Second Wave of U.S. meltdown starting about now.

[What_Goes_Up]

zerohedge.com/article/90-day … mainstream

Is A 90 Day “Mortgage Meltdown” Foreclosure Moratorium Imminent As The RoboSigning Scandal Goes Mainstream?
10/04/2010
Submitted by Tyler Durden

The Massive Mortgage Mess as we affectionately call it seems to be getting new names with each passing day - the latest one is, quite appropriately, RoboSigning Scandal (funny how after the stock market, “robotic” technology will soon becoming equated with the biggest mortgage scam in history). During today’s Kudlow segment, CNBC’s Diana Ollick who is by and far the company’s best (and only) investigative reporter, confirms various so far unfounded rumors, that the government is planning to institute a 90 day foreclosure moratorium as it deals with the realization of just how big and pervasive the mortgage problem is, and even worse, will soon be. It is so bad that even a typically ebullient Larry Kudlow is forced to note that this is the “housing equivalent of the credit financial meltdown” and that “this is going to go on for ever.” The biggest issue that is now developing, as we noted last week, is the fact that title insurers (firms such as Fidelity National, First American, Stewart Info and Old Republic) are refusing to insure mortgages in foreclosure or otherwise, uncertain as to who actually owns the title. And for all those who believe this will merely keep prices artificially high, we have very bad news - the problem with the title insurers walking away on fears of lawsuits is that no lender will be willing to write a mortgage without title insurance, meaning that suddenly the up-front component of home purchases will either necessarily have to surge, or home prices will have to plunge by a like amount, as there is simply not enough equity (read money) to cover the resulting debt deficiency. Alas, this mess is just starting, and as people realize how bad it is, it very well may lead to a total collapse in the housing market.

For all those hoping on a quick resolution so that Americans can go back to watching Dancing with the Stars, you may wish to reconsider. Quote Kudlow: “We’re not talking just a few weeks, or a few months. This sounds like a long, drawn-out, bureaucratic, robotic process with lawyers, and oh my gosh.” Another implication: a veritable bonanza for both lawyers and defaulters, the former of whom will end up making billions in legal fees (collected from the same banks which are still sucking off the ridiculously low TLGP-funded, and thus taxpayer sponsored fees), while the latter will be able to live mortgage free for years, while continuing to buy useless trinkets instead of paying what is contractually their duty.

Another important topic discussed is the fact that due to decades of faulty securitizations, suddenly no bank knows who owns what. Courtesy of several trillion in now title-undefined mortgages, which in turn form the basis for thousands of CDOs, which in turn are split up into millions of tranches, and includes the complicity of Fannie, Freddie and private label, it is the banks and their clients that have shot themselves in the foot: as other have noted, very soon, the entire MBS process can and very may grind to a halt (if that happens, goodbye Pimco).

…(cont’d)

[What_Goes_Up]

market-ticker.org/akcs-www?post=168218

Kudlow Gets Into Foreclosuregate
Posted 2010-10-04
by **Karl Denninger **

Yes, I’ve dubbed it: Foreclosuregate.

I’d love to tell you that I think there’s some reasonable way to get out of this.

There isn’t.

The reality of this is far worse than it appears. Kudlow is still downplaying it, really, even though I emailed him today with the source documents of a half-dozen Tickers. Whether they prompted him to spend the time on it tonight I’ll never know.

The real problem isn’t the foreclosures. It’s the REMICs.

The “loose document standards” of the go-go years were all predicated on this never happening - all the way up to now. In fact, the entire premise of the last three years of Bernanke, Geithner and everyone else’s actions in the government has been under the (false) belief that they could “re-inflate” house prices. This would allow everyone to refinance out of the mess, and since nobody would ever see the inside of a court, nobody would be the wiser, other than a few REMIC holders who went after each other when a note was sold twice.

Instead, what we have is a nightmare. House prices are not going to go back up. As a direct consequence, we have an intractable problem.

The REMICs - the foundational conduits for all this paper - are to a large degree defective. I bet some of Fannie and Freddie’s are too. Many notes were not conveyed, and in the states where recordation is necessary, most of them weren’t recorded either. Many of these original notes are known to be sitting with the originator, never endorsed over and in some cases shipped overseas or deliberately destroyed. For all intents and purposes they’re gone, because once the MBS closes they can’t be put in later on.

…(cont’d)

[What_Goes_Up]

publicintegrity.org/blog/entry/2507/

**Boiler Rooms, Foreclosure Mills: The Story of America’s Mortgage Industry **
October 7, 2010
By Michael Hudson

The news about the nation’s foreclosure scandal has been coming fast and furious, driven by tales of backdated documents, false affidavits and “rocket dockets” that push families into the street.

A former employee with one of the nation’s largest lenders testifies that he signed off on 400 foreclosure documents a day without reading them or verifying the information in them was correct.

Ex-employees of a law firm that serves as a “foreclosure mill” for major lenders describe a workplace where speed — not accuracy or justice — trumps all. “Somebody would get a 76-day foreclosure,” one recalled, “and then someone else would say, ‘Oh, I can beat that!’”

Shocking stuff. But surprising? Not for anyone who’s been tracking the recent history of the mortgage machine. Just about every corner of the America’s mortgage industry has been blemished by significant levels of fraud over the past decade.

…(cont’d)

[What_Goes_Up]

globalresearch.ca/index.php?context=va&aid=21354

Fraud in Home Mortgages: “ForeclosureGate” and Obama’s “Pocket Veto”
Global Research, October 8, 2010
by Ellen Brown

Amid a snowballing foreclosure fraud crisis, President Obama today blocked legislation that critics say could have made it more difficult for homeowners to challenge foreclosure proceedings against them.

The bill, titled The Interstate Recognition of Notarizations Act of 2009, passed the Senate with unanimous consent and with no scrutiny by the DC media. In a maneuver known as a “pocket veto,” President Obama indirectly vetoed the legislation by declining to sign the bill passed by Congress while legislators are on recess.

The swift passage and the President’s subsequent veto of this bill come on the heels of an announcement that Wall Street banks are voluntarily suspending foreclosure proceedings in 23 states.

By most reports, it would appear that the voluntary suspension of foreclosures is underway to review simple, careless procedural errors. Errors which the conscientious banks are hastening to correct. Even Gretchen Morgenson in the New York Times characterizes the problem as “flawed paperwork.”

But those errors go far deeper than mere sloppiness. They are concealing a massive fraud.

They cannot be corrected with legitimate paperwork, and that was the reason the servicers had to hire “foreclosure mills” to fabricate the documents.

These errors involve perjury and forgery – fabricating documents that never existed and swearing to the accuracy of facts not known.

…(cont’d)

[What_Goes_Up]

https://www.youtube.com/watch?v=yUyvOs3KCJc

[BoyRacer]

Series 5 The Daily Show with Jon Stewart (22 mins)
channel4.com/programmes/the- … od#3126156

[What_Goes_Up]

marketoracle.co.uk/Article23422.html

Bank Shot, Nobody Can Buy or Sell Property
Oct 11, 2010 - 02:47 PM
By: **Submissions **

James Howard Kunstler writes: The banking authorities were shocked - shocked - to discover last week that an awful lot of mortgage paper in this country is not quite in order… appears to contain, er, irregularities… seems less than kosher… frankly, exudes an odor like unto dead carp or, shall we say, a heap of dead carp the size of the building at 3900 Wisconsin Avenue, N.W., Washington, D.C. Any day now we will hear that… mistakes… were… made.

Is it indelicate to say that the USA as an enterprise has its head so deeply and firmly up its ass that the all the proctologists alive on planet Earth could not extract the collective cranium from the collective cloacal chamber even with the aid of a Bucyrus-Erie 1060-WX bucket-wheel excavator? Like, where were we the past ten years? Surely not everybody in the nation was doing bong hits while playing Grand Theft Auto, or watching The Real Housewives of New Jersey, or downing tequila shots and Percocets in the parking lot of the Talladega Superspeedway, or cooking meth in the family room, or whacking it to Internet porn, or searching for “excitement” in one of America’s 450 commercial gambling casinos.

Did nobody, for instance at Fannie Mae or Freddie Mac, review any of the paperwork fluttering in from places like Countrywide or Ditech and scores of other boiler rooms where mortgages were hatched like Peking ducklings? There was an awful lot of it, I’m sure, but aren’t there a lot of seat-warmers at Fannie and Freddie who collect their salaries for the express purpose of reading mortgage documents? Was nobody the least bit suspicious about the mysterious flurry of “restaurant employees” and “lawn-care technicians” buying million-dollar condominiums with no money down at terms that would make a three-card monte dealer weep with laughter? After all, they had to sort and bundle all these contracts for the likes of Goldman Sachs and JP Morgan and Citibank - the list isn’t that long, but you get the picture…

…(cont’d)

[What_Goes_Up]

Yves Smith explain the Foreclosure Freeze.

Frightening!

watch.bnn.ca/squeezeplay/october … clip359769

[yoganmahew]

Yves has become quite the prophet of doom on this:
nakedcapitalism.com/2010/10/ … -mers.html

Even though the headline item is the fact that the attorneys general in all 50 states are joining the mortgage fraud investigation, the real indicator that the banks are stressed is that they have started abandoning MERS, the electronic database that passes itself off as a registry for mortgages. JP Morgan has quit using it as an agent on foreclosures; it clearly can’t withdraw from it fully, given that it has become a central information service.

Despite this being treated as a pretty routine event in the JP Morgan earnings call, trust me, it isn’t. The withdrawal of JP Morgan from the use of MERS as the face in foreclosures is a tacit admission that the past practice of using MERS as the stand -in for the trust is problematic. I’ve heard lawyers discuss the possibility of class action litigation to invalidate all MERS-initiated foreclosures in states with strong anti-MERS rulings; this idea no doubt will get more traction given JP Morgan’s move. (An attorney who is in the thick of this situation told me another major bank has made the same move as JPM, but I see no confirmation in the news as of this writing).

The triggers for the sudden escalation appear to have been the release of a research note by Citigroup which included a grim assessment (which we did not consider to be dire enough) by Professor Levitin to Citi clients on likely path of the mortgage crisis. This was no doubt compounded among the cogoscenti by the research note published by Josh Rosner, that most if not all notes (which are the borrower IOU in a mortgage) were endorsed in blank, which creates near insurmountable problems in foreclosure, worse even for the RMBS ownership of them as de facto mere unsecured paper.

But the stunner is the withdrawal of JP Morgan from the purported mortgage registry system, MERS. 60% the mortgages in the US are registered through MERS, and not at the local courthouse as was the long established, well settled custom in the US. Countries that have moved to central databases (such as Australia) have them operated by the government, and they are transparent and run with sound standards of data integrity. As noted, banks like JP Morgan can’t fully withdraw; MERS has become too integral, but its announcement is an admission that all is not well.

The fact that major MERS members are suddenly resigning from MERS is a sign that tectonic plates are moving. MERS has become central in mortgage securitization; Freddie and Fannie have required its use since early in this decade.

[yoganmahew]

Barry Ritholz
ritholtz.com/blog/2010/10/wh … ty-rights/

There are multiple failsafes and checkpoints along the way to insure that this system has zero errors. Indeed, one can argue that the entire system of property rights and contract law has been established over the past two centuries to ensure that this process is error free. There are multiple checks, fail-safes, rechecks, verifications, affirmations, reviews, and attestations that make sure the process does not fail.

It is a legal impossibility for someone without a mortgage to be foreclosed upon. It is a legal impossibility for the wrong house to be foreclosed upon, It is a legal impossibility for the wrong bank to sue for foreclosure.

And yet, all of those things have occurred. The only way these errors could have occurred is if several people involved in the process committed criminal fraud. This is not a case of “Well, something slipped through the cracks.” In order for the process to fail, many people along the chain must commit fraud.

[yoganmahew]

Calculated Risk on Lost Notes Affadavits:
calculatedriskblog.com/2010/ … -lnas.html

First, “Foreclosure-Gate” is primarily about “robo-signers”. These are individuals who signed affidavits stating that they had “personal knowledge” of the facts in the case when in fact they did not.

As JPM admitted this morning: “We’ve identified issues relating to the mortgage foreclosure affidavits and those include signers not having personally reviewed the underlying loan files but instead having relied upon the work of others.”

There are also situations of questionable notarization of the affidavits.

Questions reporters might consider asking is what constitutes “personal knowledge” and why can’t the affiant sign with “information and belief”. Also what are the typical remedies for a false affidavit? But I digress …

Unfortunately I’ve seen a number of articles conflating the “robo-signer” scandal with MERS issues and LNAs (Lost Note Affidavits). How many servicers have put a moratorium on foreclosures for these issues? None. But I do hope they are reviewing the entire process.

[Arbitrager]

The Earls originally purchased the house for $500,000 in March 2001. Due to some refinances to take out equity, they owed at least $880,000 on a no-interest mortgage loan by the time of foreclosure.
However, she says, whenever they made a payment it was not being reflected on statements, even a $12,500 catch-up payment was not credited to the balance due. Ultimately, there was a $25,000 discrepancy between what they thought they still owed in arrears and what the bank said they owed

housingwatch.com/2010/10/12/evic … id=webmail

[veoh]https://cdn.abclocal.go.com/static/flash/embeddedPlayer/swf/otvEmLoader.swf?version=&station=kabc&section=&mediaId=7716215&cdnRoot=https://cdn.abclocal.go.com&webRoot=https://abclocal.go.com&configPath=/util/&site=[/veoh]

[mr_anderson]

The Earls originally purchased the house for $500,000 in March 2001. Due to some refinances to take out equity, they owed at least $880,000 on a no-interest mortgage loan by the time of foreclosure.

Its one of those things you look back on during the boom times and wonder what were people thinking.
The highest your mortgage should ever be is the day you take it out.

[What_Goes_Up]

guardian.co.uk/business/2010 … obo-signer

Wells Fargo under fire over mortgage foreclosure ‘robo signer’
Thursday 14 October 2010
Julia Kollewe

JP Morgan, Bank of America and GMAC among those who used people with little knowledge to deal with mountains of paperwork

Another bank has become embroiled in a growing scandal over “robo signers” in the US mortgage foreclosure crisis.

It has emerged that Wells Fargo, the second-largest US mortgage servicer, which unlike rivals is still carrying out foreclosures, used a “robo signer”, a worker who quickly rubberstamps documents without checking their accuracy.

Bank of America, JP Morgan and GMAC have halted foreclosures after discovering that these “robo signers” had signed off on thousands of foreclosure documents. At JP Morgan, these staff were known as “Burger King kids” – people who walked in from the street and barely knew what a mortgage was.

Attorney-generals in 50 American states have begun a joint investigation. JP Morgan’s chief executive, Jamie Dimon, said yesterday that banks could face penalties for their foreclosure practices, while defending JP Morgan’s conduct: “We don’t think there are cases where people have been evicted … where they shouldn’t have been.”

…(cont’d)

[What_Goes_Up]

https://www.youtube.com/watch?v=o_48fOKNCZQ

[Rick_Flair]

nytimes.com/2010/10/15/opini … yt&emc=rss

The Mortgage Morass

American officials used to lecture other countries about their economic failings and tell them that they needed to emulate the U.S. model. The Asian financial crisis of the late 1990s, in particular, led to a lot of self-satisfied moralizing. Thus, in 2000, Lawrence Summers, then the Treasury secretary, declared that the keys to avoiding financial crisis were “well-capitalized and supervised banks, effective corporate governance and bankruptcy codes, and credible means of contract enforcement.” By implication, these were things the Asians lacked but we had.

[What_Goes_Up]

globalresearch.ca/index.php?context=va&aid=21473

Foreclosuregate: Time to Break Up the Too-Big-to-Fail Banks?
Global Research, October 16, 2010
by Ellen Brown

Looming losses from the mortgage scandal dubbed “foreclosuregate” may qualify as the sort of systemic risk that, under the new financial reform bill, warrants the breakup of the too-big-to-fail banks. The Kanjorski amendment allows federal regulators to pre-emptively break up large financial institutions that—for any reason—pose a threat to U.S. financial or economic stability.

Although downplayed by most media accounts and popular financial analysts, crippling bank losses from foreclosure flaws appear to be imminent and unavoidable. The defects prompting the “RoboSigning Scandal” are not mere technicalities but are inherent to the securitization process. They cannot be cured. This deep-seated fraud is already explicitly outlined in publicly available lawsuits.

There is, however, no need to panic, no need for TARP II, and no need for legislation to further conceal the fraud and push the inevitable failure of the too-big-to-fail banks into the future.

Federal regulators now have the tools to take control and set things right. The Wall Street giants escaped theVolcker Rule, which would have limited their size, and the Brown-Kaufman amendment, which would have broken up the largest six banks outright; but the financial reform bill has us covered. The Kanjorski amendment—which slipped past lobbyists largely unnoticed—allows federal regulators to preemptively break up large financial institutions that pose a threat to U.S. financial or economic stability.

…(cont’d)

[BoyRacer]

Question to Readers On Mods → zerohedge.com/article/question-readers-mods

There has been (from my narrow perspective) a flood of approved loan mods in just the last few weeks. People who were on the edge and not paying a mortgage get a letter in the mail that says their application has been approved. After weeks and months of hanging on a phone and waiting for an axe to drop some relief arrives.

Nothing particularly unusual about that. Mods are granted all the time. But I was struck by the timing. The foreclosure story is exploding around the banks. It is not possible to see where this will end but it is a certainty that it will cost the banks big time.

What might a banker do if he was sitting on a pile of defaulted mortgages and now the traditional route of foreclosure was blocked? Adding to the problems of the bankers is that there is no assurance that they even have a valid claim to foreclose given that so much of the paperwork is tainted.

One possible response would be to get all troubled borrowers to reaffirm their debt, the second is to get the trouble borrowers back to paying something on the mortgage, even if it were a fraction of what was formerly owed on a monthly basis. A loan modification would achieve both results. When a borrower signs up for a loan mod they sign new papers. A portion of this process will re-establish any loan balance that is due. The language in the mod could have new foreclosure terms that eliminate the banker’s problem with past tainted documentation. Once a borrower makes a few months of new lowered payments they are, in effect, confirming their acceptance of the new terms.

there is more

Just someone floating an idea.

[beolight]

“This is a major, major crisis. The Lehman bankruptcy could be a spring rain compared to this hurricane. And if this isn’t handled right…and handled right quick, in the next couple of weeks at the outside…this crisis could also spell the end of the mortgage business altogether. Of banking altogether. Hell, of civil society. What do you think happens in a country when the citizens realize they don’t need to pay their debts?”

nice post op

[yoganmahew]

@beolight

“This is a major, major crisis. The Lehman bankruptcy could be a spring rain compared to this hurricane. And if this isn’t handled right…and handled right quick, in the next couple of weeks at the outside…this crisis could also spell the end of the mortgage business altogether. Of banking altogether. Hell, of civil society. What do you think happens in a country when the citizens realize they don’t need to pay their debts?”

nice post op

Never mind where citizens realise they don’t need to pay their debts, what happens in a country where contract law breaks down? (I.e. when the situation is finessed and contract law is rewritten after the fact to allow the chain to be made complete).