Foreclosuregate - banks stagger from one crisis to another

[louisiana]

Anyone else following 'foreclosuregate', 'Linda Green', MERS, the securitization due diligence saga, and all the other sh*t currently hitting the fan in the US?

http://georgewashington2.blogspot.com/2010/10/same-person-verified-billions-of.html

http://www.youtube.com/watch?v=1j2esw2B8TI&feature=player_embedded#!

Looks like this could be the next banking meltdown.

[louisiana]

Huffington Post:

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Though some have chalked up the foreclosure debacle to an overblown case of paperwork bungling, the underlying legal issues are far more serious. Yes, swearing that you've reviewed documents you've never seen is a legal offense. But at the center of the foreclosure scandal looms something much larger: the question of who actually owns the loans and who has the right to foreclose upon them. The paperwork issues being raised by lawyers and attorneys generals have the potential to blight not just the titles of foreclosed properties but also those belonging to homeowners who have never missed a mortgage payment.

So far, JP Morgan Chase, PNC Financial and Litton Loan Servicing have stopped some foreclosure proceedings in 23 states. Bank of America and GMAC, recently renamed Ally, have extended their moratoriums to all 50 states. Wells Fargo and Citigroup have said they are continuing with foreclosures, adding that they are confident in their documents and processes.

But Citigroup has now backpedaled some on that assertion. The bank sent out a press release Tuesday that it was no longer using the law firm of "foreclosure king" David Stern, now under investigation by the Florida attorney general's office. "Pending the outcome of the AG's investigation, Citi is not referring new matters to this firm," the bank said in an e-mailed statement.

Late last week, in an interview with the Florida attorney general, a former senior paralegal in Stern's firm described a boiler-room atmosphere in which employees were pressured to forge signatures, backdate documents, swap Social Security numbers, inflate billings and pass around notary stamps as if they were salt.

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[silverfox]

Query. Could the people who were foreclosed upon (the foreclosees?) afford the mortgage payments? There is an argument to say it's better a person losing the house owing ?10,000 than waiting to owe ?20,000 and then lose the house.

Edited to say just watched your YouTube link. There's nothing new here. Robert Peston explained these bundled up loans years ago and we all knew that the ratings agencies were up to their necks in it.

The real scandal is governments haven't taken the oportunity to address these wrongs, jail half the perpetrators, and bring in tough new rules.

[louisiana]

There's nothing new in the vid except that there now appears to be the possibility of proving the case, legally, because certain documents have finally surfaced. Which seems to me to open up the possibility of class actions. If so-called due diligence produced certain results e.g. 28% of loans proven not to meet the criteria in any way (when the legal agreement said <1% (or was it lower?) AND the investment houses went ahead anyway AND those figures being in the paperwork and the rating agencies still triple-A rated the investments... AND then the same investment houses shorted the investments concerned, which is as the guy says tantamount to insider dealing... That's quite a bit of fraud in just one part of the chain. Hence the suggestion there that certain interviews should now be conducted to discover who in which organisation did what with the due diligence findings.

Add that to the MERS/foreclosure saga ( mills fabricating paperwork with fake signatures etc etc) that is now emerging...

As you say, the scandal is that governments have not acted. They will protect their own, so in a sense it's hardly surprising. I'd say that perhaps the only chance of action is class actions, hence the interest of the new documents that have now come to light re due diligence. (A pity we don't have class actions in this country.) I'm sure hundreds of lawyers are already on alert. Not that I'm a big fan of investor legal actions, but this does seem to be the only way that those who devised and benefited from these schemes end up paying.

On foreclosures, I agree that it makes little sense for mortgagees to build up debt. But also the volume of foreclosures in the US is now such that the banks are ending up with a whole lot of property that they don't want, and it's killing the property market stone dead in quite a few places, with some neighbourhoods uninhabited and falling to pieces. Local councils are now starting to pursue a 'maintain it or lose it' policy with the banks, which the banks are then responding to by demolishing the houses concerned in order to stop the bills mounting. The end result is neighbourhoods (even of new houses) being bulldozed by the banks. The emergence of tent cities in affluent USA is perhaps something that five years ago I never expected to see, but there they are. Is it better for hundreds of thousands of former home-owners to be living in tents rather than in houses (that are being knocked down)?

[louisiana]

"The question to me is not do you foreclose or do you not foreclose. The question is when and with what philosophy you foreclose," the man on the bank restructuring team said. "If you want to reduce the amount of leveraged homeowners you have, you need to ultimately kick them out of their homes." A colleague walked up: His recommendation was to burn houses. It would lower the supply.

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from The New York Observer

http://www.observer.com/2010/wall-street/foreclosure-fiasco-and-wall-streets-shrug