be confused by all of the confusion...
While this problem is real, and serious, there is too much mis-information and speculation being made.
Below are some observations/clarifications.
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John,
There are some critical pieces of information missing in all of the discussions of these issues. In my opinion the most important questions yet to be answered are:
1. Are the mortgage in question the more complex and now defunct private label ALT-A and subprime loans, Conforming FNM/FRE loans or both? In my experience as a mortgage broker conforming loans were originated to tighter standards with less shortcuts taken. Most of the high flying players who were relatively loose with the rules did ALT-A and subprime business. The main examples would be Aurora Loan Services and Bear Stearns Residential Mortgage/EMC mortgage who were huge wholesale and correspondent players taking in much of the ALT-A and subprime junk of 2005-2007.
2. How much of this has to do with MERS? There have been separate lawsuits with MERS as a central issue. Are these issues truly separate or will they compound? MERS seems to be a case-by-case situation with judges taking both sides of the issues and no clear resolution in sight.
3. The worst case scenario here is the banks being forced to sit on properties which lack marketable title. This can take a tremendous amount of time to cure and will likely involve some opportunistic attorneys. The banks will than be burdened with disposing of these assets.
There are some critical pieces of information missing in all of the discussions of these issues. In my opinion the most important questions yet to be answered are:
1. Are the mortgage in question the more complex and now defunct private label ALT-A and subprime loans, Conforming FNM/FRE loans or both? In my experience as a mortgage broker conforming loans were originated to tighter standards with less shortcuts taken. Most of the high flying players who were relatively loose with the rules did ALT-A and subprime business. The main examples would be Aurora Loan Services and Bear Stearns Residential Mortgage/EMC mortgage who were huge wholesale and correspondent players taking in much of the ALT-A and subprime junk of 2005-2007.
2. How much of this has to do with MERS? There have been separate lawsuits with MERS as a central issue. Are these issues truly separate or will they compound? MERS seems to be a case-by-case situation with judges taking both sides of the issues and no clear resolution in sight.
3. The worst case scenario here is the banks being forced to sit on properties which lack marketable title. This can take a tremendous amount of time to cure and will likely involve some opportunistic attorneys. The banks will than be burdened with disposing of these assets.
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Phjilip Gvinter - - -
You have very good points about what we don't know yet. There is much discovery yet to take place.
With respect to MERS, it seems to me that those MERS served (primarily banks) were responsible for making the proper legal filings. It will be interesting to see if further discovery supports my impression or not.
I see this as a potential financial hit to banks. They will not be able to control the timing of foreclosure and subsequent REO sales; they may be exposed to investor civil action for restitution of lost capital; and homeowners (mortgagors) may file suit for financial damage. Even if the banks are able to prevail in some of these cases the legal fee expense will by significant. (That is a segue to your final point.)
And then there is the point that Yves raises in her summary article linked in my article. She feels that we have to be on alert that the banks don't manipulate government involvement in such a way that the result is tantamount to another backdoor bailout.
You have very good points about what we don't know yet. There is much discovery yet to take place.
With respect to MERS, it seems to me that those MERS served (primarily banks) were responsible for making the proper legal filings. It will be interesting to see if further discovery supports my impression or not.
I see this as a potential financial hit to banks. They will not be able to control the timing of foreclosure and subsequent REO sales; they may be exposed to investor civil action for restitution of lost capital; and homeowners (mortgagors) may file suit for financial damage. Even if the banks are able to prevail in some of these cases the legal fee expense will by significant. (That is a segue to your final point.)
And then there is the point that Yves raises in her summary article linked in my article. She feels that we have to be on alert that the banks don't manipulate government involvement in such a way that the result is tantamount to another backdoor bailout.
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Phil & John, with regard to your first point/question: We have repeatedly, so will not again here, pointed out the securitized (not?) sand state mess. What we DO know is that about 85% of those 03-07 bad sand state RE loans are now in some stage of "trouble", AND we know that almost all of them are "securitized" loans being managed by/under the MERS system.
What that should suggest to all of U.S. are two things: the most severe part of this foreclosed property crisis is in fact localized in the sand states; and that most of those Alt-A, ARMs and subprime RE loans were originated by, are now serviced by, and are being foreclosed by Chase/WAMU, BoA/Countrywide and Wells/Wichovia.
While we are NOT saying that everyone who did not deal with them are OK, we ARE saying that those who DID deal with them, and have Alt-A, ARMs or subprime RE loan, probably are not.
What that should suggest to all of U.S. are two things: the most severe part of this foreclosed property crisis is in fact localized in the sand states; and that most of those Alt-A, ARMs and subprime RE loans were originated by, are now serviced by, and are being foreclosed by Chase/WAMU, BoA/Countrywide and Wells/Wichovia.
While we are NOT saying that everyone who did not deal with them are OK, we ARE saying that those who DID deal with them, and have Alt-A, ARMs or subprime RE loan, probably are not.
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Phil & John, with regard to your 2nd point/question: there are two quite different problems that must be distinguished.
The first problem is that what was required for the valid transfer of the mortgagee's interest simply did not happen. While that places the current so-called "holder/mortgagee" of the mortgage legally out of luck, it does NOT mean that the original note & mortgage are in any way impaired. IF you are the original mortgagor, YOU have two valid contracts - the note & the mortgage. You can force compliance with those two documents. Therefore, the problem is NOT yours.
You, and/or your original title company can solve any questions/problems, simply. Including your sale, refi or estate transfers.
The second problem is that some of the "lost" documents that were needed to prove the chain of title were, in fact, forged. Again, that is not the owner/mortgagor's problem. It IS a serious problem for the current holder/mortgagee and any subsequent purchaser. IF the current/foreclosing putative mortgagee is, in fact, NOT the true mortgagee, then the foreclosure is based upon fraud, and probably is void. You cannot take back what you had no right to in the first place. And, you cannot re-convey what you do not have.
The first problem is that what was required for the valid transfer of the mortgagee's interest simply did not happen. While that places the current so-called "holder/mortgagee" of the mortgage legally out of luck, it does NOT mean that the original note & mortgage are in any way impaired. IF you are the original mortgagor, YOU have two valid contracts - the note & the mortgage. You can force compliance with those two documents. Therefore, the problem is NOT yours.
You, and/or your original title company can solve any questions/problems, simply. Including your sale, refi or estate transfers.
The second problem is that some of the "lost" documents that were needed to prove the chain of title were, in fact, forged. Again, that is not the owner/mortgagor's problem. It IS a serious problem for the current holder/mortgagee and any subsequent purchaser. IF the current/foreclosing putative mortgagee is, in fact, NOT the true mortgagee, then the foreclosure is based upon fraud, and probably is void. You cannot take back what you had no right to in the first place. And, you cannot re-convey what you do not have.
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Jeff & John: you have most of this backwards.
IF you currently "own" a home, mortgaged or not, you still CAN sell, refi, devise or gift it to your kids or girlfriend(s); and any title co - note that YOUR original title co is your best bet - will issue you title insurance. And, defend your title.
This crisis is NOT yours!
Oddly, current owners, having valid titles to convey, might be able to sell out now where all the foreclosed competition is tied up in court. And, for more than they could have gotten recently.
Even more oddly, recent "investment" buyers, and the rest of U.S., who cannot re-sell or rent or eat their properties might be able to sue the foreclosed property sellers, and/or title cos, to get their money back, with damages. (Don't go telling all Those Attorneys about this one.)
Jeff, point me to even one (1) example of a title co refusing to insure any and all existing homes, other than a foreclosure. Take a deep breath, and relax. Please, so you can write to U.S. again.
And, John, forgive me for taking you back to Jan08 when there was NO non-agency funding, to July08 when there was NO funding for RE anywhere, at any price, from anybody - unless W placated China and "nationalized" FMae&FMac.
Oh, we know, John, what if the dog hadn't barked.
IF you currently "own" a home, mortgaged or not, you still CAN sell, refi, devise or gift it to your kids or girlfriend(s); and any title co - note that YOUR original title co is your best bet - will issue you title insurance. And, defend your title.
This crisis is NOT yours!
Oddly, current owners, having valid titles to convey, might be able to sell out now where all the foreclosed competition is tied up in court. And, for more than they could have gotten recently.
Even more oddly, recent "investment" buyers, and the rest of U.S., who cannot re-sell or rent or eat their properties might be able to sue the foreclosed property sellers, and/or title cos, to get their money back, with damages. (Don't go telling all Those Attorneys about this one.)
Jeff, point me to even one (1) example of a title co refusing to insure any and all existing homes, other than a foreclosure. Take a deep breath, and relax. Please, so you can write to U.S. again.
And, John, forgive me for taking you back to Jan08 when there was NO non-agency funding, to July08 when there was NO funding for RE anywhere, at any price, from anybody - unless W placated China and "nationalized" FMae&FMac.
Oh, we know, John, what if the dog hadn't barked.
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Point well taken, however you are making two of them.
First, remember all property is a bundle of sticks. Bcuz of their own screw ups the current holder/mortgagee probably cannot "repossess" the property. Since their "secured interest" was not perfected, they "lost it" - figuratively & literally.
Second, that does NOT change their ability to collect the money. Contract law is not property law. Nor are either equity law. While they did loose their property rights to repossess, they still have the contractual rights to collect the money. However, there may be another "nice", little, common law, legal problem - he who asks equity must give equity.
If it can be shown that they intentionally committed fraud, they might be denied even their contractual rights of recovery. Now, wouldn't that be almost too delicious.
First, remember all property is a bundle of sticks. Bcuz of their own screw ups the current holder/mortgagee probably cannot "repossess" the property. Since their "secured interest" was not perfected, they "lost it" - figuratively & literally.
Second, that does NOT change their ability to collect the money. Contract law is not property law. Nor are either equity law. While they did loose their property rights to repossess, they still have the contractual rights to collect the money. However, there may be another "nice", little, common law, legal problem - he who asks equity must give equity.
If it can be shown that they intentionally committed fraud, they might be denied even their contractual rights of recovery. Now, wouldn't that be almost too delicious.
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Foreclosure Moratorium: What Does It Mean for the Housing Market?
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