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Old 10-14-2010, 03:06 PM   #61
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One of the unanswered questions is where are the auditors. Auditing the trail from book entry to physical doc is mandatory and routine. I suspect some auditors are also soon to be dragged into this.

What a mess. I suspect this is a real live example of business just pushing too hard to cut costs by eliminating employees but not the work. If that's the case, makes you wonder what else is out there...
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Old 10-14-2010, 07:23 PM   #62
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Here is a possible answer to the OP original question Foreclosure moratorium - why?
Gonzalo Lira On The Second Leg Down Of America's Death Spiral | zero hedge
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Old 10-14-2010, 10:34 PM   #63
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Here is a possible answer to the OP original question Foreclosure moratorium - why?
Gonzalo Lira On The Second Leg Down Of America's Death Spiral | zero hedge

Thanks, CB.

Funny and depressing at the same time...
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Old 10-14-2010, 11:27 PM   #64
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Here is a possible answer to the OP original question Foreclosure moratorium - why?
Gonzalo Lira On The Second Leg Down Of America's Death Spiral | zero hedge
A great explanation of the mess.
The language is a bit over the top, although if anything in recent memory deserves streams of profanity it is mortgages and mortgage back securities.
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Old 10-15-2010, 03:53 AM   #65
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A great explanation of the mess.
The language is a bit over the top, although if anything in recent memory deserves streams of profanity it is mortgages and mortgage back securities.

It does have one legal flaw. the article claims


Therefore, legally, the mortgage note is no longer valid. That is, the person who took out the mortgage loan to pay for the house no longer owes the loan, because he no longer knows whom to pay.
To repeat: If the chain of title of the note is broken, then the borrower no longer owes any money on the loan.


A failure in the chain of title means that a subsequent purchaser of the note cannot enforce the note. It does not mean the debtor does not owe the loan. The note has to go back to the last person with a clear title, who on reacquiring the note can enforce the note or endorse it.
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Old 10-15-2010, 10:36 AM   #66
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A failure in the chain of title means that a subsequent purchaser of the note cannot enforce the note. It does not mean the debtor does not owe the loan. The note has to go back to the last person with a clear title, who on reacquiring the note can enforce the note or endorse it.
The challenge for some lenders is that they don't have the original note or title (as the case may be), it was destroyed or lost in their process. Just what will be required will depend on the statutes in each jurisdiction. What a mess the mortgage writers & re-sellers made!!!
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Old 10-15-2010, 11:21 AM   #67
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It does have one legal flaw. the article claims


Therefore, legally, the mortgage note is no longer valid. That is, the person who took out the mortgage loan to pay for the house no longer owes the loan, because he no longer knows whom to pay.
To repeat: If the chain of title of the note is broken, then the borrower no longer owes any money on the loan.

A failure in the chain of title means that a subsequent purchaser of the note cannot enforce the note. It does not mean the debtor does not owe the loan. The note has to go back to the last person with a clear title, who on reacquiring the note can enforce the note or endorse it.
This is a point that most people try and ignore... also, if there was a mortgage filed by someone at the beginning of this process... then it is easy to produce one... just have the county print one out..


Also, the article seems to say that the CMO did not want title to the mortgage.... back when I was doing it the trust DID own all the mortgages... I don't know why they changed. To me, that made it easy to slice and dice the payments for the bondholders... and there is one owner...
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Old 10-16-2010, 11:18 AM   #68
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The challenge for some lenders is that they don't have the original note or title (as the case may be), it was destroyed or lost in their process. Just what will be required will depend on the statutes in each jurisdiction. What a mess the mortgage writers & re-sellers made!!!
All jurisdictions have a system for dealing with lost "pieces of paper"
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Old 10-16-2010, 11:32 AM   #69
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Ah, but the mortgagors will need to start paying filing fees. One of the causes of this mess is that they set up a flawed system to avoid that 'trouble'. It probably would have worked fine when few homes went to foreclosure and they could devote a lot of attention to those actions and pay filing fees if necessary. Save a penny, spend a dime.

Here is an interesting article from the Washington Post: http://www.washingtonpost.com/wp-dyn...T2010101406553
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Old 10-18-2010, 09:48 AM   #70
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I don't know if this has already been posted, and I'm too lazy to check, but this was kind of interesting. Don't know if all, or any, of it is true. Hope not.

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Old 10-18-2010, 10:50 AM   #71
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Oh, I think this is very true. The administrative costs of resolving this mess will be huge. It will be interesting to hear what folks who advocate that banks in trouble should fail (goodbye too big to fail) propose as a solution.

I agree with the writer that first it must be fixed, then heads should roll. The FIDC should immediately put all bank employee bonuses in trust until the mess is fixed and the employee's role in this examined.
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Old 10-18-2010, 10:52 AM   #72
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I don't know if this has already been posted, and I'm too lazy to check, but this was kind of interesting. Don't know if all, or any, of it is true. Hope not.
A few years ago I got so freakin' tired of waiting for John Mauldin to write his own stuff that I stopped reading "his" column, and it looks like he's had no reason to change. The least he could do would be to link to Schiller's material.

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"To repeat: if the chain of title of the note is broken, then the borrower no longer owes any money on the loan.
I suspect this is a hypersensationalized oversimplification.
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Old 10-18-2010, 10:57 AM   #73
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I think the borrower owes money on a loan but the issue is who has authority to enforce the loan terms. It is the chain of title on the loan document, not the property.
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Old 10-18-2010, 11:43 AM   #74
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If for whatever reason any of these signatures is skipped, then the chain of title is said to be broken. Therefore, legally, the mortgage note is no longer valid. That is, the person who took out the mortgage loan to pay for the house no longer owes the loan, because he no longer knows whom to pay.
To repeat: if the chain of title of the note is broken, then the borrower no longer owes any money on the loan.
This might be true in Venezuela, but that's not where it was written. I think this was written for the benefit of the non-thinking segment of our population. It only resonates now because we're in election season when the gullibility factor is in overdrive.

Ours is a system that protects property ownership. If a physical document is lost or a signature is skipped, the disadvantaged party (mortgage provider) will incur additional costs to ensure recovery, but that in no way relieves the homeowner from the burden of repayment.

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I think the borrower owes money on a loan but the issue is who has authority to enforce the loan terms. It is the chain of title on the loan document, not the property.
If you own the mortgage and the chain of signatures is incomplete, you go to court, establish the existence of the mortgage, affirm it is not repaid, then the previous participants attest it is not repaid up to the break, then allow the homeowner to demonstrate it is. IOW, you bring all the parties together that were involved at one time and they all agree. It is expensive and time consuming but there's no way the homeowner is relieved of his/her obligation to pay.
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Old 10-18-2010, 12:01 PM   #75
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...It is expensive and time consuming but there's no way the homeowner is relieved of his/her obligation to pay.
I think that is the core problem. The shortcuts will have to be corrected and the extra time and costs will bring the system to its knees.

Banking stock anyone?
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Old 10-18-2010, 12:07 PM   #76
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Yes indeed.

Can you imagine the position of the bond holders? They think their bond represents clear title to the underlying loan documents. It won't be just mortgage writers in trouble, the folks who put together the secruities are in deep do-do too, including the lawyers who prepared the documents. There are a lot of fish in this pot.
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Old 10-18-2010, 12:16 PM   #77
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I think that is the core problem. The shortcuts will have to be corrected and the extra time and costs will bring the system to its knees.
Itís a problem but I donít think it will bring the system down. Most likely, states will enable separate mortgage / foreclosure process to deal with it. I think itís a giant PITA and greatest benefit will be to lawyers and deadbeats, but the banks will manage. The media and the blogs, however, are going to have a blast.

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Can you imagine the position of the bond holders? They think their bond represents clear title to the underlying loan documents. It won't be just mortgage writers in trouble, the folks who put together the secruities are in deep do-do too, including the lawyers who prepared the documents. There are a lot of fish in this pot.
Agree.

Of late there has been much discussion on S&P profit margins being above historical levels. I think this type of cost cutting has led to some of that and we may be seeing the first signs of costs going back up faster that revenues and margins falling again.
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Old 10-18-2010, 12:33 PM   #78
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If you own the mortgage and the chain of signatures is incomplete, you go to court, establish the existence of the mortgage, affirm it is not repaid, then the previous participants attest it is not repaid up to the break, then allow the homeowner to demonstrate it is. IOW, you bring all the parties together that were involved at one time and they all agree. It is expensive and time consuming but there's no way the homeowner is relieved of his/her obligation to pay.

Not exactly. What do you mean by "Own the mortgage" ? Do you mean "own the mortgage NOTE ? "

a mortgage is a type of transaction not a type of property
e.g. Mortgage
A legal document by which the owner (i.e., the buyer) transfers to the lender an interest in real estate to secure the repayment of a debt, evidenced by a mortgage note. When the debt is repaid, the mortgage is discharged, and a satisfaction of mortgage is recorded with the register or recorder of deeds in the county where the mortgage was recorded. Because most people cannot afford to buy real estate with cash, nearly every real estate transaction involves a mortgage.

mortgage legal definition of mortgage. mortgage synonyms by the Free Online Law Dictionary.

You can have possession of a note, and an equitable interest in the note without being the legal owner of the note, due to the failure of an indorsement. Under the UCC

(c) Unless otherwise agreed, if an instrument is transferred for value and the transferee does not become a holder because of lack of indorsement by the transferor, the transferee has a specifically enforceable right to the unqualified indorsement of the transferor, but negotiation of the instrument does not occur until the indorsement is made.

Without the indorsement there is no negotiation of the note , so the transferee is a mere possessor.
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Old 10-18-2010, 01:26 PM   #79
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I think that is the core problem. The shortcuts will have to be corrected and the extra time and costs will bring the system to its knees.

Banking stock anyone?
I don't see this bringing the system to it's knees. It'll hurt the banks. They made their own mess. But IMO at most it will really slow things down and reduce banking profits.

And it might really help the folks trying to sell their houses that NEVER had a foreclosure, because buyers might not want to touch foreclosed properties for a while until title issues are well settled. So non-deadbeat homeowner/sellers might be helped temporarily.

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Old 10-18-2010, 02:06 PM   #80
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And it might really help the folks trying to sell their houses that NEVER had a foreclosure, because buyers might not want to touch foreclosed properties for a while until title issues are well settled. So non-deadbeat homeowner/sellers might be helped temporarily.
Good point. Those with no foreclosure history and also long time owners with high levels of equity might just get a break here.
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