Krugman's editorial from yesterday - 'The Mortgage Morass' - and the new bubble

[geckosfeet]

The Mortgage Morass

...an awful truth is becoming apparent: In many cases, the documentation doesn’t exist. In the frenzy of the bubble, much home lending was undertaken by fly-by-night companies trying to generate as much volume as possible. These loans were sold off to mortgage “trusts,” which, in turn, sliced and diced them into mortgage-backed securities. The trusts were legally required to obtain and hold the mortgage notes that specified the borrowers’ obligations. But it’s now apparent that such niceties were frequently neglected. And this means that many of the foreclosures now taking place are, in fact, illegal.

This is very, very bad. For one thing, it’s a near certainty that significant numbers of borrowers are being defrauded — charged fees they don’t actually owe, declared in default when, by the terms of their loan agreements, they aren’t.

More -

True to form, the Obama administration’s response has been to oppose any action that might upset the banks, like a temporary moratorium on foreclosures while some of the issues are resolved. Instead, it is asking the banks, very nicely, to behave better and clean up their act. I mean, that’s worked so well in the past, right?

The response from the right is, however, even worse. Republicans in Congress are lying low, but conservative commentators like those at The Wall Street Journal’s editorial page have come out dismissing the lack of proper documents as a triviality. In effect, they’re saying that if a bank says it owns your house, we should just take its word. To me, this evokes the days when noblemen felt free to take whatever they wanted, knowing that peasants had no standing in the courts. But then, I suspect that some people regard those as the good old days.

The Mortgage Morass

What's a poor peasant to do?

I would add to this, that many companies that do have cash are buying back their stock and creating another stock bubble. And guess what, the companies that do not have cash are borrowing from the fed at near 0%.
http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=103x558223
http://demopedia.democraticunderground.com/discuss/duboard.php?az=view_all&address=389x9332499

Brother can you spare a dime.

[glinda]

1. Uh, this is starting to remind me of when my grandma said they took her family's house in Poland.

[fasttense]

2. One financial site went so far as to say you do NOT have to pay your mortgage back.

That if your note is missing and the title was not accurately recorded, you owe no one.

Or as the site puts it:
"If the chain of title of the note is broken, then the borrower no longer owes any money on the loan."

http://gonzalolira.blogspot.com/2010/10/second-leg-down-of-americas-death.html

[geckosfeet]

5. Well. How do we know the bank is not commiting fraud? They say they own

the mortgage.

My credit union has the paperwork I signed when I re-financed. I KNOW they own the mortgage. They can prove it. These banks can't.

What's worse, is that they issued billions in mortgage backed securities that they are really on the hook for now. If they can't prove that they own the mortgages, they committed fraud by selling those securities.

[barb162]

3. I really loved the example of the guy who Owned his house

and somehow they took it from him. I CAN'T FIGURE THAT ONE AT ALL.

[geckosfeet]

4. Yes - he had NO mortgage with any bank. He owned the house outright.

[pokercat999]

6. I sold a townhome I bought cash. Just a few days before

closing the lawyer at the title company called wanting to know what mortgage company to pay with the proceeds of the sale. He was confused and sounded like he didn't believe me when I told him I bought the house for cash. This was the title insurance company that was supposed to have cleared the title for sale! Obviously he didn't have a clue as to what the hell he was doing.