Foreclosuregate, We Hardly Knew Ye

Bank of America, which made headlines ten days ago when it suspended foreclosures in the 23 states that require court approval, says it has finished its review of pending evictions and will now continue foreclosing on 102,000 properties. From CNN:

The company said the first of the new affidavits will be submitted by Oct. 25, and that it will continue its review in 27 other states.

According to a spokeswoman for the bank, no errors were found during the review, and fewer than 30,000 foreclosure sales across all 50 states will be delayed as a result of the investigation.

State attorneys general have stepped up pressure on banks in recent weeks after it was revealed that some bank employees had signed foreclosure affidavits without verifying that the documents were accurate, a process known as "robo-signing."

That was quick. This is not the end of the fallout over robo-signing, which has modestly been described as "the biggest scandal in human history." But the paperwork crisis will subside, not because of any attorney general and probably without the legislative malfeasance John Carney predicts here. You can correct all the cases of robo-signing, subtract all the instances of outright fraud by lenders, and repeat the supposedly shocking fact that MERS has made securitization of loans easier. But when you borrow money, those greedy fatcats still expect you to pay it back. And there are plenty of people who still owe money. 

Comments

[Death Panelist]

Robo-signing is the genesis of SkyNet.

[Episiarch]

Contrary to canon, John Henry was not created from the Turk, but rather from a mortgage program.

[Old Mexican]

But when you borrow money, those greedy fatcats still expect you to pay it back.

For some reason, the lender ends up being the bad guy even when he's doing something good - which is lending.

[Lint]

Of course the lender is the bad guy. He has enough money to lend other people, so he must be rotten.

[Tony]

He should give it away.

[Barack Obama]

Only if he makes over $250,000.

[Joe Biden]

Do they really count as "human beings" if they make more than $250,000 a year?

[Trespassers W]

I have yet to see a spoof of Tony that was anything near as funny as the real thing.

[Jeffersonian]

And here I thought they were doing what Chairman Maobama wanted. Now they're vilified for it?

[Chinny Chin Chin]

Just wait till they tackle predatory charities.

[T]

I would make damn sure any entity purporting to own the deed on my house could prove ownership in a court of law. And that's the problem right there. The paper trail that claims to document ownership is murky in a whole lot of cases.

[West Texas Boy]

And our nation of deadbeats will just have to find itself another get-out-of-jail-free card.

[SIV]

Speaking of Deadbeats

[omg]

Only 6 states have been left untouched by BoA's foreclosurethon.

[Rich]

According to a spokeswoman for the bank, no errors were found during the review

Damn, they're good.

[T]

Doesn't mean they aren't there, just that BofA's crack internal auditors didn't find them. So just trust the nice bank when they try to sell your house.

[Rich]

Damn, my sarcasm is too low-key.

[R C Dean]

According to a spokeswoman for the bank, no errors were found during the review,

That's about as credible as Saddam Hussein winning 95% of the vote.

There is no way, no way on Earth, that there were no errors at all in the mortgage paperwork in 23 states.

We know, pretty much for certain, that some non-zero number of mortgages were never properly and legally assigned from the originator through the securitization chain. Those mortgage pools that should have had those loans are locked, and have been since issuance. That can't be fixed, as far as I know.

The MERS system relied, I believe, on electronic transfers of mortgages. That's not allowed in "wet ink" states. Fannie and Freddie flat out don't have some of the mortgages that they supposedly bought. Where are they? In, as I suspect, another pool somewhere?

Those affidavits that were robo-signed were fraudulent when signed. That can't be fixed, either. Any foreclosure proceedings based on those documents constitute a fraud on the court. That can't be fixed, either, unless the court and the injured party (the homeowner, I suppose) waive the defects.

This is handwaving. I'd love to know the basis on which BoA decided it was OK to continue foreclosing on properties where robo-signers did the paperwork, or in states with wet ink transfer requirements. There's just no way they could have confirmed in this short a period of time that every single one of those loans is sparkly clean.

[Slumpbuster]

To the extent that a court proceeding was required in a particular case, the foreclosure judgment was obtained, and the appeal period has now run, I don't see how there is any question as to the validity of the foreclosure. It is rare that one may collaterally attack a facially valid judgment after the appeal period has run, even if fraudulent evidence was used to procure the judgment. There are some avenues one could pursue, but the debtor is not likely going to be able to show that it suffered any real damage as a result of the fraud, which it would be required to undue the judgment. After all, the debtor was in default, and it probably could not cure the default (or it already would have). The question is only whether the documents used to prove the default were 100% on the up and up.

[Lost_In_Translation]

Its called rule of law. Even if you are in defacto default, if no one can prove they are the holder of the note along with the deed of trust (the collateral), you proceed as if you were in bankruptcy, not foreclosure. Its not the homerenter's fault the bank decided to get all fancy with the deed of trust and sell it into a legally murky pool which could constitute fraud in some states. The bank is just the servicer in any case and can't point to the particular owner of the note/deed anymore, but knows it owes money to MERS and its trying to sweep all of it problems under the rug. The banks have stuck their fingers in their ears and are singing loudly so people will stop reminding them of that fact. So they continue to rake in money for...who exactly? Long when this thing first started, I called for an army of independent accountants (who could have been paid for a fraction of the bailout money). But that could have raised these issues sooner and denied the banks the free rides they were getting.

[Red Rocks Rockin]

This^.

Look, I've got no sympathy at all for the idiots that took out hundreds of thousands of dollars in equity on their mortgage, or lied on their mortgage applications about their income, or bought more house than they could afford, just because "their giving it away!" These people deserve to get screwed good and hard for buying a house on easy credit terms in what was an obvious bubble market as far back as 2002.

The ones who are really getting boned here are the people who put 20% down for a 20-year loan during the last decade, or people like me who saw way back what the end game of all this interest-lowering and easy credit was going to result in, and decided to rent instead. There's no recourse or "bailout" for those who are fiscally responsible, unfortunately.

But that doesn't mean that the banks shouldn't also get railed here--TARP was a goddamn travesty, and the banks made it possible by doing exactly what LIT described above.

The bottom line is that EVERYONE--from the banks on down to the individual loan recipients that committed fraud in all its various forms--should all be prosecuted and stuck with fines and/or jail time, if the rule of law was even applicable anymore. Unfortunately, if the administration actually tried to do its job and enforce the law, they'd likely end up throwing about half the country in prison. So basically, we'll just keep pressing on until these freaking lemmings march us right over the cliff.

[Ass of Catalonia]

Unfortunately, the cliff was encountered long ago. At this point, we are all merely hanging onto shrubs and protruding rocks along the cliff's facade. Hooray for being the world reserve currency as it provides us with the strongest forearms.

I'm curious about the thoughts of the libertarians here concerning the events surrounding shay's rebellion. Being one of the first insurrections "perpetrated" by the People against the government, it seems rather important IMO. Farmers who participated in the revolutionary war were paid in worthless, government-inflated constitutional currency and were essentially broke and relied on a barter economy. This was largely due to the British crown's attempt to prevent specie(precious metals) flowing to the colonies and the colonial government's unyielding propensity for inflating the paper currency they issued. Seeking the potential investments of the wealthy, the confederation offered amnesty to British loyalists. Many of those farmers had incurred debts(most quite small it seems) with these british loyalists, possibly assuming they would not have to live up to the debts.

However, upon their return they viscously pursued these debts through the justice system. The justice system, being full of federalists seeking any method of strengthening the federal government, chose to overwhelmingly find in favor of the lenders and send the debtors to debtor prisons, confiscate their property, and threaten any who disagree with execution. As you may know this strategy worked, fomenting a rebellion that even Jefferson thought to be in ignorance, which paved the way for the establishment of a much stronger federal government.

Control of the money supply controls the people which controls the government.

But I'm a retard and I doubt I could adequately explain my views in this post. The gist is(me being a misesian minarchist libertarian) that human action in the aggregate IS the economy and money as the medium of exchange is the MOST important part. Banking plays the most important role in this and they have been fought by those fighting for liberty since America birth. Look at Jackson's "bank wars." They eventually won. The federal reserve, the banking oligarchy, and the government are destroying the economy to enrich themselves and their favored business interests and nobody cares.

Fuck, why did I even write this? I don't even remember.

People who took on debt need to pay but the banks are the bigger assholes who need to get fucked before they shit all over us. Or something.

Ugh, I'm a retard and I don't even care. Read "THE DENATIONALISATION OF MONEY" by hayek. It's a great book.

Did I mention I hate myself?

[gaijin]

Thanks...history has many things worth remembering--if not reliving--today. The problem with rebellion is that it puts one's life at risk...I don;t sense that many of us are uncomfortable enough (yet) to do more than talk about rebellion. Maybe you are ahead of the curve?

[Fluffy]

We know, pretty much for certain, that some non-zero number of mortgages were never properly and legally assigned from the originator through the securitization chain. Those mortgage pools that should have had those loans are locked, and have been since issuance. That can't be fixed, as far as I know.

Sure it can.

If someone forgets to record an assignment, do you know what the fix is for that?

You record an assignment.

Time to perform this fix: 15 minutes of doc prep, an hour to drive down to the county title office. Cost to correct: That labor, plus $13 to record the assignment.

There may be disputes that arise here between the originator and the investor who bought the security, but that's not really relevant to the borrower.

Those affidavits that were robo-signed were fraudulent when signed. That can't be fixed, either. Any foreclosure proceedings based on those documents constitute a fraud on the court.

This sort of pearl-clutching throughout this debacle has been the most galling part of the whole thing to me.

If we undo every piece of litigation in this country where a plaintiff signed a document prepared by counsel without fully reading every word of it, we would be undoing 95% of all litigation that takes place outside of small claims court.

The simple fact of the matter is that in every organization larger than three people, "I attest..." probably reflects the work of more than one person.

The only thing more stupid than the robo-signer whining is the notary stamp whining. If you work with the same notary for five years, and you have fifty documents to get notarized a day, you know what? She's not going to check your driver's license for each one of them, because that's fucking stupid. The procedural advice given to notaries makes sense in the context of a single document signing undertaken by a stranger. When you and the notary work in adjoining offices, there is going to be some rationalization of the workflow, because the alternative is moronic.

[CrackertyAssCracker]

I think I'm agreeing with the fluffy version of things. I've even got a healthy dose of sympathy for the view that if somebody is going to foreclose on your house, you have the right to make sure they dot all their i's and cross all their t's. But I've been patiently awaiting for the fraud part to explained to me, as in, intentional deception for monetary gain. Seems there isn't actually much of that.

[gaijin]

IF there is fraud, it will be alleged not by the forecloased home 'owners' but more likely by those who bought the securitized mortgages...only to find out the same slice was sold to 30 other purchasers.

[Binky]

If we undo every piece of litigation in this country where a plaintiff signed a document prepared by counsel without fully reading every word of it, we would be undoing 95% of all litigation

You say that like it's a bad thing.

[Lost_In_Translation]

The problem is the banks are acting like a deed of trust/note holder when really they are a servicer to an alectronic qausi-firm. The servicer has to identify the specific note/deed of trust holders before it can proceed with foreclosure and it can't do that. Due to the way the MBS's in MERS were pooled and then insured on (remember those CDO's), alot of the owners were paid out by the CDO sellers, so technically the CDO sellers should get any proceeds from the foreclosure, but they insured on a numerical basis and may or may not have individual shares identified to a particular mortgage. If they can't identify that (or subsequently went under *cough* AIG *cough*) then either someone that bought the scraps or the government (via Fannie and Freddie) now hold what remains of the original note/deed. So, who the fuck gets paid by the foreclosure? The bank that sold the mortgage to MERS and was acting as a servicer, the MERS purchaser that insured the loss with a CDO and thus was paid when the pool went bad? The CDO seller who was bailed out by the government or went under and sold their CDO holdings for pennies on the dollar? Or us, the taxpayers, who have already pre-funded this whole debacle. See, its not so fucking simple as some would have us believe. In fact, this is one of the worst legal clusterfucks of all time and the only people that are going to benefit are the goddamn lawyers being paid by the hour in what is eventually going to circle back around to the taxpayers pockets.

[fresnodan]

As bad as it is for the ostensible "homeowner" who one can argue should not have taken on debt he could not handle, or should not have signed financial contracts he did not understand, there is a much, much bigger problem looming.

http://www.zerohedge.com/artic.....audclosure

When those mortgages were originated, there are all sorts of convenants and contractural obligations about "underwriting standards" Maybe the homeowner not paying is still in foreclosure, but the bondholders have more power and legal standing to say that the fraudulent preparation of the title and note constitute fraud, and render all the MBS (mortgage back securities) null and void...which means the banks have to take them back.

TARP II - bigger,worser, and much, much more smegma.

[horsewithnonick]

Sure it can.

If someone forgets to record an assignment, do you know what the fix is for that?

You record an assignment.

I know Cavanaugh tosses links in like croutons, but check out the Daily Caller story, and the sworn testimony of employees who were expected to attest to things they knew to be false, before you call "Nothingburger" on this mess...the rabbit hole goes a hellof a lot deeper than you have yet observed.

[Paul]

I'm predicting another round of bank bailouts... erh, stimulus. And Democrats will line up squarely behind it... hell, it'll be their idea, and our newfound Republican overlords will join hands with said Democrats and mind-will the economy better.

[jbird]

Umm, this rather reminds me of when a police shooting of an unarmed crook is called righteous by the police department. Granted, the crook was a crook, but...

[James]

On the other hand, can any of the current occupants of the houses prove that they have any greater claim on the property? This is almost an existential argument.

[Lost_In_Translation]

Assuming they have no equity in the house, you the taxpayer probably have a greater claim on the house depending on your income ratio compared with theirs and how under they are.

[jbird]

And they managed to adequately review the paperwork for 102,000 foreclosures in only 10 days. What efficiency, what skill! And would you like some oceanfront property in Nevada?

[Jonas]

Does it seem a little suggestive that the states with the worst problem have been colored Republican red and the states with the least amount of problems have been colored Democratic blue? Couldn't they use a different color scheme?

Maybe I'm reading too much into it.

[Steven Smith]

The impact of the foreclosure fraud crisis will be felt in two areas: past foreclosures that were performed without proper documentation as to chain of title or default; and future foreclosures, which will take much longer to finalize because of increased judicial scrutiny. Neither area is going to be effected by today's decision.

[Episiarch]

STEVE(N) SMITH HAVE SIMPLE SOLUTION FOR MORTGAGE DEADBEATS AND ROBO-SIGNERS: RAPE! YES, THAT STEVE SOLUTION FOR EVERYTHING, BUT MAKES SENSE HERE!

[robc]

I thought the proper scandal name was waterforeclosure.

If reason staffers are gonna steal my jokes, Im gonna make them as unfunny as possible.

[Ebeneezer Scrooge]

Okay, so if nobody knows who owns the loans in the case of default -- who's getting the payments from those who are not in default?

It sounds like an army of ghosts own your house. How they aren't fighting over your house payments?

[new laptop battery]

Personally I know a guy is gay when we meet and i feel the need to check my fly~hsjtrrrf

[rhea]

The borrowers were never told that debt is impossible to pay when deflation hits. This is how banks confiscate property and leave you homeless. Its not as simple as you took the loan, you pay. The problem is bigger than that. There needs to be significant change from the top. Businesses need to learn the definition of responsible lending just as many borrowers need to learn about responsible borrowing.

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[libarbarian]

But when you borrow money, those greedy fatcats still expect you to pay it back.

Yeah, and when those greedy fatcats , to 2, 3, 4, or more parties then they expect you to pay back 2,3,4,or more times what you borrowed.

How dare those deadbeats who borrowed $100,000 question their obligation pay back the $1,000,000 they owe to the 10 people who bought their debt?