US: Deutsche Bank in ownership court row

Gosh. That could be quite upsetting for those banks. Imagine if they didn’t actually own any of the houses that they were holding RMBS for? Wouldn’t that be a bit of a pickle for the financial system.

It sounds shocking but its not a big deal. This is just a judge trying to stop some repossessions on a technicality. The bank will easily be able to bring the title deeds for the properties to the next foreclosure hearing.

Maybe, maybe not…There is potential for scandals similar to the one involving Irish solicitors at the moment.

A further complication seems to be that once mortgages are pooled for securitization, there is no link between the slices of securities sold off to investors and the underlying mortgages, so one particular investor is not able to say that they own a particular loan. The use of a trustee bank to see that the payments on the mortgages go to a particular investor is supposed to get around this, but they don’t own the loads either.

There is a sniff of a second scandal starting here as the NYTimes puts it (nytimes.com/2007/11/15/busin … nted=print):

The scandal is how much of this inflation went on? Never mind the underlying assets defaulting, what if the underlying assets were leveraged and everyone comes looking for their money at the same time?

I am presuming that it would be possible to sort out the paper trail at some point to give the investor the paperwork to support the mortgage they have invested in!

A couple of good pieces from Tanta on CalculatedRisk:

calculatedrisk.blogspot.com/2007/11/deutsche-bank-fc-problems-and-revenge.html

calculatedrisk.blogspot.com/2007/11/in-re-foreclosure-cases.html

It appears I have been smoking my own dope :blush: But I didn’t inhale!

The last paragraph is interesting, though:

How is our Government going to solve this little conundrum? They have been great supporters of Securitisation over the years, glad to give speeches and be photographed at the opening of Conferences on Securitisation etc. They passed numerous laws to facilitate Securitisations. This area was already touch upon in the Pin.