What Happens Post Stimulus?

[Conan71]

Nathan, I'd swear you'd hacked my brain the last few weeks.  Either that or we seem to agree more on economic issues than I've managed to glean on previous conversations.  I'm aware of the fraudulent foreclosure issue, but I've not investigated far enough into it to figure out what is fraudulent about it. 

Okay, I just read this synopsis of the issue and it's a mess alright.

http://www.cnbc.com/id/39634568/Foreclosure_Fraud_It_s_Worse_Than_You_Think

Having worked in lending, if you quit paying on your loan, you are in default.  If you have security on your loan, the lender properly registered and perfected a lien, and it's worth more than the cost of recovering it you are going to lose your secured property.  If lenders weren't filing mortgages in a timely manner with the local counties, then they deserve to lose their security.

I guess as I understand it, it's not only an issue over borrower abuse as it is investor abuse in the notes and who actually owns the notes and improper assignment documentation.  I'll dig further on this before I form too much of an opinion.  Reader's Digest versions are always welcome.

[nathanm]

It's only abusive toward the homeowners insofar as the shoddy documentation and robosigning leads to foreclosure actions being brought against the wrong property or after a modification has been agreed to. In a couple of cases already the property a bank attempted to foreclose on had no mortgage in the first place, much less a mortgage with that particular servicer. That and the possibility that they've been paying the wrong party.

Nearly every mortgagor these days uses MERS, so the mortgage isn't actually filed with the county except for the one time at closing. When it later changes hands, it may or may not get updated in MERS. Worse, a good part of the time they don't bother to endorse the mortgage and note over to the trust that holds the mortgage for the investors. Under NY trust law, they only get 90 days. After that, who owns the mortgage? The originator, who may well be bankrupt? Their money lender? This is why it's such a big clustermug. There are creditors in bankruptcy cases attempting as we speak to claw back these mortgages and notes that are still nominally owned by the bankrupt originator thanks to them never being signed over to the trust.

I agree that if you don't pay for your house and someone has a valid mortgage securing the promissory note, you should lose it. That said, if everybody's screwed anyway because of all this, it might be best to nullify the messed up mortgages and tell the homeowner they got lucky. At least then they'll have a place to live in the coming hyper-depression/zombie apocalypse.

Seriously, though, you can see why I think it's going to take some very unpopular action by the federal government to fix this mess. It'll amount to yet another bailout of the banks, but at least this time we won't have to give them money from the Treasury, just let them get away with their fraud with no consequences by screwing MBS holders. I'm not sure whether that's better or worse.

I guess it's just one more uncertainty to throw on the pile keeping the economy in the doldrums.