Sunday, October 24, 2010
Criminal Behavior Behind the Foreclosure Mess
The recent news that major banks have been "robo-signing" inacurate foreclosure documents is just the proverbial tip of the iceberg. To add insult to injury, Bank of America has now announced it will resume foreclosure action, having "fixed" the problem. The fix may be in, but the truth is not as it would appear.
Mainstream media (MSM) has not reported much on this, but an explosive issue is behind the difficulty banks are experiencing with establishing chain-of-custody to mortgage notes. That issue potentially involves massive amounts of criminal fraud. As a few astute observers have reported, the real estate bubble culminated in a frenzy of investment in mortgage-backed derivitives. Large numbers of mortgages were often rolled up into something called collateralized debt obligations, or CDO. The original mortgage notes were supposed to be tracked by a digital database known as MERS, but as the CDOs were sliced up and parceled out, the chain-of-custody became less clear.
Real estate securitization was vastly profitable as long as the bubble expanded. Legitimately-achieved profits were apparently not enough for some. According to Catherine Austin Fitts, some CDOs were created using the same collateral over and over - the mortage notes were simply duplicated. Once the data was input into the black hole of MERS, who's to know the difference?
Another layer of complicity was added by the notorious credit default swaps, in which some investors bet on investments defaulting. Some reporting was done on this in the aftermath of the scary crisis in the fall of 2008. For the real estate market, it amounts to betting on homeowners falling into default and losing their homes. This could be one reason why mortgages were agressively pushed for people that couldn't afford them.
What we seem to have now is many banks coming to realize that their real estate portfolios are worth much less than face value. This is not simply due to some individual homeowners defaulting, but rather to the underlying fraudulant or non-existent mortgage note documentation.
Banks like BOA realize that they are better off foreclosing sooner rather than later, even if this depresses the market still further. There is the danger of the fraud being exposed, but also, whoever owns the CDOs on the mortgage securities benefits financially if more mortgages default. Thus, this could explain why the banks have generally stonewalled efforts by homeowners to seek mortgage modification. Many report overcoming numerous delays, lost paperwork, nit-picky requirements, etc only to have the bank still balk in the end without further explanation.
I sincerely hope that the rising tide of consciousness results in the light fully shining on these criminal misdeeds. Some courts have begun to insist that a valid copy of the original note be produced before foreclosure is allowed to proceed. This could result in the extent of fraud being revealed, and could be one reason many banks are not pressing ahead with foreclosure actions and leaving the affected homeowners in limbo. I suspect there is a looming problem that could blow up the entire banking system once it is revealed.
We have been done a serious disservice by our elected officials, who have been bought and paid for by the Banksters. Word was that Barney Frank and Christopher Dodd rushed through emergency legistation that eased bank requirements for notarized signatures on foreclosure documents, to "fix" a looming problem for the banks. Unfortunately this would be business as usual for congre$$.
A congress representitive of citizen's interests would have passed a foreclosure moratorium long ago, and vigorously investigated the allegations of fraud. Perhaps the light will soon shine into those dark places, and the result will not be pretty.
Voters may be about to swing the pendulum the other direction, and return power to the Republicans. It's vital to remember that this really doesn't matter. Both parties line up at the same feeding trough. Both sides speak of change, but change will be recognized only when the interests of ordinary people starts to come first.