Mike the Mad Biologist

…Big Shitpile is looking more and more shitty. Last week, I wrote about how the dissolution of the bond between lenders and borrowers could lead to a home owner debtors’ revolt. One of the key issues is that, when mortgages are bundled and sold to other parties, such as investment banks, the mortgage assignments are often made illegally–or perhaps more accurately, extralegally, since they are often not registered with the appropriate government authorities.

This makes a recent decision from the Massachusetts Land Court very interesting:

The blank mortgage assignments they possessed transferred nothing…in Massachusetts, a mortgage is a conveyance of land. Nothing is conveyed unless and until it is validly conveyed. The various agreements between the securitization entities stating that each had a right to an assignment of the mortgage are not themselves an assignment and they are certainly not in recordable form…The issues in this case are not merely problems with paperwork or a matter of dotting i’s and crossing t’s. Instead, they lie at the heart of the protections given to homeowners and borrowers by the Massachusetts legislature. To accept the plaintiffs’ arguments is to allow them to take someone’s home without any demonstrable right to do so, based upon the assumption that they ultimately will be able to show that they have that right and the further assumption that potential bidders will be undeterred by the lack of a demonstrable legal foundation for the sale and will nonetheless bid full value in the expectation that that foundation will ultimately be produced, even if it takes a year or more. The law recognizes the troubling nature of these assumptions, the harm caused if those assumptions prove erroneous, and commands otherwise. [Italic emphasis in original.] (U.S. Bank National Association v. Ibanez/Wells Fargo v. Larace)

In Ohio, a related decision reveals that, at least some members of the judiciary view these improper foreclosures and the ‘shadow’ mortgage assignment system that enables them as a threat to government authority:

Plaintiff’s ‘Judge, you just don’t understand how things work,’ argument reveals a condescending mindset and quasi-monopolistic system where financial institutions have traditionally controlled, and still control, the foreclosure process…There is no doubt every decision made by a financial institution in the foreclosure is driven by money. And the legal work which flows from winning the financial institution’s favor is highly lucrative. There is nothing improper or wrong with financial institutions or law firms making a profit – to the contrary, they should be rewarded for sound business and legal practices. However, unchallenged by underfinanced opponents, the institutions worry less about jurisdictional requirements and more about maximizing returns. Unlike the focus of financial institutions, the federal courts must act as gatekeepers… (In Re Foreclosure Cases)

While this might seem a bit esoteric, this is not a small problem: most mortgages which have been bundled have very shoddy paper trails. Here’s the frightening scenario. First, desperate people, in danger of losing their homes, attempt to hold on to them by requiring the paper trail. As this proves successful (and there really isn’t a reason to think it won’t be), other people, figuring that they don’t have to pay their mortgages either, will also demand to see the paper trail. At that point, Big Shitpile becomes the Mother of All Meltdowns.

Much of what has already happened probably wouldn’t have occurred if there had been serious cramdown legislation (forcing mortgages to lower values). Wages of sin and all of that, I suppose….

Somebody might want to do something about this.

Comments

  1. #1 Tony P
    October 24, 2009

    That’s key to any debt. They have to prove that you accepted the terms of the debt. Ask em’ to provide the paperwork you signed, give em’ 30 days or else complaint dismissed and clear title belongs to you.

  2. #2 megan
    October 24, 2009

    But another way for people in financial trouble to be swindled out of their houses and not be covered by original government oversight are the delinquent property tax sales that are happening around the country by counties and cities wanting to make a quick buck by selling the tax liens to property investors who get primacy like the government over collection/foreclosure by banks even and don’t have to offer terms or leniency like the goverment or the bank. Just show their papers to the sheriff and your shit is out on the curb like a renter/tenant and for a dime per dollar they own a shit nice house (if you didn’t trash or torch it on your way out or after the sheriff leaves. };-)

    Many people wanting the home ownership dream fell for mortgages that sounded cheaper by declining to have the PMI included in the payments. So instead they get behind twice a year, jarred by the property tax bill that shows up in June when they just wasted 600-1000bucks on a vacation or something.

  3. #3 llewelly
    October 25, 2009

    Foreclosures drive home prices down. They lower the value of the other mortgages financial institutions continue to hold. They create empty houses which drives many kinds of crime up. They create homeless people. The fewer people lose their homes the better. If these decisions prevent “financial” institutions from foreclosing, that’s a good thing. I believe things of this sort will make any kind of violence less likely, as well as helping the economy. In fact – a temporary ban on all foreclosures – period – would almost certainly be a good thing.

  4. #4 Paul Murray
    October 26, 2009

    The reason the government wants i’s dotted and t’s crossed when it comes to mrtgaes is perfectly straightforward and obvious: an acre of land in (say) Ohio is a tiny chunk of Ohio itself. It’s not like a container load of widgets. The polity insists that transfers of ownership of land therefore only happen at the express consent of the polity.

  5. #5 Nora
    October 26, 2009

    That is an absurd, ask for them the papeworks, they cant prove anything without papeworks signed by you. Dont give up, the pressure will be big and hard, but dont give up, if the things will be hard to deal, hire a lawyer. Good Lucky

  6. #6 Credit Card Debt Relief
    October 14, 2010

    It is quite obvious that a homeowner would never like to loose his home and would try to save it by hook or by crook. Everyone is right at his place.

  7. #7 Hank Roberts
    November 24, 2010

    > Credit Card Debt Relief
    ‘oogle that one, it’s a blogspammer