Reconciliation

I'm trying to reconcile these two statements from the MERS Mortgage Registry.

“The MERS System is not a legal system of record or a replacement for public land records. No interests are transferred on the system—they are only tracked,” Smith, Merscorp vice president of corporate communications, wrote in a response to emailed questions. “MERS does not have or maintain any document recording system, public or private, and does not do anything to compete with or supplant the public records for land located in the County records.”

OK. That could be true.

MERS is the true owner of the mortgage, and is not, in the complaint’s words, a “straw man” placeholder listed in public records.“The ‘owner of the loan’ is the party who has possession of the promissory note, but the promissory note is not, and has never been, and is not required to be disclosed or filed in the public records”

I'm now totally confused. I'm a mere engineer with a small understanding of electron flows. This legal stuff has me confused.

Congress to the Rescue.

A new Senate bill proposing to wind down the GSEs by at least 10% a year also includes a provision that would replace the private MERS System with an identical platform run by the Federal Housing Finance Agency (FHFA) — along with new national standards for mortgage title transfers.

The bill outlines the director of the FHFA to establish “MERS 2” and incorporate a single national database for all mortgage title transfers, to be maintained and operated by FHFA.

Well they accidentally let the cat out of the bag.

In his first-ever, and so far only, media interview since becoming president and CEO of Merscorp in April, Bill Beckmann told MT that Merscorp can and must succeed as a revamped company with a higher level of scrutiny on its operation.

“If this model doesn't work, there are only two outcomes I could see,” Beckmann said in the interview, which appeared in the September issue of MT. “One would be a nationalized approach. Personally, I think that's nuts. Why would you go that route when you're already 60% of the way there with something the regulators and the constituents say is OK?”

And who is behind this little proposed bail out of the mortgage slicers and dicers? Sen. Bob Corker, R-Tenn.

So real estate will no longer be a state issue but a Federal one based on Federal preemption. I predict that if they actually try to pull this off the transition will be a bitch.

As my grand pappy used to say, "They are all crooks."

H/T Zero Hedge

Cross Posted at Classical Values

China Opens The Gold Window

Well Gold ATMs actually.

China is one of the world's largest producers and purchasers of precious metals, especially gold and silver. Beijing has now unveiled its first gold ATM machine in a shopping district. More than 2,000 will be installed in the next two years.

I wonder if this is meant to sop up the money that no longer has confidence in Chinese real estate?

Cross Posted at Classical Values

Dialog With The 99%

The New American has some thoughts on the OWS (is that like multiple owies?).

Wall Street drank the alcohol that the Federal Reserve poured. If there was no Fed pouring the alcohol, if Fannie and Freddie weren’t guaranteeing all these mortgages, Wall Street wouldn’t have originated them. So it was Wall Street working with government, but the source of the problem was the government. Government started it. That’s how come when I was warning about the crisis back in 2004-2005, begging the Fed to raise interest rates, trying to get Fannie and Freddie out of the mortgage guarantee business, nobody wanted to listen to me.

Read the whole thing. And watch the video.

Caught In The Rigging

Reason Magazine is looking at why banks don't do more to clean up the mortgage mess.

The point has already been made but I think it is worth repeating: if you can't trace the actual owners of the mortgage due to bad paperwork what would be the point of foreclosure? To get the bank into a spat with the lawyers guild?

The game was rigged and now the banks are stuck in the rigging.

Confirmation With A Leftist Bias

I have written a few articles about the real estate debacle and how it came to be. Basically the government took over the mortgage LOAN business. Banks and other financial institutions still ORIGINATED mortgages but they no longer put up the money for the loans. That was the job of a couple of Government Sponsored Enterprises(GSEs). Fannie Mae and Freddie Mac as they are colloquially known.

It is all explained by some New York Times authors in Reckless Endangerment: How Outsized Ambition, Greed, and Corruption Led to Economic Armageddon. The leftist bias? They are New Your Times authors. Thus they are at least nominally arguing against interest.

This customer review nails it (and repeats what I have been saying - it was a government job).

Morgenson and Rosner have done their homework and written an in depth and hard-hitting book that reveals with perfect clarity how this mess began. It's refreshing to read a book that doesn't rehash the Wall Street stories we've all heard over and over. I'm much more interested at this point in the characters in Washington who were championing home ownership and enriching themselves as they set the stage for disaster, and who really have remained blameless up to now. The sense of outrage the authors feel comes through on every page and the book is actually a page-turner in addition to being a real narrative, unlike some of the other books on the crisis, with a beginning and an end. Great storytelling and great reporting as well. Read it!!!

I'm looking forward to a time when Chris Dodd and Barney Frank become standard American villians with a reputation similar to what Joe McCarthy and his "witch hunts" once had. McCarthyism!!! Frankism? Doddism? We are going to need a snappier name.

Misunderstanding Libertarians

Reason Magazine takes a look at a Salon article that interviewed some Reason editors.

Well, you guys wrote your book in the shadow of the Great Recession, but the book never actually addresses how the recession happened in the first place. And critics of libertarianism often cite the different actors in the subprime mortgage crisis, arguing that they took advantage of an unregulated system to consolidate power, and took advantage of a lack of understanding amongst consumers to sell them products that they didn't fully understand.

MW: It's a big question, so I'll just take on little bits of it. One is the notion that the financial crisis was caused by deregulation... The central libertarian argument about what to do in the wake of a financial crisis is let the people who made these terrible decisions go bankrupt. And when appropriate -- and do it early and often -- send the motherfuckers to jail, you know?

How about we start with Franklin Raines and Daniel Mudd? A couple of the motherfuckers involved who really could use some jail time.

Can't Buy A Clue

Diana Olick was discussing the state of the housing market and it wasn't just current bad news that bothered her.

I have to say, leaving yesterday's conference, I felt a strange unease, not because we talked about the same barriers to recovery that I talk about every day of the week, but because all these experts who are supposed to tell us when it's all going to be alright...don't have a clue.

So what does that mean? It means that a turn around by June of 2012 is very unlikely. The prospects for November 2012? Real Estate will be a dead weight on Democrat prospects.

The Riots In China You Never Heard About

This is a story I have been meaning to get to for over a week. I've been lazy. But with the "China's Rise America's Fall" stories being so prevalent these days I thought some counter balance was in order. And what are the riots about? Inflation and wages.

Yesterday we reported news that has so far received almost no media exposure, namely that thousands of striking truck drivers had poured into Shanghai's Waigaoqiao zone, one of the city's busiest container ports, protesting over "rising fuel prices and low wages." Today, via Reuters, we learn that this situation has escalated materially, and progressed into violence: "A two-day strike over rising fuel prices turned violent in Shanghai on Thursday as thousands of truck drivers clashed with police, drivers said, in the latest example of simmering discontent over inflation. About 2,000 truck drivers battled baton-wielding police at an intersection near Waigaoqiao port, Shanghai's biggest, two drivers who were at the protest told Reuters. The drivers, who blocked roads with their trucks, had stopped work on Wednesday demanding the government do something about rising fuel costs, workers said." And while we have violent uprisings over austerity in Europe, now we have violent strikes over inflation in China?

So the next time you hear about the swift and painless ascent of China don't be so sure. At the very least it will not be painless.

Go to the article for more links. And don't forget the comments. Here is part of one I particularly liked.

by PulauHantu29

The PRC "injected" over $800 Billion (officially) into their economy, i.e., directly into their RE and stock market (na dinto the pockets of wealthy RE developers) and creating more Billionaires in China then in the USA in just two year! Add to that the trillions of "hot money" and those markets became a bigger Bubble then the USA subprime imo.

Last year I watched TV interview various people complaining about rising food and housing...the PRC CB did nothing.

Last November I watched PBS interview a Shanghai realtor who said "prices are rising over 8% per month"...the PRC CB did nothing. Rural peasants were complaing that food was too expensive. One old man said "green peppers rose 300% in one month"....no action was taken to curb the problem.

Now we have riots and protests and the gubberment there is behind the curve.

The net of the comments? A hard landing is predicted for China.

Cross Posted at Classical Values

The Weapon Shops Of Isher

The Weapon Shops of Isher By A.E. Van Vogt is one of my all time favorite science fiction books. It tells of a shadowy organization "The Weapon Shops" designed to redress the grievances of a corrupt galactic empire.

It was brought to mind by a story Instapundit linked to about the breakdown in the mortgage market. Middle Class Anarchy. And what a story it is.

On Saturday October 9th the Earls and their attorney followed thru with their previous threats and took the law into their own hands. They hired a locksmith to break into the Mustang home. They had arranged to have t.v. news cameras filming their actions, and then proceeded to hold a press conference stating that they were within their rights and that we (Conejo Capital Partners) had somehow violated the law. All along the Simi Valley Police Department sat idle and refused to get involved no matter how much proof was offered supporting our legal rights and position. We were told that we needed to resolve it in front of a judge even though it had already been decided.

That is the "bank's" side of the story from a news report.

The story asks a very important question. Where did the lawlessness originate? The banks. And despite admitted fraud no one at the banks, or those who were contracted by the banks is being prosecuted. (Just so you know - I'm using "banks" as a sort of generic term for the money movers. Loan arrangers as it were.)

Evidently there is a problem with the law. To wit: judges unaware of the existance of the Constitution.

If the foreclosure was unlawful and initiated with "robosigned" and bogus documents then it was. The Earls apparently attempted to demand a jury trial on the facts (including these facts) and were told to go to hell. Someone hasn't read their Constitution lately - it says that for all controversies exceeding $20, you have a right to a trial by jury (7th Amendment). It doesn't say that if it's inconvenient for a bank and might expose criminal fraud for which bank officers could be imprisoned the judge can tell you to pound sand. That, standing alone, broke the chain of lawful behavior in the instant case.

This is where lawlessness leads us - to more lawlessness. Once you commit a lawless act against someone and are not punished for it you have invited them to retaliate with complete disregard for the law in their response. You are only required to deal ethically and morally with an ethical and moral entity across the table - one who ignores the law loses their right to demand that respect in return.

This mess begins with the securitization and sale of these mortgages in the first instance. It begins with whether or not the original banks actually transferred the notes at all (there's plenty of evidence they did not) and whether the representations and warranties were complied with when these securities were sold to investors (we know in many cases - if not all - they were not, from FCIC sworn testimony.)

A very hard rain is going to fall. In fact I predict 20 ton (metric) blocks of hail.

The article closes with:

We are not far away from a complete and total breakdown of lawful behavior among the population of this nation. If it happens, it will not be because of people like the Earls. While I cannot recommend a lawless response to any insult suffered by people like them I will understand what has happened and why - and who's to blame.

This has and will in the future occur because the government has refused to enforce long-standing laws against "favored people", allowing the general public to be asset-stripped mercilessly through various connivances and frauds, even though such conduct is blatantly unlawful - and the people have simply had enough of being treated like a turkey drumstick at an amusement park.

The blame for this incident and those like it rests squarely with Mr. Holder, President Obama, Tim Geithner, Ben Bernanke, President Bush, Hank Paulson and the 50 States Attorneys General who have all refused, collectively, to prosecute the rampant lawlessness in our financial system for the previous two decades - and are still refusing today.

You know. This sort of thing is enough to turn elections. And if that doesn't cure the problem we should consider ourselves lucky that America has plenty of trees. And matches (well lighters mostly these days). And fire arms. Fortunately only a moderately enraged populace so far.

I am definitely in favor of seeing this mess solved without violence, arson, or any of the other of the Devil's tricks. But that means the devils who caused this mess must be constrained and then banished. Because unrestrained deviltry breeds more Deviltry.

Cross Posted at Classical Values

Cheery News - It Is Way Worse Than We Thought

As most of you know by now there has been massive incompetence or fraud (take your pick - the initial net result is about the same) in the mortgage issuance and foreclosure markets. I covered that at Who Has The Title? You might want to visit there for some background.

The Financial Times finds that at least at Wells Fargo Bank it was straight up fraud.

Unlike its rivals, Wells Fargo has not halted foreclosures. The San Francisco-based bank said on Tuesday it was reviewing some pending cases, but it has maintained that it has checks and balances designed to prevent serious procedural lapses.

In a sworn deposition on March 9 seen by the FT, Xee Moua, identified in court documents as a vice-president of loan documentation for Wells, said she signed as many as 500 foreclosure-related papers a day on behalf of the bank.

Ms Moua, who was deposed as part of a foreclosure lawsuit in Palm Beach County, Florida, said that the only information she verified was whether her name and title appeared correctly, according to the document.

Asked whether she checked the accuracy of the principal and interest that Wells claimed the borrower owed – a crucial step in banks’ legal actions to repossess homes – Ms Moua said: “I do not.”

Ms Moua nevertheless signed affidavits that said she had “personal knowledge of the facts regarding the sums of money which are due and owing to Wells Fargo”. The affidavits were used by the bank in foreclosure proceedings.

Ms Moua added that before reaching her desk, it was her understanding that the foreclosure documents had been reviewed by outside lawyers.

Ah but it gets worse.

In an effort to rush through thousands of home foreclosures since 2007, financial institutions and their mortgage servicing departments hired hair stylists, Walmart floor workers and people who had worked on assembly lines and installed them in "foreclosure expert" jobs with no formal training, a Florida lawyer says.

In depositions released Tuesday, many of those workers testified that they barely knew what a mortgage was. Some couldn't define the word "affidavit." Others didn't know what a complaint was, or even what was meant by personal property. Most troubling, several said they knew they were lying when they signed the foreclosure affidavits and that they agreed with the defense lawyers' accusations about document fraud.

"The mortgage servicers hired people who would never question authority," said Peter Ticktin, a Deerfield Beach, Fla., lawyer who is defending 3,000 homeowners in foreclosure cases. As part of his work, Ticktin gathered 150 depositions from bank employees who say they signed foreclosure affidavits without reviewing the documents or ever laying eyes on them -- earning them the name "robo-signers."

The deposed employees worked for the mortgage service divisions of banks such as Bank of America and JP Morgan Chase, as well as for mortgage servicers like Litton Loan Servicing, a division of Goldman Sachs.

The bankers were running the banks as if they were casinos. Except that the wheel has come up double zeros. And that is not their number.

H/T Tyler Durden Tyler also has a long explanation of why this is so bad. Money For Nothing And Houses For Free

Update: 15 Oct 1010 1111z

Head of Freddie Mac dead of apparent suicide.
The Best Congress Fannie Could Buy might explain it.

Cross Posted at Classical Values

Who Has The Title?

Someone threw a book at Obama during a rally to raise morale among Democrats. Does any one know what the title of the book is?

Which brings us to another question about titles. This time the titles in question are the documents that prove ownership. It seems that with the slicing and dicing of mortgages clear title is rather unclear.

Evidently when people are in a hurry they make mistakes.

Bank of America is delaying foreclosures in 23 states as it examines whether it rushed the foreclosure process for thousands of homeowners without reading the documents.

The move adds the nation's largest bank to a growing list of mortgage companies whose employees signed documents in foreclosure cases without verifying the information in them.

Didn't read the paperwork? I thought it was Congress' job to avoid reading the paperwork. In theory banks are supposed to be held to a higher standard.

One cause of the problem is that banks relied on one company to do all the work and they weren't up to the job. Kind of like the Democrats in Congress.

Some of the nation's largest mortgage companies used a single document processor who said he signed off on foreclosures without having read the paperwork - an admission that may open the door for homeowners across the country to challenge foreclosure proceedings.

The legal predicament compelled Ally Financial, the nation's fourth-largest home lender, to halt evictions of homeowners in 23 states this week. Now it appears hundreds of other companies, including mortgage giants Fannie Mae and Freddie Mac, may also be affected because they use Ally to service their loans.

As head of Ally's foreclosure document processing team, 41-year-old Jeffrey Stephan was required to review cases to make sure the proceedings were legally justified and the information was accurate. He was also required to sign the documents in the presence of a notary.

In a sworn deposition, he testified that he did neither.

The reason may be the sheer volume of the documents he had to hand-sign: 10,000 a month. Stephan had been at that job for five years.

Let me see. that would be 10,000 times 60. Or about 600,000 mortgages. See? Unlike the Democrats in Government I can do numbahs.

Well this may be a case where Obama did the right thing.

President Obama stepped into a growing political furor over the nation's troubled foreclosure system Thursday by vetoing a little-known bill that critics say would have made it easier to evict homeowners who missed their payments.

The decision to block the measure, which Congress passed without debate, came as members of the president's own party have urged the administration and federal regulators to more actively address the crisis over flawed foreclosures.

Meanwhile, attorneys general from about 40 states vowed to band together to investigate reports of fraudulent documents and of banks seizing property without having clear ownership of the mortgages.

At least 10 states - with Iowa and Delaware being the latest - are seeking to expand a voluntary freeze on foreclosures by some of the nation's largest mortgage lenders to include more companies and more regions. And calls have increased for a nationwide moratorium - a move that could deal a blow to the earnings of big banks and grind to a halt the sale of millions of properties in foreclosure.

In the middle of a heated election season, a growing number of politicians have been eager to weigh in on the matter - and are taking pains to rebuke the financial institutions at the core of the controversy.

Evidently the reason for the veto is that there are more home owner voters than banker voters.

And the central problem? Bankers created new "security" instruments while bypassing the safeguards meant to prevent fraud in the real estate market. Then they sliced and diced the mortgages. You could buy the income from the interest on the mortgage. Or you could buy the income stream from the repayment of capital. And probably other things I'm not even aware of (I'm an engineer - not a banker). And the income streams from many mortgages were bundled together and sold as "securities". And every time the securities changed hands the title got cloudier. And at this point it is not exactly clear who owns what.

And that is causing problems for title insurance companies.

Sales of foreclosed properties, already stalled by mounting evidence of widespread flawed documentation practices by lenders and attorneys, may hit another roadblock: New buyers might not be able to get the title insurance required for a mortgage.

New House Title, owned by a large Tampa foreclosure law firm under state investigation, this week denied coverage for a 2009 Deerfield Beach condo foreclosure that its own attorneys had handled, citing potentially defective court filings.

The New York Times last week also claimed Old Republic National Title, the fourth largest title insurer in the country, had sent a memo to its agents in some states saying the company would not cover homes foreclosed on by JPMorgan Chase until "objectionable issues have been resolved." Earlier, the company had taken the same stand on homes foreclosed by GMAC Mortgage, now owned by Ally Bank.

All I can say is that if I designed airplanes they way these bankers handled their obligations, no one would dare step foot on an aircraft.

Cross Posted at Classical Values

Total Loss

Seeking Alpha is taking a look at the problem with bundled mortgages. And they are huge. As in bigger than you can possibly imagine.

Mortgages bundled into securities were a favorite investment of speculators at the height of the financial bubble leading up to the crash of 2008. The securities changed hands frequently, and the companies profiting from mortgage payments were often not the same parties that negotiated the loans. At the heart of this disconnect was the Mortgage Electronic Registration System, or MERS, a company that serves as the mortgagee of record for lenders, allowing properties to change hands without the necessity of recording each transfer.

MERS was convenient for the mortgage industry, but courts are now questioning the impact of all of this financial juggling when it comes to mortgage ownership. To foreclose on real property, the plaintiff must be able to establish the chain of title entitling it to relief. But MERS has acknowledged, and recent cases have held, that MERS is a mere “nominee” — an entity appointed by the true owner simply for the purpose of holding property in order to facilitate transactions. Recent court opinions stress that this defect is not just a procedural but is a substantive failure, one that is fatal to the plaintiff’s legal ability to foreclose.

I see a lot of work ahead for lawyers.

Update: More at Stop Foreclosure Fraud

Cross Posted at Classical Values

Europe Is Cracking

The EUReferendum has a few words about the status of the Euro.

...Merkel is now admitting - that the trillion-dollar stabilisation package that the "colleagues" cobbled together last week merely "buys time". It solves nothing in the medium to long-term and, in fact, its beneficial effect may not last even weeks. Serious commentators are now quite openly talking about the collapse of the euro.

And this is what is more than a little surreal about the whole issue. The prospect of the euro collapsing is serious. Despite our willing it to happen, the impact on currency markets and the EU member state economies would be catastrophic – and prolonged. We could quite easily see Europe dragged into a depression, the like of which made the 1920s look like a rehearsal.

If Europe and the UK go down the US will definitely take a hit. A big hit. That could lead to a double dip recession. If that is followed by the collapse of the Chinese real estate bubble there could be a triple dip. And that is not even counting the uncleared real estate overhang in the US.

Richard North has more at Crash and Burn.

H/T Chuck at Pounding The Pound

Reality Check

Dr. Housing Bubble is looking at the state of the real estate market. It is not good. Not good at all.

Let me start with a quote that explains the above chart.

The ultimate sign of housing distress is foreclosure. This should be obvious. So for all the talk of a housing recovery I point to the above chart. Today, as in right now, we are in record territory for the number of homes in foreclosure. 14 percent of all U.S. mortgages are in some form of foreclosure.

So are things actually improving? Would the government lie to you? No and yes.

...foreclosure filings are still at record levels. In fact we are heading to a 3.5 to 4 million foreclosure year in 2010! This is somehow a positive thing for the market? People forget that foreclosures happen because of underlying economic issues. If everyone was making big bucks and homes were going up in value then we wouldn’t have this problem. Just look at the number of foreclosure filings back in 2005. Roughly 60,000 to 70,000 per month. Last month we hit 367,000+ which was an all time record. When foreclosure filings get back down to more normal levels, then we can say the housing market is improving.

If the numbers are still rising then things are not improving. No matter what the government says.

So who is making the housing market these days (providing loans)? I'm sure you can guess. But no need for guessing. There are answers.

96.5% of all originated loans are now government backed. Remember Fannie Mae and Freddie Mac and their epic continuing losses?

The housing market has been nationalized. As in bought by the government. I suppose it is better than outright theft. That comes later when taxes have to rise to pay for the "fun".

Banks are moving on current REOs (the small batch that they have) and pumping this up as good news but the 90 days plus foreclosure number is still trending up. How is this magic done? We’ve talked about it above. You simply don’t move on delinquent homeowners. You ignore actual losses. You mark your assets to fantasy valuations.

In total the housing market is in worse shape today than it was a few years ago.

So that may explain why the economy seems to be trending up. A LOT of home owners are living rent free. Why does that make any sense at all? Two reasons come to mind. One is that if the banks had to acknowledge their losses they would be failing. Which is to say the banking system is kaput. Another reason is that a property with people living in it will be better maintained than one that is vacant.

Now about the nationalization of the mortgage industry.

The bailouts have been one large transfer of wealth to the banking sector. Remember that the bailouts were brought about under the guise of helping the housing market and keeping people in their homes. None of that has happened. Ironically the only thing that seems to keep people in their home is when they stop paying their mortgage! If that is the strategy we have arrived at after $13 trillion in bailouts and backstops to Wall Street we are in for a world of problems.

Yes we are.

May I also suggest reading Foreclosures, Auctions, and Banks Obscuring Financial Data by Dr. Bubble.

My guess is that Europe is in no better shape. And that does not even take into account the coming collapse of the Chinese real estate bubble.

Cross Posted at Classical Values