The pooling and servicing agreement, which governs who does what when in a mortgage securitization, requires the note to be endorsed (just like a check, signed by one party over to the next), showing the full chain of title, and the minimum conveyance chain is A (originator) => B (sponsor) => C (depositor) => D (trust). The endorsements also have to be wet ink; no electronic signatures permitted...'' [Posted by Michael Pollak]
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Wow! This is unbelievable. So this is why BofA and others are haulting their foreclosures. IMHO, this is almost the story of the year in financial sector fraud. I suspect the story is being heavily spun by WSJ, as a sign of banker-government generosity:
``Senior Obama administration officials said Friday that a nationwide moratorium on foreclosure sales may be inevitable, despite their grave reservations about the impact a broad freeze would have on the nation's housing market and economic recovery.''
http://www.washingtonpost.com/wp-dyn/content/article/2010/10/08/AR2010100806850.html
I'd sure like to read or listen to an in depth examination of the implications of this---hint, hint Doug for a Behind the News interview.
I'll sketch out what I think are the implications. But I am worried these are somehow incorrect. So, anybody step in and do the correction.
If I understand this essay, it means that millions of foreclosures are illegal proceedures. Even worse (or better) those proceedures can not in principle be made legal because the court required documentation does not exist. In turn this means there is no legal owner of a lien or mortage. In effect, if you live in one of these houses, all you have to do is pay taxes, utilities and you are the owner, by possession. When you are served papers, you go to court and demand proof of ownership of your mortage or lien.
On the lien holder's side, if BoA can't prove it owns the mortage, then dosen't own it. Double wow. If a court demands that I produce a pink slip for my truck, I have to produce a pink slip or I do not own the truck.
Whoever these home `owners' are currently paying, they don't have to pay, because that company or corporation doesn't own the lien.
You can force a forclosure by not paying on the mortage, go to court and demand proof of lien holder. If they can't produce that document, the foreclosure stops by de fault. They can say they lost it and swear. Or they can produce a counterfeit document, which your lawyer should demand be certified as original. If it is an original you can demand the signatories be produced in court or by affividavit they have the proper rank and authority to sign. This creats a whole chain of frauds.
Now as I understand, on the other side, there are no legal owners of these mortages because they have been packaged in bundles and sold as MBS without the necessary signatures of potential sale on each individual mortage. Fucking mind boggling.
I think this means there is no money value to these packages, because the collection was never sold by the firm who drew up MBS and sold or potentially delivered it---because they never got all the necessary signatures for the individual documents to sell them. Amazing.
Let's say that is a near representatino. Please LBO, clear up mistakes in my understanding.
If the above is a near representation, it means that some or maybe some huge percentage of MBSs are completely worthless. I think this follows from the probability that the foreclosures unmask the problem of signatures. That doesn't exclude the probability that many more, even most mortages that are being paid, are not in the same illegal position.
``In other words, in none of the cases this large group has seen were the notes transferred to the trust properly.'' (from the above quoted essay)
Let's say that is the case. What happens to credit default insurance business? The MBSs buyers insured themselves against a bundled security losing value. Most of these now contain some percentage of mortages with unmasked zero value and no doubt many with unexamined value, meaning potentially zero, because of no wet signatures of transaction. So the insurance against a fall in value (if it is disclosed) is now obligated to pay on the MBS stated value or some percentage of that stated value.
``But while it is clear the notes weren't handled properly, I'm not certain that this electronic scanning story is accurate either (meaning it isn't standard practice in mortgage land).''
Even this passage seems to have spin. Not handled properly? You mean illegal? Were not lawyers supposed to review these transactions and sign them in wet signature?
Photocopying is a very good way to produce counterfeit anything, including money. If you examine money with a lupe, you discover it is a photocopy process on special paper with special inks, and alignment. This means only the ink and paper make it `real'. I wonder if the US Treasury uses the Pantone ink system?