1. When Bank #1 sold the mortgage, it didn't necessarily "keep the title" at all. There was probably a lot of paperwork transferred in the process. But transferring paperwork and transferring the "ownership" of a title aren't necessarily the same thing. In order to legally transfer the title, the transfer of ownership to a new mortgage holder requires the mortgage/title to be re-filed in a state or county courthouse. I suspect a lot of the confusion we are seeing is related to the failure of Bank #2 (the investment bank) to do all of this paperwork. I suspect they didn't do all of this paperwork because they were dealing with such large numbers of mortgages that they didn't want to bother with it -- or maybe didn't even realize they were supposed to do it!
2. Now take this one step further . . . What happens if you are an investor who buys a mortgage bond that was created by a big investment bank under the scenario I described in my previous post -- and the investment bank had never done all of this necessary paperwork to legally gain ownership of the mortgages that are backing that mortgage bond?
You can see how complicated this can get, right?
Again, thank you.