Posted on 05/05/2011 7:44:03 AM PDT by Chunga85
How fitting that when Wall Street finally takes a hit after years of mortgage malpractice, the stick is called the False Claims Act.
If there is one thing that's never in short supply in banking circles, after all, it is false claims. Internet stocks are good as gold! House prices never fall! Derivatives make the financial system safer!
Those particular false claims aren't the ones that have Wall Street looking down the barrel of a $1 billion-plus government civil suit, mind you. Preet Bharara, the U.S. attorney who sued Deutsche Bank (DB) Tuesday, is going after the bank's alleged practice of making federally insured mortgage loans without actually checking, as it repeatedly claimed, on annoying details like whether the borrowers actually had jobs or incomes or bank accounts that would allow them to repay.
(Excerpt) Read more at finance.fortune.cnn.com ...
I don’t think they intended to have the market decline either. But they did intend to make fraudulent sales and incomplete transfers to the MBS investors to effectively allow the banks to retain a claim against the borrowers. This is what is happening and what the article addresses.
The liability for the bank is that when they sold the mortgage the original debt was paid off by the MBS purchaser-investor, yet title was not properly conveyed breaking the financiers’ claim of ownership.
As for the homeowner’s obligation the MBS investor paid off their debt yet the bank failed to properly convey ownership to the MBS purchaser. Bank’s mistake, bank’s loss.
Sure the ‘deadbeats’ are also at fault but at least they paid into the property. The banks are responsible for stiffing the MBS investors. The deadbeats are just bringing this issue to the forefront by not paying into the bank’s unlawful transfer/clouded title.
There’s also a local vs. national angle to this. To the counties the current owner is preferential as they pay taxes and maintain the property. At the national level the banks are preferred due to bank solvency and political considerations. Look for a federal law being pushed to ‘fix’ the “heartbreak of foreclosure” and restore the banks’ claims on a national level.
Your are supporting corrupt institutions by paying on mortgages that have no legal claim to your properties.
What are you thinking??
I respectfully submit that this is not wide spread and not the major factor in the problem.
And I would like to know who is it that does have legal claim to the properties? I am not being flippant - I really do want to know what you are talking about.
OK Smart Ass - I fully understand the issue. I was trying not to respond with 900 word replies so I used some short cuts.
So regardless of how many times the loan was sold, the fact remains is that there is no profit for lending 400 thousand and acquiring a property worth 250 thousand — regardless of how many times it is packaged and regardless if the paper is held by one group and the servicing is held by another and so on. Again, I short cut my response by just saying “bank” to include originating lender and every other entity along the way.
Nothing about this changes a fact:
If the loan is not repaid, then there is loss to the financial system that lent it. I realize that originating banks hold only a tiny percentage of the loans they originated. I also know that in certain price ranges they are almost always backed up by Fannie and Freddie and this fact impacted all the esoteric derivatives that were packaged and sold.
I actually have never defended the Wall Street practice of the packaging, other than the banks were sort of forced to do something with loans they would never have approved without government pressure.
This is Free Republic. I thought it was a site for those in favor of limited government and I see this as a classic case of over reaching government and the resultant crony capitalism. It just strikes me that there is a class warfare anger here. The anti bank rhetoric is the same anti business rhetoric that I see on the left. None of these massive amounts of loans would have been available to be sold without the CRA and the borrowers that accepted loans they could not pay as a result of the pressures brought by the CRA (and related liberal influences from government).
That was the root of the problem, and thus, the emphasis of my point. Any fraud that has resulted is nothing I support but it doesn’t change the genesis of the problem.
I have taken out three mortgages in my lifetime. In each case the mortgage has properly been recorded in the county records office. In one case one of my mortgages was sold to another party. That transaction, too, was recorded in the county records office.
I suggest that if a mortgage held on your property was transferred to another owner without properly being recorded in whichever local entity is responsible for the recording of deeds and their encumbrances, that you may, and I repeat may, be making payments to someone who is not empowered to issue a satisfaction of mortgage when the loan is paid off.
Being forced to do that, they did some very unsavory things with regard to packaging and re selling the mortgages on Wall Street. It was like OK government, if you make us do bad loans through your threats, we’ll figure out a way to “sub out” the risk."
FORCED!!! You mean they were FORCED to do this???
NO, they were NOT forced, they just made peace with the corrupt government. They CHOSE to go along to get along. They did nothing to stop the government. They chose to side with evil, with power being better than to be just. They CHOSE to do this instead of fighting it.
They were NOT forced, they had a choice, and they chose badly.
You make a valid point. I think the pressure was more than you choose to acknowledge, but I’ll agree that they chose to go along instead of fighting. I think it had more to do with fear at first for survival — and then when they figured out they could off load the risk through derivatives — then greed kicked in.
Having Jesse Jackson and Al Sharpton and the original founder of ACORN, before he founded ACORN, and other rabble rousers at your throats is hard on a business trying to simply do business. But I’ll concede they chose not to fight it hard enough.
Corporations tend to cower in the face of government pressure.
You're still not getting it. The minute the bank securitizes the loan, and sells it, the liability is passed on to some chump investor. Now the really creative money making begins.
Hey, let's package that MBS again in another CDO! We just doubled our money! (And make sure that annoying promissory note gets destroyed.)
Now let's rate those CDOs full of shit loans as AAA and get some nice premiums when we sell it!
And now let's bet against the shit CDO we just sold with 10 or 20 CDSs! Nice!
Oh, and let's create a 'Servicing Company' to manage the 'loan', and collect premiums!
Oh, and if the guy defaults, we make crazy money from our Credit Default Swaps, plus we get that chump's house!
Get it yet? The bank has often already doubled or tripled its money on their initial so-called 'loan', and if the home is in a good area, stands to gain much more from a foreclosure than from 'servicing'.
+ 1
What Notary Sojac said, check the Recorder’s office and the GSEs are begging for more funds because all they hold is worthless mortgage paper which in about 90% of all current outstanding mortgages. If you consider ‘not widespread’ because the government vacuumed up all the bad paper but is still not in possession of the notes (the government can’t even lien properly).
“...To: C. Edmund Wright
...who is it that does have legal claim to the properties...
I have taken out three mortgages in my lifetime. In each case the mortgage has properly been recorded in the county records office. In one case one of my mortgages was sold to another party. That transaction, too, was recorded in the county records office.
I suggest that if a mortgage held on your property was transferred to another owner without properly being recorded in whichever local entity is responsible for the recording of deeds and their encumbrances, that you may, and I repeat may, be making payments to someone who is not empowered to issue a satisfaction of mortgage when the loan is paid off.
67 posted on Monday, May 09, 2011 1:12:59 PM by Notary Sojac...”
There’s still no way a bank loans 400 K on a mortgage and then wins by taking a repo that is only worth 250 K now. The idea that the did this on purpose to lose 20-50% of what they lent out makes no sense whatsoever.
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I’ll make this easy for you.. the REO sale price is PURE PROFIT ... No different than if I walked onto a Maybach dealers lot and sold your dear buddy Rush a new car when I neither owner or worked for the dealership..
1.) The “banks” were just strawmen lending out other peoples money , they had no skin in the game.
2.) They created these CDO/CMO instruments and sold them as AAA when they knew most of the contents were CC-
3.) The banks bought swaps and such as insurance against the crap securities , sometimes at 30X the face value.
3a.) Oh and by the way they sold the securities at a undisclosed and illegal premium ,,, say the instrument truly had $500M in loans at an average of 8% ... It would be sold as $650M at 6% ... they would always put the properties in at full appraisal and pocket any down payment and adjust the interest rate to get the same expected cash flow.
4.) The banks ignored all the trust laws ,, the notes were never delivered , the assignments between true lender , depositor , trustee , trust etc. were not created ...
Good luck on those 4 mortgages you’re paying on ,, do you have any idea if you can get a satisfaction at the end of the payments? If you answer YES you’re lying unless all the loans are from a S&L and held locally on properties that weren’t run through the securitizer machine with a prior sale..
I should have read all the way down to your reply ,, I echoed your points ...
Well said.
There are a lot of well-intentioned people on FR and in the conservative movement as a whole that have no clue how most financial instruments work. That includes mortgages, the Fed itself, fractional reserve banking and all of it.
If we did some of the things they suggest, we’d be an agrarian society of serfs.
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