can’t foreclose with a fraudulent affidavit and expect it to stick when appealed.
The missing paperwork may not be that easy to fix, however. The banks have, in some cases, destroyed the paper that they need to foreclose. Deliberately. They wanted only one “copy” of a mortgage in their system, so they made an electronic copy in MERS and destroyed the original(s).
Trouble is, in some states they needed those original documents. That’s what the state law requires. Should they have read the state law before creating MERS? Of course. DId they? From what I’m seeing, they obviously didn’t. And to top this off, now many county clerks are realizing they’ve been gypped out of a ton of recording fees by MERS (and this avoidance of recording on physical paper and the required fees was sold as one of MERS’ benefits)... and guess what most counties in the US would like right now? More money. I’m guessing that some county clerks and recorders start to go after banks to do physical recording and pay the fees. They should.
JP Morgan was one of the founders, if you will, of MERS. They’ve let it slip that they’ve ceased to use it - because it simply leads to more problems.
As to the RMBS securities: There are types of securities into which residential mortgages are put that you cannot clear up these types of paperwork mistakes (or more likely, outright omissions) easily. eg, REMICs.
What most people here are just not “getting” is that this is a two or three-sided problem. There are deadbeat homeowners... that’s seems to be the only part that too many conservatives want to understand.