Petem95

It seems there is a very good reason why a lot of major US banks have put a freeze on foreclosures (home repossessons) just the other week....

Basically when mortgage debt is 'sold', the new owner of this debt has to legally own it, and this requires the correct formal documents and signatures. All these new financial products which have been 'packaging up' this debt, and selling it on basically hasn't been doing this..

Result? if someone falls behind on their mortgage payments the bank can't legally repossess as they're going to be unable to provide the legal documentation to do this. In effect the mortgage becomes void...

Obviously the financial crisis has lead to massive numbers of foreclosures in the US, but in many cases it seems the bank has in effect illegally foreclosured, and sold the house on the someone else... how the hell are they going to dig themselves out of this one?!!

http://www.reuters.com/article/idUSTRE69B4UY20101015

Bit of a heated article on the subject...

http://www.zerohedge.com/article/gon...s-death-spiral

FlightMan

Was reading about this earlier in the week. It has the potential to get very very mess indeed.

Heard a story about a couple with 9 kids who got evicted after falling 6 months behind on the $800k mortgage. The couples lawyer helped them break back in as their is doubt that the foreclosure process was legal. No-ones disputing their in arrears but they're living in the house again.

PaulC72

It also makes you wonder what will happen tot he people who have subsequently purchased a foreclosed house and are paying a mortgage (or cash) now, where do they stand as surely they are not the legal owners if the foreclosure was illegal.

Weasel 555

totally screwy !

serega

"Now, what does “broken chain of title” mean? Simple: When a homebuyer signs a mortgage, the key document is the note. As I said before, it’s the actual IOU. In order for the mortgage note to be sold or transferred to someone else (and therefore turned into a Mortgage Backed Security), this document has to be physically endorsed to the next person. All of these signatures on the note are called the “chain of title”.

You can endorse the note as many times as you please—but you have to have a clear chain of title right on the actual note: I sold the note to Moe, who sold it to Larry, who sold it to Curly, and all our notarized signatures are actually, physically on the note, one after the other.

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."

serega

"People still haven’t figured out what this all means—but I’ll tell you: If enough mortgage-paying homeowners realize that they may be able to get out of their mortgage loan and keep their house, scott-free? ****, that’s basically a license to halt payments right the **** now. That’s basically a license to tell the banks to **** off.

What are the banks gonna do—try to foreclose and then evict you? Show me the paper, mother****er, will be all you need to say. "


Awesome, banks shot themselves in the foot with this one havent they ?

ReallyReallyGoodMeat

Interesting. I have no idea about 'chain of title' but it makes a lot of sense.

Assuming this is the case, why has it taken so long to come to light?

Petem95

It just looks like the banks have simply over looked all this stuff when things were booming and they were making huge amounts of money - but the consequences of this mess are potentially epic - if hundreds of thousands of mortgages in the US had to be 'written-off' then needless to say this would bring down the banks (again...), but this time there is no way the government could afford to bail them out - so where would that leave things?!!

serega

Since most of the financial tools including MBS's originate in the US and are then shared with the world, i'm betting that UK mortgages have the same loophole.

However, since its just a paperwork issue that threatens to destroy the financial world they will most likely invent some sort of law that will fix this pretty soon.

PaulC72

Who is up for buying Texas then....

pslewis

Interesting ... it would seem like many thousands of people in the USA can, legally, just stop paying their mortgages!!

That would be bad as it is ... but, the UK Banks have bought £millions of these debts 'packaged' - the whole world Banking system could be about to go under!

What has happened to all the money pumped into the Banks last time to save them? That's all gone and we cannot bail them out again ..... money will be worthless within 2 years ...... Banks will have closed and the end of the Western World will be assured.

China will bail us out - with massive penalties for us - 3rd world here we come.

PaulC72

Phew I am glad I spent all my money now Pete, it may be lucky Ihave a bulk supply of seeds which could be the new currency...if we beleive you that is.. ;-)

Dingdongler

As Dave says...............SIAL!

Petem95

Anyone got enough gold?! I don't think they'll be accepting fiat currencies the way things are going!

Pjamie

It's not the first time banks have overlooked the proper paperwork required to make a loan legal and liable for repayment. Look at all the people disputing their credit card debts in the UK because banks failed to comply with the legislation when providing these cards.

In their greed to purchase more business as quickly as possible, finanical companies seem to be too willing to skip over some of the subtleties required to give them the legal write to demand repayment. Now it has come back to haunt them. Can't say I feel the slightest bit sorry for them.

skeeter

Whilst I can agree with the senitment the view expressed is pretty dangerous. If the US banks start falling, the knock on effect for both the UK and the rest of the world would be catastrophic.

S

skeeter

When the loans are packaged one of the checks made by the purchaser is the quality of paperwork. I assume that most organisations have simply believed that the quality of that checking was robust.

From my own experience when the market is continually driving upwards the quality of this type of quality control check is one of the first things to suffer on the alter of 'the deal'.

Given that it is only now that significant numbers of people in the US are getting into the size of arrears that trigger foreclosure it is somewhat understandable why it hasnt come to light earlier.

As someone else has said, the advice being given out last week in the USA (I was just there) was simply wait for your day in court and ask the bank to produce the actual mortgage deed.

Scary stuff.

S

Petem95

It's a massive issue, and it seems to be about to hit just as the banks have used up all their bailout money..

As mentioned something on this scale will likely have knock-on effects all over the world, and even without this economys are faltering.

Certainly going to be a very interesting few years ahead!..

f1_fan

iTrader: (9)

Your usual ray of sunshine I see

A recent pic of you?

Petem95

Jesus I look tired in that pic! Going to get an early night and try and lose those dark circles!

Nice to hear you have rainbows in your pockets and head in the sand with the current economic situation, but some people like to be realistic about these things, and try and plan ahead accordingly.

hodgy0_2

like get mortgaged up to the hilt - and hope to fvck the cvnts loose the paper work

astraboy

Okay, I'm perfectly prepared to get shot down for this one, but if the banks go under then so what? do we really *need* banks anyways? Cos the only thing I can see coming of this is the power to be financially independent of banks as you can turn round and say "well perhaps I wont spend the next 25 years working my **** off to keep a roof over my head"

Have I got it wrong? I suspect I have.
astraboy.

f1_fan

iTrader: (9)

No, head not in the sand, just don't feel the need to make every post I make about the downside of the economy. It's like you are willing it to happen, you are like the media... the more downbeat you can be the happier you seem. Weird!!!

GlesgaKiss

You're spot on astraboy, but as fast bloke and trout pointed out in another thread, in the modern world we DO need banks. It's a grim situation that has lead to these banking institutions having far too much power and influence over politics and people's lives. The problem is how to get away from it, because we are all dependant on them for everything. A lot of short-term pain is needed to change things, IMO for the better. How to go about it, and whether it will ever happen is anyone's guess.

hodgy0_2

so GlesgaKiss - would you have let the banks fail?

and take the short term hit, what do you think the consequences would have been, and how long would they last

it would be a pretty high risk route, but who knows how it would have panned out