http://blogs.wsj.com/economics/2009/06/04/mozilo-on-8020-loans-pay-option-arms/http://www.washingtonpost.com/wp-dyn/content/article/2010/10/09/AR2010100903468.htmlFirst off..Thanks for keeping this going....Second....no doubt you have the expertise you claim...
Third...You are making assumptions based on an honest common sense approach to how a rational person would expect lenders to conduct business. IMHO there are fatal flaws to that approach.
Unlike the old days, the vast majority of current RE loans are not the property of the original underwriter nor do they exist as a singular financial instrument. They are/were often securitized and held as investments by everyone from State retirement funds to private individuals (and everything in between) Groups of loans would be bundled to form mortgage backed securities (MBS) It's also common for parts of a mortgage to split amongst different MBS.
(I assume this is old news to you, but it may assist others that may be following...OK?)
The original underwriter (Usually an Investment Bank, but not always) is often just the servicer of the loan. It's the responsibility of the servicer to keep the money flowing from a loan to the holder/s of the MBS/s in which the loan or part was bundled and sold off in. An investor or fund manager would place an order for an MBS that had a coupon of X (paid interest to that amount) and would be comprised of loans in which the mortgagors met certain requirements, the properties met certain requirements (SF or MF, commercial, primary owner occupied, etc), and the loans themselves fell within certain parameters. In most cases the MBS was also paid for up-front In other words, not unusual for the issuer of a loan to never have had any skin in the game. The contracts were/are pretty detailed with no room for mis-interpretation.
basically the agreement is: here's X amount of money. In return I want RE loans that meet these specifications and will pay me this amount of interest
The buyer of an MBS would insert verbiage in the contract to enable the return of and receive full compensation any portion of an MBS that did not meet the conditions of the original purchase contract. If the number of non-conforming loans exceeds a certain percentage of the total MBS, the investor usually had language in the contract that allowed for the whole instrument to be returned as defective, and receive a total refund of the initial investment
Basically: if you screw up I'll demand my money back for part or all of the security
If the bank that bundled the MBS had prior knowledge that there were non-conforming loans in an MBS and passed if off anyway that is fraud. (It's just a matter of whether the fraud is civil or criminal in nature)
Now we're back to the document thing.
How can the investors prove that the were screwed? The original documents would clear the issue up in a heartbeat. The original documents would also prove in a heartbeat if there was fraud. There are a lot of people/States/funds that have lost serious amounts of money on MBS that by all rights should have been safe investments
Your experience with banks would indicate they tend to be very particular about taking care of documentation.
If all of a sudden the courts and investors have the blue ink papers setting out in the open, and everything is as it should be. Then it can be written off as just some clerical missteps. But if our country was raped by banksters whom knowingly committed widespread fraud, they deserve to rot in a cell.
If the doc problem is an attempt to deceive the courts then the matter is both civil and criminal.
The break-in at the Watergate was just a simple burglary. The attempt to cover up what was a fairly minor crime took down the President.
ps....there are also several other logical reasons that banks would look at clearing their books, in a timely fashion, as not in their best interests...