Court strikes down foreclosures on securitized mortgages

This is an awesome moment of sanity. For once we're bailing out the debtors instead of the predatory lenders. I would call this a great step forward, except that debt forgiveness used to be a commonplace way of stabilizing the economy. So it's more of a step back in the right direction after siding with the usurers for so long.

fucking awesome. the banking industry has become way too reliant on what are basically optical illusions, and shell games like this one.

i wonder if this is the beginning of a major reduction in corporate rights? it seems to me that one of the problems underlying a lot of the big issues (the recession and the fight over medical coverage being the two that spring to mind) is abuse of corporate rights which effectively allow individuals to act without fear of repercussion. for instance, there's little incentive to keep MERS from illegally foreclosing on homes for which it doesn't have a note of ownership, because the worst repercussion for getting caught, from the perspective of the loan officers in charge of such operations, is maybe getting fired. more frequently, i expect the only repercussion is a fine, if that.

Wow. Look for this to be appealed to a higher court, stat.

If it holds up, this is a game-changer.

Related: JP Morgan forced to freeze 56,000 foreclosures after admitting they didn't even read them, and oh shits Bank of America too.

On the original topic, several courts have followed the Kansas decision.

This is huge. Corporations and other forms of obfuscation allow certain highly privileged people to loot and destroy with impunity. So long as people can pull off crimes equivalent to thousands of murders or bank robberies and use legal mechanisms to get away with it, they will.

I dunno. It seems to me that even allowing whole loans to be traded without regulation is a problem. If I can turn around and sell a loan any time I want, even at a market-adjusted, discounted rate, I can easily look at lending out with a gambler's mentality. If I think I am probably stuck with the loan for its duration, I am looking at a risk/benefit analysis of borrower pays vs. debt collection, foreclosure, seizure, marketing, selling, etc...

In the olden days, when loans weren't traded like roulette numbers, 20% was a standard down payment on a house, and it made sense.

This.

Call me cynical, but I just can't imagine this holding in the America I know. MERS is huge, and this seems to fuck them royally.

But on the other hand, maybe this will force the banks to come up with a modification program that works and costs them less than foreclosing.

Fucking hell. I'm one of those people counting on a foreclosure. My ex-wife was supposed to be responsible for the mortgage on our marital home until she sold it. It is almost 2 years behind on payments and B.o.A. refuses to short sell it, and hasn't made a move towards foreclosure in almost a year now. My credit is fucked because of this. I have legal court documentation stating that I'm no longer responsible for the mortgage, but I've been by my lawyer and the bank that there is fuck all that can be done until the mortgage is "closed" (foreclosed or sold).

Fucking A.

As far as this specific precedent goes, it is just common sense. A mortgage, by definition, is a loan collaterized by the home- how can you foreclose/evict someone is you only have either the collateral or the ownership of the note and not both? It's insane that they were getting away with that to begin with.

Yes, but see, having to show both slows down the process of extracting wealth from the middle class. Why do you want to stop the rich from getting richer? Do you hate America, is that it? I bet you're secretly a Muslin!

so how difficult will it be for MERS to "sell back" the notes to the deed holders? overall, doesn't seem to change the base fact that people who signed a promissory note i exchange for cash to buy an asset still owe on that note, or they forfeit the collateral. It only changes the process a small bit.

My first thought is that it'd be pretty damn hard, on account of who wants to buy debt that's already been defaulted upon?

That's the thing, MERS can't sell anything. MERS is nothing but a registry--a list of who owns what, who has mortgaged what, and who holds the note for what mortgage. And the notes themselves have been chopped up into a million pieces and sold to lots and lots of different investors.

I think, anyway. I am full of key lime pie, right now, which makes brain go sleepy no think good.

(Uh oh) Major insurer, Old Republic National, decides to stop insuring foreclosure titles from Chase and GMAC, others may soon follow suit. Watch for free falling values on foreclosed homes, sold homes to be returned to limbo as the "owners" try to figure out how to clean their titles, meanwhile the houses will remain empty and uninhabited...

Obama kills a bill that would have sped up the foreclosure process. This seems like a strongly populist, starkly anti-bank move (and none too soon).

Background on the veto: fuckin' robots, man. To foreclose on a property, you have to be able to prove that you sold the property owner a mortgage. The mortgage paperwork is supposed to be reviewed by the bank to make sure everything's in order; otherwise, banks could just come up to you and say "Hey, you owe me money and now I'm foreclosing on you" even if you had never taken out a mortgage with them. Turns out, nobody's actually doing any reviewing. The question--and I'm honestly not sure how anyone can actually ask this with a straight face--is, "was it fraud?"

I hope the case proceeds, and I hope the get not only the robosigner(s) but the bank officers who mandated such practices. It's hard lines for the poor schmucks who were doing their job, but see, that's how the justice system is supposed to work: if you break the law, you get punished, and your example discourages other people from breaking the law.

The foreclosure moratorium cam too late for this guy.

To the complete shock of absolutely no one, banks continue to foreclose despite the moratorium.

It's interesting that the justice system seems to be becoming the last bastion of, well, justice.

To clarify:

Grodensky bought a house in a short sale while a repossession action was already in motion against the previous owner. That repossession action was never stopped when the short sale was completed, which is how a guy buying a house for cash can lose it by court order.

That is a tremendous fuckup; caveat emptor.

Megan McArdle is a god damn liar.

See that? She defines 'improper foreclosure' in a way that sounds correct, but actually isn't at all. Maybe she's not lying--maybe she just doesn't know how mortgages and foreclosures work. I certainly didn't until about a year ago, and every time the subject comes up I have to refresh my memory. Then again, I'm not the economics editor for the frickin' Atlantic.

But the principle is pretty simple: if you can't produce the title, you can't foreclose. It doesn't matter if 'everyone knows' you had the title, it doesn't matter if the title was, like, right there just a second ago and maybe it fell behind the couch, hold on a sec while I look. You have to have the title. You have to be able to prove that you're the one who gets to foreclose on the property if the debt isn't paid.

To say that foreclosing on a property that you lost the title to isn't 'improper' is like saying you're not in default if you're late on a payment. Hey, man, the payment got there, it's not like I'm not paying, so it's not really default, right?

A one page "Who’s Who in the Foreclosure Scandal: A Primer on the Players" learn about: Mortgage Servicers, “Foreclosure Mill” Law Firms, and others key players.

Edit: To add the write up comes from ProPublica