I was surprised that gretchen repeated the "they couldn't prove they owned the properties" line from the blog ... the issue isn't whether they own the properties (obviously the borrower owns the property) it is whether they own the note.
This vendetta is clouding your vision. I'm a trained professional journalist, so here it is.
You acknowledge scoops produced by others when they involve non-public information, especially ideas or data that take time to dig out. There's nothing especially enterprising about scooping the world on a matter of public record, like court cases.
Also, you keep looking at the trees. The reason courts and borrowers need to know with clarity the owners of mortgages has less to do with custodians and forms than with principles and processes. If you are losing your home, for many reasons you have a right to know without doubt that the valid legal entity is enforcing the action in public court.
Rich must have gone to law school. "Losing the forest for the trees" is a popular saying there. Or so I am told. I think we are starting to split hares. (I think I got that from watching the Looney Tunes parody of the Barber of Seville.) Watch out for Elmer Fudd.
Sad isn't it. Even after being taken to task several times in this blog (which I have no doubt she reads) GM doesn't care. Why? It doesn't matter. GM knows what counts is giving them what they want in the manner they think is laudible (truth be damned.)This is precisely why I never read/watch MSM and precisely why GM has a pulitzer.
Well, yes. Court orders are matters of public record. A claim about why they are important and what significance they have to the wider world is an idea. And agree with it or not, the idea in question was originally IAFC.com's.
I realize that Moe of IAFC thinks I'm a horse's ass, but I did him the courtesy of addressing his own arguments by name and link. That allowed readers of my blog to go read his blog and see for themselves who is saying what.
The reason courts and borrowers need to know with clarity the owners of mortgages has less to do with custodians and forms than with principles and processes.
I have no idea what you mean here. There are these Platonic Ideal "principles and processes" that have nothing to do with real world principles and processes like having a third party custodian certify that a pool of mortgages is complete and correct and owned by the trust before you, small-time investor, buy a piece of that security? A relevant principle is not that physical secure custody of these docs isn't crucial?
Hello! Both investors and homeowners are supposed to be protected here by having the legal evidence of a debt (note and mortgage) held by a reputable regulated third party who does not directly profit from the loan. Why does that not matter?
What irks me is precisely this desire some people have to want to natter on about "principles" and "forests not trees" while being perfectly ignorant of how the whole process works. I make this claim: you will never have anything useful to say about how to fix a problem if you do not know how the problem happens.
The rush to gratuitously defend your kind has clouded your judgement. I'm a trained process improvement engineer, so here it is.
" The reason courts and borrowers need to know with clarity the owners of mortgages has less to do with custodians and forms than with principles and processes. "
DOCUMENT RETRIEVAL IS THE PROCESS.
If the documentation isn't 110% correct, your process is faulty. If your process is faulty, somebody eats the cost of rework to discover all those documents which should have been correct the first time.
DB has no "dog ate my lunch" excuse.. their sloppy, insulting moves in Federal Court are the only story here.
Will the houses be foreclosed on? Certainly, the judge didn't shut that door. They do, however, have to cross their z's before refiling.
This entire story is only substantive in that DB shows its disregard for the amount of rework involved in fixing the sloppy document handling - which occurred years before the FC began, by the way.
You know, this place is sort of turning into the Daily Kos of financial blogs.
Tanta and CR, just do us a favor - don't switch to the horrible Scoop system, which is what turned DK into the bloated, laughable entity it has become. Keep your blog the way it is, and don't push this whole "bloggers vs. journalists" thing too hard. It's not important in the long run.
Now this may not speak well of me, but when I see a piece by Tanta on GM I do a quick 'Oh goodie!" and dig in for the journalistic equivalent of a "Kill Bill" battle sequence (Uma plays Tanta natch)!
mal, I don't want this to turn into blogs v Em Ess Em. That is not my purpose.
However, there is a crucial real-world issue at stake here, as people keep reminding me in the comments. How are borrowers protected against incompetent or predatory lenders and servicers? How are investors protected against fake investments in bonds that have no true collateral backing? What should the regulators do? What should Congress do? Who should get "bailed out"? What, actually, would constitute a "bailout"?
These are incredibly important questions, and if the public agenda is being driven by people whose only exposure to the problem is the NYT, then I'm here to worry that we will get the wrong solution to the wrong problem at the wrong time.
The fact is that the NYT still functions as "the paper of record." Once its imprimatur is placed on a goofy claim, it becomes difficult to shake the story.
In the instance we are dealing with today, I tried to shake the story a little before GM got her hands on it. In other words, I wasn't arguing with the NYT yesterday.
It isn't about "scoops." It's about Clues. As in, I want everyone to have one.
OT: Maybe the recession is a comin' down the pike:
"So far this year, consumer prices are rising at an annual rate of 3.6 percent, up by more than a full percentage point from the 2.5 percent increase for all of 2006."
Isn't 2% the goal? If so, then unless this is an anomaly, we need a rate hike. With gasoline prices sure to rise, I don't see how inflation could be decreasing any time soon. Maybe soon the FED will be caught between a sinking economy and fast rising prices. That should so it.
Mal, do you read this blog? Showing readers the actual numbers (and actual "processes") behind what has passed as financial news is what CR has been about for some years now, to the great benefit of readers -- and I might add, to the great benefit of journalists who desperately need to be kept informed and honest.
Journalists have simply got to stop being so thin-skinned about having their work critiqued in places like this-- their credibility and probably their survival depend on it.
There's nothing especially enterprising about scooping the world on a matter of public record, like court cases.
Just the first of many that come to mind: the Duke Cunningham story was broken by Marcus Stern reading public documents of real estate sales. He received a Pulitzer for his efforts. You may be interested in the American Journalism Review's article on Stern.
The public record is so large, so tedious, and so disorganized, that actually pulling something consequential from it is, in fact, an activity that requires a lot of enterprise.
"What irks me is precisely this desire some people have to want to natter on about "principles" and "forests not trees" while being perfectly ignorant of how the whole process works. I make this claim: you will never have anything useful to say about how to fix a problem if you do not know how the problem happens."
DITTO-DITTO-DITTO
Your teenager is a PITA is because he has the ability to reason through a problem with no idea of how the world works. Same situation with reporters and systemic analysis, they don't know what they don't know.
n. A large fishing net made to hang vertically in the water by weights at the lower edge and floats at the top.
v. To fish for or catch with such a net.
hey guess what? DB was the trustee and custodian on the loans (they're in a number of different securitized pools)...shocking.
This is a big important Clue. Thanks, bacon dreamz.
Let me summarize again: if DB is the custodian on these pools, then it was DB who certified that all the docs were present and correct when the pool was issued.
When DB goes to court as trustee of the security and claims the dog ate the assignments, you have a powerful, powerful problem here.
Yes, homeowners are hurt by stuff like this. So is every investor owning a mortgage-backed bond. False pool certs are a huge deal.
DB better be coughing up docs or else. I predict an investor class action filing in the next ten minutes.
And because they don't know, Boo2U, (or don't want to know), they can easily be manipulated, and in turn manipulate their readers. And become pied pipers instead of warning beacons -- exactly what played out in the housing boom.
I have to agree, you're letting your hobby horse of beating up on Gretchen get in the way of seeing her point. I think it can best be summed up with the quote she uses, the apparent result of original reporting:
This is the miracle of not having securities mapped to the underlying loans, said Josh Rosner, a specialist in mortgage securities at Graham-Fisher, an independent research firm in New York. There is no industry repository for mortgage loans. I have heard of instances where the same loan is in two or three pools.
If that last line is true, the sloppiness here has definitely reached a serious level and could well provide a little more fuel for the fire if the current uncertainty leads to panic.
I've never been a great fan of Morgenson's, but your petty fault finding is a real bore.
Wow,if DB was custodian and could not provide he docs,this is BIG news,and very ugly,unless you are an attorney.as far as the grey lady,she had had senile dementia for some time...judy miller anyone?
So far as I can tell, GM sort of split the ground between the original blog post and Tanta. She even went so far as to get a quote from the very same person quoted in the OP, who had it seems, been the blog's source at the start of it all.
Tanta requested, and got, a copy of the court's order. She posted it online here. If I were a betting man, I'd wager that GM read the original blog, Tanta's entries, read a study on background, called three people (April Charney, Josh Rosner, and the non-responsive bank), and filed her story.
And she still only dimpled the story that I think Tanta nailed--That these institutions have been playing too fast and loose with the rules, and now they're being bitten.
In this case, GM might have done better to take another few hours putting things together. The real story (to which she alludes rather breezily, in my opinion) is that foreclosure proceedings might get lots tougher to execute.
In the bigger picture (of a forest, dominated by trees) this is news worthy of deeper analysis. Are the folks at the other such institutions now scrambling to cross tees and dot eyes? Will this detract from their already sinking bottom lines? Will they, like the homeowner replacing one bad chunk of siding, peel it back to find badass termites armed to the pincers with small uzis?
We don't know. And neither does GM, I guess. But anyway, Tanta's analysis has been deeper and more insightful by far than Gretchen M's. I'll stick to this blog, and take anything I get from a "trained professional journalist" with a grain of salt, thank you.
Thanks, Tanta for the continuing incisive analysis. Plenty concise for me. I love your line about "counting the teaspoons when the guests leave."
It seems the real issue here is not whether DB can prove they have the notes, but whether they have to fill out the paperwork BEFORE they file the foreclosure action, rather than afterwards. DB seems to have provided assignments dated AFTER the foreclosure. This suggests that they have the paperwork, they just didn't bother to retrieve the documents and fill out the assignments. (At least they didn't backdate the assignments, which all too many crooked lawyers would be tempted to do!). So now they have to fill out the paperwork first, and foreclose second.
You can see why judges and borrowers would like to see the original note and assignment before foreclosure, especially if the suggestion that the same note is in more than one pool is true. This helps avoid the embarrassing circumstances of having two trusts try to foreclose on the same mortgage, and the borrower subject to two different competing foreclosure actions.
Of course, if one note is in more than one pool, that would be a pretty big story, major securities fraud. Has anybody looked at the total dollar amount of MBS compared to the total amount of mortgages out there to be securitized to see if there is a major disconnect, and double counting going on?
I've never been a great fan of Morgenson's, but your petty fault finding is a real bore.
Yes, Bob, it is. A real bore.
Josh Rosen gets to make a claim like that to a reporter, who gets to print it, and neither one of them has to bore everybody with what, exactly, it means.
It's fun to shoot your mouth off. It's tiresome to dredge through that claim to figure out what it might mean. I'm sorry that you cannot see this as anything other than a pissing match. I only note how convenient that is for Morgenson: all criticisms of her reporting can be dismissed as "petty."
Do you, or does anyone else here, have the first idea what Rosen (a media-quote-bot if ever there was one, who owns a business that makes a lot of money when investors panic, but nevermind) means by a "national repository of mortgages"? If you know what that means, are you in favor of having one? If you are, can you tell me why?
It sure sounds like Rosen thinks we should "nationalize" the document custody function of all loans. What, start a new government-sponsored enterprise to be the nation's Trust Department? How would that work? Who would pay for it?
Do you care about those little details? Surely you do.
I've been trying to find answers to the following for awhile now:
Are there any parameters or basic guidelines of which you are aware that dictate how long an assignment can remain "en blanc" before being required to be (1) "officially" assigned (2) officially recorded at a county registry?
Also, what happens if the subsequent assignment, after not being recorded for several years after supposed assignment/ownership of a note xfers, is just flat out wrong and can be proven?
The same goes for having "heard of instances where the same loan is in two or three pools. Wouldn't that be a real story, if true? One with major implications for the participants, like jail time? But this gets glossed over as if the reader is nodding along, Sure, I can imagine that...uh hunh, yup; Geez, why don't you name one? Can't remember where you heard about it from?
I mean, if I told you I heard that the Japanese government was secretly a front for the Orangutan liberation front, you might second-guess me if I mentioned that I "heard" it from Weekly World News (despite the impressive pictures). GM just gets to propagate a claim that could have me, as a forclosee or investor, pretty freaked out without reality check. Newspaper of record, indeed.
All I know about journalistic practice tells me that if this story had originally been reported in the Podunk Inquirer, GM would have credited the ol' PI in her story.
That may be journalistic principle, but it is, unfortunately, not practice. My experience as a journalist was that reporters were generally willing to steal from any source they thought they could get away with (i.e. any that they thought readers would not find or recognize.) That used to mean foreign language newspapers, small, 'free' papers in different cities, or even (yes it happens) Joe Schmoe freelancer who called to pitch a story.
I once asked a big name (and big ego) foreign journalist if he thought his paper would be interested in a story I had (in a country where I had long experience and spoke the language). He said they might, but if so, they would undoubtedly send him or another big name to cover it.
My experience living abroad and seeing how American journalists operate there explained a great deal to me about why our news media gets the big foreign stories so wrong, so often. Tanta's work here is giving me the nuts and bolts on how they manage to screw up the domestic stories so badly.
Bob_in_MA:If that last line is true, the sloppiness here has definitely reached a serious level and could well provide a little more fuel for the fire if the current uncertainty leads to panic.
A pretty big IF. How come he heard about it, but Gretchen didn't think that this was the big story? Or do you believe she is holding back, just placing a teaser for her follow up? If so, she sure buried the lede.
Otherwise, it sounds like something to add to a story to make it a bit more salable. Tanta may not have the respectful attitude you demand of your amateurs, but I'm suprised to find you coming down so hard on her for demanding proof of allegations and a bit of support by the facts of the case, as it were. Personally, that's why I come here, and not the NYT.
I think it's significant that I'm reading this blog and not the NYT. The blogs have been way out in front of the Housing Bubble story and now the Credit Crisis story (Doug Noland at PrudentBear has been on top of that one for, literally, years.) I realize how tired the MSM vs bloggers story is, but the bloggers are way out in front in this area, and the MSM is only catching up.
I also think that Tanta is correct in essence, that GM (among other MSM writers) has been lifting her material from other sources. Of course she's smart enough to get away with it; lift the ideas but don't lift any of the wording or anything that can be traced directly back to the blog source, and add a little original research and an original quote or two. It can't be proven, but the general feeling is that the MSM journalists are having the bloggers do the sort of heavy lifting that they themselves used to do.
This entire story is only substantive in that DB shows its disregard for the amount of rework involved in fixing the sloppy document handling - which occurred years before the FC began, by the way.
I diagree. You and Tanta both want to focus on all the little nits and nats that happen before this case reaches court. I'm not saying that's not important. I'm saying there's another separate issue, which is only what happens when two parties stand up in court (and anything that follows).
I once heard a judge in court say to a plantiff: "Don't bring me your problems or your history. Just evidence." Most judges don't know all the details you and Tanta know, and don't ever want to know. But they recognize it's a pretty big deal when people in their towns lose their houses, and they also know it may not be the end of the legal line for those people. Big class actions are coming, you know.
Mike, an assignment is a legal document that gives the assignee the ability to exercise the rights given to the original mortgagee.
The rights given to the original mortgagee, in the mortgage, pretty much boil down to the right to foreclose. That is the right to force the borrower to sell the property at public auction in order to satisfy the debt secured by the mortgage.
That right can be exercised only if the borrower fails to pay the debt as agreed.
Therefore, the right granted by the assignment may never ever be exercised. In the overwhelming majority of cases, it never is.
Therfore, assignments can go unrecorded until the day the borrower pays the loan off. As long as the servicer files a Release of Lien when the borrower pays off, either in a lump sum via refi or by making the last payment, it doesn't actually matter who held the potential right to foreclose during the time that loan performed.
Therefore, a lot of mortgage market participants have taken the approach that an assignment may be in recordable form (completed, executed, attested, signed, sealed and delivered) but not actually recorded in the land records unless and until it is needed. It is needed when someone wishes to foreclose. Therefore, the practice has been that the FC department first pulls that recordable assignment from the custodian, records it, then files the FC.
I am not defending that practice; obviously it's hugely error-prone and it means that you can't rely on the public records to know who has FC rights at any given point. So please understand I am not defending this practice. I am explaining it.
I have some sympathy with the argument that all assignments should be recorded at the time the loan/servicing rights are sold. That would mean the business would be very different, and the "true costs" of managing risk would emerge. This is my hobbyhorse, after all: the costs of doing business.
"Yes, homeowners are hurt by stuff like this. So is every investor owning a mortgage-backed bond. False pool certs are a huge deal."
I agree that DB, if all that has been stated is true, really has a problem that the compliance team needs to correct quickly, however I am not feeling it for the homeowner and "they should know who is foreclosing on them" arguement. If they want to make their mortgage payment, they know where to send it. This is ownership perfection process issue, not a predatory complaint.
Tanta,
I rely on you to explain in detail the mistakes and misstatements that characterize business reporting in the Times. Please do not let any nay-saying mutts deter you from making your appointed rounds. Thanks.
It's curious that neither DB nor its lawyers have made any comment re the whole episode. I'm guessing there's some fingerpointing going on. DB is probably barking at the lawyers that by not making sure all the docs were properly lined up before filing they've generated a national news story with DB's name all over it(and the suggestion that they've lost track of the very thing they are paid to keep track of). The lawyers are probably saying "We don't generate and control mortgages, we just file foreclosure actions." It's easy to second-guess the lawyers in hindsight (i.e., you should have insisted on a properly documented chain of title on the notes before filing a FEDERAL LAWSUIT, what with Rule 11 and all). I'm guessing going forward lawyers will be a lot more picky on this kind of thing (much as everyone bashes lawyers, in some circumstances they do serve as gatekeepers).
As to whether there are pools of original notes, mortgages, assignments, etc. flying around, from my experience (mostly with pools of defaulted commercial mortgages and corporate credits), the documents nerds try their best until there is some sort of deluge of activity and the investment bankers are screaming at them to "just do it and we'll fix it later." I've seen more than one eight-figure loan where no one could find the parts and pieces of the original loan documents. Usually it's a non-issue for the very reason that the lawyers for DB probably thought it was a non-issue: no one ever questions whether the lender, or assignee(s), really have the original notes, own the debt, etc. But it does get challenged now and then, if only as a stalling tactic by the borrower/debtor.
As to the "blog v. newspaper" debate, I've found that I read the blogs (this one in particular) before I read the papers these days. Which says something (in fact, I don't even read GM anymore, except when Tanta calls her out and even then I sometimes pass on it). I have noticed however, that the WSJ cites/credits blogs much more frequently than any other MSM. Maybe they don't feel as threatened. Interesting that the NYT (and soon the WSJ) have stopped charging for "premium content"...it seems the real "premium content" is being generated by folks in their pyjamas (housecoats? track suits?) with "tip jars."
As for Tanta's annoyance with GM, I share it. Not sure I'd be as cranky, but, then, it's Tanta's blog. If she wants to get up at the crack of dawn to write these things while I'm snoring like Homer Simpson (Uncle Festus?), more power to her.
"All I know about journalistic practice tells me that if this story had originally been reported in the Podunk Inquirer, GM would have credited the ol' PI in her story."
Why? This isn't a scoop -it's a court case, and GM could confirm that it happened.
The general rule in these situations - quote somebody if you use their original ideas.
I thought the piece did a reasonable job. The mistake you point out may be galling to you as an insider, but it doesn't really kill the premise of the article. It seems as silly as me saying that I should ignore your post Tanta, because your understanding of the rules for attribution is wrong. The point is, you aren't an insider, so I cut you some slack - if the mistake is germain, then it needs correction. Otherwise, it just shows how much there is to learn in the world.
No way would DB's lawyers ever say anything about it, lawyers are in the business of keeping their mouths shut.
Re DB, to them it is a flea on an elephant's ass to them, they have billions of dollars at risk, a short delay in 15 foreclosures means nothing to them.
Tanta:
I have spent nearly 20 years in the financial journalism business developing nche products for the investment community, and reporters ripping off ideas from blogs without attribution is not specific to blogs. Before the internet (and actually still), major newspapers would regularly use niche newsletters as source material for ideas and stories. Ethically, if they get the idea and go look up the facts themselves, there is no need for them to site the source of their inspiration.
Morally, well, everyone can have their own view of that.
That all said, I agree with the poster who advised that this blog not become like Daily Kos and others who rail against the MSM for not recognizing the greatness of blogs or giving them enough credit.
And as for poor Gretchen, understand that unlike you, she is not an expert in the material she covers. Her job as a reporter is to dig out and communicate the views of experts to her audience. That doesn't required the kind of detailed knowledge that you possess -- it is quite a different skill. That is not intended as an excuse for her, merely an explanation of what, in my view, reporters do. Blogggers, the good ones at least, do something different. They (you) provide us with the benefits of your understanding of how the market works.
This is a long-winded way of saying Gretchen, if your reading this, you could do worse than to use Tanta as a source.
But there are a jillion court orders entered in dockets all day in this country. IAFC.com caught this one, apparently because an attorney emailed them and alerted them to its significance.
GM jumped on the story after that. Am I supposed to believe that she just reads PACER filings all day in case one turns out to be important? I do not believe that.
Either the same lawyer who tipped off IAFC tipped off GM, or GM picked up the "relevance" of this story from IAFC.
What's killing me about the "giving credit" issue is that I personally disliked IAFC's post quite thoroughly. I would not have based my own claims about what's going on here and what the underlying issues are on that blog post.
I am also a bit tired of the "this is just inside baseball" stuff. Of course it's inside baseball stuff. I'm trying to share what insiders know, so that you all can understand whether this stuff is a tempest in a teapot or something you should care about, either as a homeowner or as an investor or as a bank customer or whatever.
I thought GM's purpose was supposed to be the same as mine: not just tell me about some obscure thing like document custody, but tell me why I as a reader of the Times should give a shit about it.
I happen to believe that you all, lord love you, don't know what you don't know when it comes to secondary mortgage market archana. Why should you?
So I picked up on something that is, as written, misleading. I believe that the practice of third-party custody is an important investor protection that is rather expensive, not a failure of the marketplace in pursuit of ever faster and cheaper securitizations.
You are free to care or not. But I just don't think you'd have had any idea whether GM's description of document custody was good bad or indifferent if I had not told you.
Nor would GM have had the first idea why the DB order is germane if IAFC hadn't told her.
As far as being a bit cranky, well, hell, it's a blog. It's supposed to be hours of entertainment for you and me both. Clearly, what entertains me is not always what entertains my readers. The age-old problem of every writer. Sadly, for everyone like Bob who dislikes that part, there are others who enjoy it. I'd like to make everyone happy all at once all the time without fail, but I am aware that that is not a possible goal.
Bob, I'm glad you're here and reading the blog and participating. I'm glad you feel comfortable making blunt criticism of my posts. All I can say is that I am happy to discuss why this issue is or is not important. I can't argue about what does or does not bore you (or me). About taste there is only assertion, not disputation.
I think the concern is that borrowers are going to put the lenders to the proof in many more cases, and the administrative delay and cost will increase for the lenders accross the board. That would be news, given that there are a few million foreclosures looming on the horizon.
A related issue, by the way, is that in many state courts lawsuits by credit card companies are dismissed at trial because the credit card company doesn't bring a competent witness who can testify regarding the business records proving the debt. Similar to the DB case, some judges say that even if you're a big credit card company with lots of fancy printouts, you need actual testimony from an actual human being who is competent to testify.
The other angle to this is if thousands of people begin reading this blogg i cant help feeling there will be pressure on the blogg and an invasion of louts to ensure it becomes harder and harder to read.
And people will find out who you all are somehow. GM is walking up and down mainstreet as a public figure. Imagine the pressure she has to deal with
I agree that DB, if all that has been stated is true, really has a problem that the compliance team needs to correct quickly, however I am not feeling it for the homeowner and "they should know who is foreclosing on them" arguement.
Banker, I doubt you and I disagree on that much, end of the day. I started this whole line of posts because I was frustrated by something that seems to me mostly a practice that hurts investors being hyped as "predation on little guys." So I am recognizing that individual mortgagors can be harmed, while also trying to talk about other kinds of harm, too.
But remember the dust-up over workouts? What keeps getting reported is that borrowers talk to servicers, but servicers can't say yea or nay on a workout because they don't know if they have the authority to do so. They have to go to the trustee. The trustee has to go to the bondholders. Like, years later, after it's too late, someone might have made a decision.
You don't think this might be complicated if a trustee's report shows that it owns a loan it doesn't own? And that foulups like that don't hurt borrowers?
So, we've lost the share certificate for British Airports Authority stock and since its been bought out we need it to get the proceeds. We are going to have to jump through a variety of hoops to establish our ownership. That's the way it should be.
Now, if the custodian of the document(not ME had done her() job properly, we'd have been ok. But, we can't go out and say.. c'mon - you KNOW we own the stock, you've been sending us dividends etc - we STILL have to do the necessary stuff.
This is about being able to prove, as per law, ownership isn't it ?
How about: this is about how we all love book-entry because it's fast and cheap and technologically cool until the day it fails, then we all want to know who has the actual original physical certificate of ownership tucked away in a vault somewhere.
Does anyone else remember that troll we had a while ago who kept accusing CR of being a "coupon clipper"? I remember having to explain to at least one of our readers what a coupon is and how you used to have to cut them off the physical bond with a pair of scissors and send them in to get your interest payment. Everyone chuckled over such a quaint thing. It's a book-entry world, and coupon clippers are Old Farts.
Rich's problem is that he thinks this should be about a preoccupation with the facts alleged in a specific courtroom about a specific foreclosure.
I am trying to say that while the facts of a specific FC are undoubtedly important to the parties involved, the rest of us should care, if we do care, for other reasons.
Re notes getting securitized several times over, I don't see how that can happen unless the company doing the securitizing just grabs notes at random from the public records and sells them. The units of interests in the trusts are in fact sold over and over (and nobody really knows who owns those, it's a series of book entries with DTC holding the actual certificates), but that's very different from selling the same note over and over.
DB's process of document retrieval necessarily started before the foreclosure was filed.. otherwise they have no legal case to say that they own the properties in question. The results of the document storage and retrieval process only are visible during this court case -- however, all the clerical errors brought to light during this court case happened long before the court case began.
" I'm saying there's another separate issue, which is only what happens when two parties stand up in court (and anything that follows). "
What are you talking about? DB had already lost the case before they entered the courtroom -- their lawyers simply didn't know it due to their shoddy document storage and retrieval processes.
' "Don't bring me your problems or your history. Just evidence." '
Thank you for making my point for me. The reason why this happened to DB is because they couldn't provide the evidence required. If they had the evidence the judge requested, this wouldn't have been news.
To all the MSM reading this blog and comments -- it should not be a surprising conclusion that DB's document storage and retrieval processes are faulty. When you report this in your papers, however, be sure to include the fact that DB's processes have been faulty for YEARS. However, DB's management chose to ignore that fact and move merrily along their way, assuming (hoping?) this type of result wouldn't occur.
This court case proves conclusively that DB's document storage processes have been faulty for some time now. As Tanta's answers above have been describing, it would serve the homeowner's interests for DB to fix their processes. However, it took this result for DB to internally realize document storage is an issue for them.
It remains to be seen, of course, if DB will fix their process.
seminole, what stops the same loan from being sold to two or more parties is, exactly and precisely, document custodians.
You cannot sell a security until a document custodian has "certified" that there is a valid original endorsed note for every loan, and a loan record for every note.
The only possible way that pool A and pool B could both show the same loan is if one custodian certified on a copy note or a fraudulent duplicate original note or no note at all.
I guess I didn't make it clear why I flipped my snark lid this morning over that throwaway line about custodians.
Rosen seems to be implying that the only solution is to have One National Custodian. Therefore there would be only One National Pool List.
I happen to think that we could handle this problem just fine by dealing with what Uncle Festus brought up: let the nerds be nerds, and stop pressuring them to go ahead and certify without docs in hand.
Trivial detail, but notes never end up in the public record. Only mortgages/DOTs and their assignments.
About a month ago I posted an item in the comments section that was interesting...I'll try to find it.
Basically a large bank (I think it was Wells F) that was moving by tractor trailer mort. files from TX to Mexico for copying and storage. This was part of an outsourcing business decision to save money on custodial services.
While the slant of the story was about personal information and identity theft, I just found it odd that a bank would house docs in a foreign jurisdiction. My sense is that the person who did the outsourcing rfp did not think this though...a US judge has no abiltiy to... well you get the drift
The cold pit in the stomach part is what worries me. What if Rosen is right? What if the reason DB couldn't produce the paper is because these were some of the loans he claims that were sold more than once and therefor only one of the buyers has the original paperwork? That sort of extreme speculation leads to all kinds of interesting situations. Maybe the borrowers are not in default, maybe they are dutifully paying their mortgage every month on time to the other pool that also bought this same mortgage note. Lawyers full employment act of 2007 v.2.
"You don't think this might be complicated if a trustee's report shows that it owns a loan it doesn't own? And that foulups like that don't hurt borrowers"
180 days later since the last payment they managed to make(or not if they were a FPD)? I think they had more than enough time to figure it out before judicial foreclosure proceedings, don't you think?
180 days later since the last payment they managed to make(or not if they were a FPD)? I think they had more than enough time to figure it out before judicial foreclosure proceedings, don't you think?
But, Banker, it's not just nonperforming loans.
Here's a quite common scenario: you make a large curtailment (prepayment of principal) on your loan. You would like the servicer to recast the payment on the lower balance (which requires a modification).
Or your LTV has gotten much lower since inception and you want to drop MI. Or you used to escrow for T&I but you would now like to change that and pay it yourself.
You call your servicer, the party to whom you have been making payments, and ask for what you want. The servicer says, I'll have to check with the investor and get back to you.
It would sure help matters if the servicer's records about who the investor actually is are up to date, no?
I don't want to overstress this issue one way or the other. I'm just saying that the whole process breaks down for everyone if record-keeping about note ownership gets fouled up.
And being a pig is a feature. Being a whiny puppy is an affliction.
Regarding the comments about not seeing the forest for the trees...
being a forester of a sort, there are "emergent properties" of the forest that cannot be determined by even the most intense study of individual trees. Total leaf area of the forest is an example. TLA remains about the same regardless of the number or age of individual trees.
However, one does not learn about or understand such emergent properties of the total forest until after one learns about and understands the properties of individual trees first. Forests are built on trees and mortgage industries are built on individual loans.
What Tanta says is important, at least to me, because she understands and can explain clearly the properties of the individual trees in the forest of the mortgage industry.
The forests of the United States would not be in such poor health if more of the "concerned citizens" understood the principles of forest health management, which are built on the management of individual trees,l instead of reacting in horror at the sight of one dead tree laying on a logging truck.
Tanta strikes me as being a voice in the wilderness trying to bring light and understanding to a complex topic. What a pity such a momentous work cannot be done in two lines of pithy sound bite.
You're right, I guess I was just being a bit myopic on this particular case.
You're the servicing expert, but my limited experience is that our servicers have carte blanche to waive impounds on most loans (if performing of course) and have a detailed process to waive MI without a letter from Mom...?
A while back in my career, I ran both the Mortgage Custody and Trustee areas of the Corporate Trust Division of a national bank, and we specialized in certifying pools of mortgages for securitization. Tanta is exactly correct in her classification of the group I ran as the red-tape line of ubernerds with document checklists, although I've never counted teaspoons personally. I can't tell you how many times I've been howled at by some MD at a bulge bracket because we were bouncing 2% of his pool for document exceptions, but when we were insistant, they always relented and cleaned up the loans they could. (The ones they couldn't got tossed.)
First, the "heard of instances where the same loan is in two or three pools. issue is a red herring. For reasons too tedious to explain, the possibility that the same loan could wind up in two or three different securitizations is extremely remote at best. The same ubernerds who are checking the documents are also in a lot of cases the ones charged with receiving and processing the actual payments associated with said loans. They don't receive a $1000 mortgage payment and then make 3 $1000 disbursements. Any implication that it may have happened on anything other than a de minimus level is patently false, period. Enough on this subject.
The DB "false pool certification" thing aside for a moment (which would be a big deal), I agree with Tanta that this is generally a tedious paperwork issue. It will require the current owner of the mortgage to make sure it has a proper chain of note endorsements from the original lender to the current owner, and a matching set of recorded assignments on file with the county clerk before beginning foreclosure proceedings. In a typical foreclosure in which the mortgage had only been transferred once, it might add a month or two to the procces. Multiple transfers obviously complicate the issue.
Let's say for a moment that the Ohio ruling becomes well-publicized and is seized on by attorneys and consumer advocates as a foreclosure-delaying tactic. The thing that's been bothering me, and what prompted me to write - what if one of the entities in the chain no longer exists? If ABC Mortgage Co. sold the loan without a note endorsement or assignment to DB as part of a securitization pool, and then became one of the many subprime lenders to go under or shutter its operations, how does DB establish ownership? ABCs officers and principals are gone, and its records would be difficult to obtain - there's little evidence of the legal sort that DB is the owner of the loan. What's to stop a reasonably ambitious attorney, acting on behalf of the stockholders of ABC Co., from using this standard to claim that all of the loans ABC ever sold were never legally transferred?
I think JJC has hit the real issue on the head. Given that many of the entities in the chains of title have croaked, getting the paper trail cleaned up could be a nightmare. Each assignment of a lien (endorsement of a note) needs to be signed by an actual human bean with legal authority to do so.
I've been wondering how this issue might surface as a problem in states with non-judicial foreclosure. I guess it would come down to the title insurers...but only if some resistant borrower had objected somehow prior to the non-judicial foreclosure sale.
jjc, that is why in Tanta's world you don't let those mistakes go: you fix them at the time, not later. For a lot of reasons, including the big one that an entity might not be around to send me an updated endorsement several years later.
My example from yesterday's post, actually, was about something like that. An entity who had endorsed the note no longer actually existed. In this case, it was lucky that the current noteholder was the one who absorbed that no-longer-existing entity, and so therefore had successorship of interest.
Had that not been the case, it wouldn't have been a $20,000 problem. It would have been a $20,000,000 problem. I have been involved with having to go to court to establish some fact regarding a defunct lender, to whom no one is claiming successorship. You want the definition of a Bad Day? Yikes.
Anyway, all these hedge funds wanting to bid on NEW and AHM's assets at the BK sale might want to pause and think about this first. No?
jjc- you are correct- I saw a really ambitious attorney use this already in AZ BK court in October while awaiting my little problem. And the opposing attorney said it could take a couple of months. But then confusion reigns in this wide open field.
As for my operation- I feel better today than I did before I lost my little stones. Miracles of modern medicine.
Tanta, keep right on blogging as you are apt to do- dumbing down the process only encourages the ignorant. I do notice nobody mentioned MERS during this entire discussion- perhaps an ubernerd post on them is due?
Of course, I believe that I should be able to find the trust holder and make an offer for my paper without having the servicer stand in between and obfuscate the issue to keep making the 6 bucks a month. But then I believe that if you are pricing it on the open market for $0.25, I should be able to buy it for that without a huge fiasco of a runaround.
No jello-that is for children- pudding is ok, but I just ate cheerios last night and kept that down. I already chucked the prescription stuff and went to aleve- Codone makes me jittery.
As for food- I am contemplating another bagel- ate one for breakfast with my coffee and felt much better. An entire day without caffiene was almost too much.
Yes bacon, mers is based in the midwest and is run by some extremely boring folks. That ubernerd post will provide me some entertainment, but will in all probability be the antidote to GM's article.
Time to move on, this article is getting buried;-] too much bad news still on the way- and CPI was today!
AllenM, you're clearly not recovered yet...you threw out your miracel durgs and then requested an UberNerd on MERS? i once made the mistake of reading the document linked below, which science has since proven is not humanly possible without the help of miracel durgs (two people died in the experiments, but don't worry, they were just mortgage brokers):
Isn't is possible to slice and dice the income stream from a single loan and assign the rights to different securitizations? For example, security #1 gets the first three years of payments received on the loan, security #2 gets the next seven years of payments received on the loan, and so on...
well it wasn't ducks, i don't know where you got that from, but interestingly, it is also the experiment that led to the controversial conjecture that 1 mortgage broker's soul = 0.5 lab rat souls.
Isn't is possible to slice and dice the income stream from a single loan and assign the rights to different securitizations?
Short answer? No.
What you are describing would be something like a "participation interest" in a mortgage loan. Participations do happen, as do syndicated loans (where there is one loan and many lenders). Mostly these days on big commercial loans.
If that were happening, the security would not own an undivided interest in a pool of loans, and the note endorsement would have to say something like "pay to the order of an X% interest in" or something like that. The prospectus of the security would also have to inform everyone that it owns only a fraction of the collateral.
I think jjc is right: Rosen heard of some screwed-up set of pool reports once, and from that claims that there are really loans being multiply securitized.
The Judge's order may be accessed on the web site of the US District Court for the Northern District of Ohio, under the caption Foreclosure Information.
Keep up the great work. As someone who spends my days educating college students in the dynamics of social stratification and inequality, I have observations on this thread:
1) Many of the today's posts offer introductory textbook examples of the sexism women face in professional contexts. Instead of addressing the issues at hand, someone plays the gender card (e.g., vendettas, cat fights, bitch sessions...). Often, the strategy attempts to push women off balance and lose their place in the debate. Often, the guys, and some gals, who pull these stunts do so because they can't follow the lines of argument. They use humor as a way of questioning the status of those in the debate and as a way of leveling the playing field. It's a classic strategy of the incompetent.
Second, we should expect greater expertise and greater attention to detail from reporters at the New York Times. Too much is a stake for Times reporters to make such simple but profound mistakes. They must have taken something away from Judith Miller saga. In general, one does not get to be a Times reporter unless one possesses marked intellectual acumen. Frankly, it's surprising that Morgenson can't grasp the issues here. I don't have a mortgage or banking or business background, but I can see the problem in how she framed the Deutsche Bank case. Unfortunately, as in the Miller case, such incompetence feeds conspiracy theory and poor decision making both among policy makers and among the electorate.
Christopher Carrington, PhD
Professor of Sociology
Comparing her and your roles is like comparing the description of a roller coaster ride to a technical manual explaining what keeps it on its tracks. She is writing to an audience of millions that has a lot on its collective minds, the legal ramifications of a case relating to mortgage foreclosures is pretty low on their list for most of them. She has x number of words to give them some context and to make them aware that this may become an issue to watch for in the future.
A (small) fraction of that audience will care enough to dig deeper than a general daily newspaper can provide (even if it is the NYT). Theyre going to seek out other sources, and if they are really lucky theyll find CR.
And theyll find Tanta (and all the knowledgeable commenters) and theyll learn a lot more about something that they care about. And the number of words allowed is a lot larger than GM's "x".
The other GM readers? Theyll go on with their lives with a little more knowledge about mortgages than they had before and continue to pay attention to what matters most to them. And whatever that may be, God bless them because there are other issues that need expertise and theyre the ones providing it.
Cramer on CDO valuation - OT but he notes "servicing has 1/10th of the staff needed. No one wants to be in servicing because it doesn't generate revenue"
Oh, lovely. Another sexist attempt to patronize me. By all means, that's a great setup for the rest of your comment.
Comparing her and your roles is like comparing the description of a roller coaster ride to a technical manual explaining what keeps it on its tracks. She is writing to an audience of millions that has a lot on its collective minds, the legal ramifications of a case relating to mortgage foreclosures is pretty low on their list for most of them. She has x number of words to give them some context and to make them aware that this may become an issue to watch for in the future.
So who forced her to put that Rosen quote in, and then further to drop that line about document custody that is, charitably, misleading and uncharitably, ass-backwards? If you do not have the time and space to explain an explosive accusation, then surely good sense tells you to not mention it at all?
Goddam, and I thought I was being patronized. You just infantilized a million Times readers. (A lot on their "collective minds"? What are they, Borg?) I'm guessing most readers of the business section of the Times are investors. You are telling me investors don't care whether grossly illegal things (multiple securitization of same loan) are going on in the market? That they're just too busy to wonder if this is an important allegation or some throwaway line to juice up the article?
You know my line about the elitist pig thing? It's a joke. I don't really think that other people who are not industry insiders are too stupid to understand what the issues are here.
And no, I'm not going to stop demanding that reporters report facts correctly and in context just because you think that little girls should be nicer to each other. And I find your analogy quite telling: you really seem to think that the business section of the Times is about entertainment. If that is so, I don't know what I could tell you that would make you happy.
Tanta, if you haven't started drinking yet today, you should.
The reason GM doesn't cite you is because if she did the traffic would shift from her to you. Newspapers are sinking like stones for the very reason that you, Tanta, are no more mouseclicks away than she, GM. Her "research" seems to consist of reading a few blogs and other sites to find out the news (note that Reuters ran an article about the Ohio yesterday before GM's article was published...the Reuters article was linked on Drudge). Then she calls an "expert" for a quote so that it looks like she's done some "research." If journalists are just aggregators ("intelligent agents") who pick up on the story of the day from other sources and provide their own take on the meaning of the news, then they're no different than bloggers (I mean that in a good way) and should be judged by the same standards.
The argument that it's ok for GM to garble the facts because her readers probably can't tell the difference and are only looking for "truthiness" instead of actual truth makes as much sense as the "pigtail" comment. And it's equally offensive.
the business section of the Times is about entertainment.
Yes, this is true. And not only about the business section, and not only about the NYT. Although I prefer to use the phrase "making feel good about themselves (readers, viewers, listeners, etc.)" instead of "entertaining".
I say the above as someone was professionaly involved in the field (of broadly understood entertainment) for 10 years.
All Em Ess Em (as you've said earlier) is really in a business of providing the "make me feel good service" to the owners of eyes and ears. They charge the said {eye,ear}-owners by inserting advertisements into the streams of {enter,edu,info,...}-tainment. The ability to insert something is then monetized on the secondary market. This is what makes them "Em Ess".
Please try to understand the above without prejudice. You will then see
that many seemingly irrational things in Em Ess Em are really rational ways of maximizing the stream of "make me feel good"-ness that can be resold.
And finally, many thanks for your very informative writing and beautiful writing style.
Keep up the good coverage. You're the best source I have of what is actually going on in the financial markets. I've always hated newspaper coverage of topics I'm familiar with (mostly engineering related topics) because they always get the story wrong because the reporter doesn't really understand it. You've amply demonstrated that this is also the case with the financial press and have inspired me to research my own investments much more thoroughly.
Tanta,
During the refi boom in 2003 and 2004, a mortgage broker in Manhattan complained that her job was greatly complicated by faulty paperwork. She said clients would apply for refis, be approved, everything would be moving along -- and then the current mortgagee would say, "Oops, we don't have our paperwork in order. The refi will have to be delayed." It drove her nuts.
Are the headaches that this broker had during the refi boom a consequence of what you wrote above: "Therefore, a lot of mortgage market participants have taken the approach that an assignment may be in recordable form (completed, executed, attested, signed, sealed and delivered) but not actually recorded in the land records unless and until it is needed."?
This is indeed a big deal. For many years foreclosing lenders have been alleging in Miami foreclosures that they have lost the note. Every single time. I thought that the Plaintiffs were simply too lazy to find the note, because, if forced they do eventually come up with it.
Now what I think is happening is that there is no chain of endorsements on the backs of the notes and the allegation that they can't find them is to cover this up. Also, no proper chains of assignments of mtges.
I did get ahold of and read the judge's decision, and I think it is dead on. I suspect that if push comes to shove, it make be that things got so sloppy that it really isn't clear who actually owns the note.
I have been closing loans for years, and I defend foreclosures when I am convinced that the money to bring the mtg current will eventually come in.
I am defending one right now that sounds exactly like the Deutche Bank situation, only in state court (Florida). This is a very very big deal, not because of the judge's decision which really is a very ordinary garden variety decision, but what it says about the inability of Deutche Bank to find the notes, endorsements and assignments. They could have asked for more time to find them, but didn't bother. You also don't get that arrogant with a judge. . . unless you want your head handed to you, which is what happened.
GM won't stand for General Motors anymore once GMAC/Rescap/RFC goes belly up....How much of a writedown do you think $62b of subprime mortgages merits?
Gretchen will have the ticker symbol all to herself soon enough.
Well, as Tanta predicted, the GM story has hit the blogs (Credit Slips, The Real Estate Bloggers) complete with the misleading conclusions. Seems everyone is jumping on the nefarious angle when, as Tanta has shown us, it is most likely sloppy business. They also missed the elephant in the room of having to sort out assignments when an assigner in the chain has gone under. I guess it works to drag up the evil banker story rather than dig into the real facts of the current situation.
I also like how they latch on to the quote that notes were sold to two or three pools. This defies logic even without the excellent explanation by jjc. If the note was placed in several different pools, someone isn't getting paid when they expected and would have complained by now. I also believe that if homes were being foreclosed on when payments were made on time to another party with a legitimate claim, that would have made the news as well.
Ditto to Prof. Carrington's post. Tanta, you've done a first-rate job in providing a very timely and insightful analysis on this curious DB court case and its possible implications (and wrongly perceived implications). Kudos!
For whatever its worth, I do not think youre a horses ass and I appreciate you at least had the professional respect to give us credit. It was just how that credit was portrayed and the fact that you did bash and attack our character for no reason in your first post.
I felt compelled to comment for the first time (even though I have been a regular reader for over a year) and I received the tongue lashing from the CR rapid fire comment crew. (as expected)
We reported on how we interpreted it along with April Charney. You then picked up the story and reported on the decision based on your professional opinion. Then Gretchen did the same.
Keep up the good work and thanks for reporting on what are a very serious issues and a landmark decision.
Debt is slavery.
I was surprised that gretchen repeated the "they couldn't prove they owned the properties" line from the blog ... the issue isn't whether they own the properties (obviously the borrower owns the property) it is whether they own the note.
Tanta,
This vendetta is clouding your vision. I'm a trained professional journalist, so here it is.
You acknowledge scoops produced by others when they involve non-public information, especially ideas or data that take time to dig out. There's nothing especially enterprising about scooping the world on a matter of public record, like court cases.
Also, you keep looking at the trees. The reason courts and borrowers need to know with clarity the owners of mortgages has less to do with custodians and forms than with principles and processes. If you are losing your home, for many reasons you have a right to know without doubt that the valid legal entity is enforcing the action in public court.
tanta, First, I love your stuff. Usually best digested on Sundays, when I have less competition for my time.
Q: Has anyone in your professional career ever begged you for a little crispness?
Rich must have gone to law school. "Losing the forest for the trees" is a popular saying there. Or so I am told. I think we are starting to split hares. (I think I got that from watching the Looney Tunes parody of the Barber of Seville.) Watch out for Elmer Fudd.
Fast, Cheap ... and Out Of Control is more like it.
ot but its a great movie too btw
Sad isn't it. Even after being taken to task several times in this blog (which I have no doubt she reads) GM doesn't care. Why? It doesn't matter. GM knows what counts is giving them what they want in the manner they think is laudible (truth be damned.)This is precisely why I never read/watch MSM and precisely why GM has a pulitzer.
especially ideas
Well, yes. Court orders are matters of public record. A claim about why they are important and what significance they have to the wider world is an idea. And agree with it or not, the idea in question was originally IAFC.com's.
I realize that Moe of IAFC thinks I'm a horse's ass, but I did him the courtesy of addressing his own arguments by name and link. That allowed readers of my blog to go read his blog and see for themselves who is saying what.
The reason courts and borrowers need to know with clarity the owners of mortgages has less to do with custodians and forms than with principles and processes.
I have no idea what you mean here. There are these Platonic Ideal "principles and processes" that have nothing to do with real world principles and processes like having a third party custodian certify that a pool of mortgages is complete and correct and owned by the trust before you, small-time investor, buy a piece of that security? A relevant principle is not that physical secure custody of these docs isn't crucial?
Hello! Both investors and homeowners are supposed to be protected here by having the legal evidence of a debt (note and mortgage) held by a reputable regulated third party who does not directly profit from the loan. Why does that not matter?
What irks me is precisely this desire some people have to want to natter on about "principles" and "forests not trees" while being perfectly ignorant of how the whole process works. I make this claim: you will never have anything useful to say about how to fix a problem if you do not know how the problem happens.
Well not "fast and cheap", in other words, "slow and expensive" is certainly descriptive of my experience with Wells Fargo.
Rich:
The rush to gratuitously defend your kind has clouded your judgement. I'm a trained process improvement engineer, so here it is.
" The reason courts and borrowers need to know with clarity the owners of mortgages has less to do with custodians and forms than with principles and processes. "
DOCUMENT RETRIEVAL IS THE PROCESS.
If the documentation isn't 110% correct, your process is faulty. If your process is faulty, somebody eats the cost of rework to discover all those documents which should have been correct the first time.
DB has no "dog ate my lunch" excuse.. their sloppy, insulting moves in Federal Court are the only story here.
Will the houses be foreclosed on? Certainly, the judge didn't shut that door. They do, however, have to cross their z's before refiling.
This entire story is only substantive in that DB shows its disregard for the amount of rework involved in fixing the sloppy document handling - which occurred years before the FC began, by the way.
Q: Has anyone in your professional career ever begged you for a little crispness?
No.
Is that crisp enough for you?
Rich must have gone to law school. "Losing the forest for the trees" is a popular saying there.
It wouldn't surprise me. Journalism is a profession where you can annoit yourself a member despite the fact that you have no credentials.
hey what happened to the "picking on poor gretchen" label?
hey what happened to the "picking on poor gretchen" label?
Dammit, I knew there was something I forgot . . .
Is it some kind of girl thing? Aren't there other lousy journalists to pick on?
You know, this place is sort of turning into the Daily Kos of financial blogs.
Tanta and CR, just do us a favor - don't switch to the horrible Scoop system, which is what turned DK into the bloated, laughable entity it has become. Keep your blog the way it is, and don't push this whole "bloggers vs. journalists" thing too hard. It's not important in the long run.
Tanta,
Thank you for a crisp and tart breakfast read!
Now this may not speak well of me, but when I see a piece by Tanta on GM I do a quick 'Oh goodie!" and dig in for the journalistic equivalent of a "Kill Bill" battle sequence (Uma plays Tanta natch)!
seine!
mal, I don't want this to turn into blogs v Em Ess Em. That is not my purpose.
However, there is a crucial real-world issue at stake here, as people keep reminding me in the comments. How are borrowers protected against incompetent or predatory lenders and servicers? How are investors protected against fake investments in bonds that have no true collateral backing? What should the regulators do? What should Congress do? Who should get "bailed out"? What, actually, would constitute a "bailout"?
These are incredibly important questions, and if the public agenda is being driven by people whose only exposure to the problem is the NYT, then I'm here to worry that we will get the wrong solution to the wrong problem at the wrong time.
The fact is that the NYT still functions as "the paper of record." Once its imprimatur is placed on a goofy claim, it becomes difficult to shake the story.
In the instance we are dealing with today, I tried to shake the story a little before GM got her hands on it. In other words, I wasn't arguing with the NYT yesterday.
It isn't about "scoops." It's about Clues. As in, I want everyone to have one.
OT: Maybe the recession is a comin' down the pike:
"So far this year, consumer prices are rising at an annual rate of 3.6 percent, up by more than a full percentage point from the 2.5 percent increase for all of 2006."
Isn't 2% the goal? If so, then unless this is an anomaly, we need a rate hike. With gasoline prices sure to rise, I don't see how inflation could be decreasing any time soon. Maybe soon the FED will be caught between a sinking economy and fast rising prices. That should so it.
hey guess what? DB was the trustee and custodian on the loans (they're in a number of different securitized pools)...shocking.
Off topic: Tanta, we love you...
Mal, do you read this blog? Showing readers the actual numbers (and actual "processes") behind what has passed as financial news is what CR has been about for some years now, to the great benefit of readers -- and I might add, to the great benefit of journalists who desperately need to be kept informed and honest.
Journalists have simply got to stop being so thin-skinned about having their work critiqued in places like this-- their credibility and probably their survival depend on it.
There's nothing especially enterprising about scooping the world on a matter of public record, like court cases.
Just the first of many that come to mind: the Duke Cunningham story was broken by Marcus Stern reading public documents of real estate sales. He received a Pulitzer for his efforts. You may be interested in the American Journalism Review's article on Stern.
The public record is so large, so tedious, and so disorganized, that actually pulling something consequential from it is, in fact, an activity that requires a lot of enterprise.
Is it some kind of girl thing? Aren't there other lousy journalists to pick on?
Oh, talk about the Kossification of things. A woman blogger criticizes a woman reporter, and your first question is "it it some kind of girl thing"?
No, it's some kind of a finance and economics thing. Girls can write about those subjects these days.
Girls can write about those subjects these days.
but not until you've done the dishes and cooked us dinner (no trout)!!!
"What irks me is precisely this desire some people have to want to natter on about "principles" and "forests not trees" while being perfectly ignorant of how the whole process works. I make this claim: you will never have anything useful to say about how to fix a problem if you do not know how the problem happens."
DITTO-DITTO-DITTO
Your teenager is a PITA is because he has the ability to reason through a problem with no idea of how the world works. Same situation with reporters and systemic analysis, they don't know what they don't know.
seine (sān)
n. A large fishing net made to hang vertically in the water by weights at the lower edge and floats at the top.
v. To fish for or catch with such a net.
hey guess what? DB was the trustee and custodian on the loans (they're in a number of different securitized pools)...shocking.
This is a big important Clue. Thanks, bacon dreamz.
Let me summarize again: if DB is the custodian on these pools, then it was DB who certified that all the docs were present and correct when the pool was issued.
When DB goes to court as trustee of the security and claims the dog ate the assignments, you have a powerful, powerful problem here.
Yes, homeowners are hurt by stuff like this. So is every investor owning a mortgage-backed bond. False pool certs are a huge deal.
DB better be coughing up docs or else. I predict an investor class action filing in the next ten minutes.
I know I failed you Tanta. I did notice, if I read the docket right, is that:
DB has a lot of foreclosures. I think 56 in a week and a half showing up. Methinks that is a lot.
I noticed they own these? But it looked like most were originated by someone else. Does it matter if the someone else is out of business?
Sorry if I got these terms wrong but it was somewhat interesting to look at.
nova
And because they don't know, Boo2U, (or don't want to know), they can easily be manipulated, and in turn manipulate their readers. And become pied pipers instead of warning beacons -- exactly what played out in the housing boom.
Tanta,
I have to agree, you're letting your hobby horse of beating up on Gretchen get in the way of seeing her point. I think it can best be summed up with the quote she uses, the apparent result of original reporting:
This is the miracle of not having securities mapped to the underlying loans, said Josh Rosner, a specialist in mortgage securities at Graham-Fisher, an independent research firm in New York. There is no industry repository for mortgage loans. I have heard of instances where the same loan is in two or three pools.
If that last line is true, the sloppiness here has definitely reached a serious level and could well provide a little more fuel for the fire if the current uncertainty leads to panic.
I've never been a great fan of Morgenson's, but your petty fault finding is a real bore.
Wow,if DB was custodian and could not provide he docs,this is BIG news,and very ugly,unless you are an attorney.as far as the grey lady,she had had senile dementia for some time...judy miller anyone?
Tanta:
Your plenty crispy enough for me.
Rich:
So far as I can tell, GM sort of split the ground between the original blog post and Tanta. She even went so far as to get a quote from the very same person quoted in the OP, who had it seems, been the blog's source at the start of it all.
Tanta requested, and got, a copy of the court's order. She posted it online here. If I were a betting man, I'd wager that GM read the original blog, Tanta's entries, read a study on background, called three people (April Charney, Josh Rosner, and the non-responsive bank), and filed her story.
And she still only dimpled the story that I think Tanta nailed--That these institutions have been playing too fast and loose with the rules, and now they're being bitten.
In this case, GM might have done better to take another few hours putting things together. The real story (to which she alludes rather breezily, in my opinion) is that foreclosure proceedings might get lots tougher to execute.
In the bigger picture (of a forest, dominated by trees) this is news worthy of deeper analysis. Are the folks at the other such institutions now scrambling to cross tees and dot eyes? Will this detract from their already sinking bottom lines? Will they, like the homeowner replacing one bad chunk of siding, peel it back to find badass termites armed to the pincers with small uzis?
We don't know. And neither does GM, I guess. But anyway, Tanta's analysis has been deeper and more insightful by far than Gretchen M's. I'll stick to this blog, and take anything I get from a "trained professional journalist" with a grain of salt, thank you.
Thanks, Tanta for the continuing incisive analysis. Plenty concise for me. I love your line about "counting the teaspoons when the guests leave."
It seems the real issue here is not whether DB can prove they have the notes, but whether they have to fill out the paperwork BEFORE they file the foreclosure action, rather than afterwards. DB seems to have provided assignments dated AFTER the foreclosure. This suggests that they have the paperwork, they just didn't bother to retrieve the documents and fill out the assignments. (At least they didn't backdate the assignments, which all too many crooked lawyers would be tempted to do!). So now they have to fill out the paperwork first, and foreclose second.
You can see why judges and borrowers would like to see the original note and assignment before foreclosure, especially if the suggestion that the same note is in more than one pool is true. This helps avoid the embarrassing circumstances of having two trusts try to foreclose on the same mortgage, and the borrower subject to two different competing foreclosure actions.
Of course, if one note is in more than one pool, that would be a pretty big story, major securities fraud. Has anybody looked at the total dollar amount of MBS compared to the total amount of mortgages out there to be securitized to see if there is a major disconnect, and double counting going on?
--K (not SK, just K).
I've never been a great fan of Morgenson's, but your petty fault finding is a real bore.
Yes, Bob, it is. A real bore.
Josh Rosen gets to make a claim like that to a reporter, who gets to print it, and neither one of them has to bore everybody with what, exactly, it means.
It's fun to shoot your mouth off. It's tiresome to dredge through that claim to figure out what it might mean. I'm sorry that you cannot see this as anything other than a pissing match. I only note how convenient that is for Morgenson: all criticisms of her reporting can be dismissed as "petty."
Do you, or does anyone else here, have the first idea what Rosen (a media-quote-bot if ever there was one, who owns a business that makes a lot of money when investors panic, but nevermind) means by a "national repository of mortgages"? If you know what that means, are you in favor of having one? If you are, can you tell me why?
It sure sounds like Rosen thinks we should "nationalize" the document custody function of all loans. What, start a new government-sponsored enterprise to be the nation's Trust Department? How would that work? Who would pay for it?
Do you care about those little details? Surely you do.
Tanta -
I've been trying to find answers to the following for awhile now:
Are there any parameters or basic guidelines of which you are aware that dictate how long an assignment can remain "en blanc" before being required to be (1) "officially" assigned (2) officially recorded at a county registry?
Also, what happens if the subsequent assignment, after not being recorded for several years after supposed assignment/ownership of a note xfers, is just flat out wrong and can be proven?
The same goes for having "heard of instances where the same loan is in two or three pools. Wouldn't that be a real story, if true? One with major implications for the participants, like jail time? But this gets glossed over as if the reader is nodding along, Sure, I can imagine that...uh hunh, yup; Geez, why don't you name one? Can't remember where you heard about it from?
I mean, if I told you I heard that the Japanese government was secretly a front for the Orangutan liberation front, you might second-guess me if I mentioned that I "heard" it from Weekly World News (despite the impressive pictures). GM just gets to propagate a claim that could have me, as a forclosee or investor, pretty freaked out without reality check. Newspaper of record, indeed.
Sorry, Tanta. I forgot no one has any credibility on the subject but you, and those in your favor on a particular day.
GM=GeneralMotors
This is a big important Clue. Thanks, bacon dreamz.
my "z" is back! thanks Tanta! i find it looks less like a proper name when spelled with an "s"...
All I know about journalistic practice tells me that if this story had originally been reported in the Podunk Inquirer, GM would have credited the ol' PI in her story.
That may be journalistic principle, but it is, unfortunately, not practice. My experience as a journalist was that reporters were generally willing to steal from any source they thought they could get away with (i.e. any that they thought readers would not find or recognize.) That used to mean foreign language newspapers, small, 'free' papers in different cities, or even (yes it happens) Joe Schmoe freelancer who called to pitch a story.
I once asked a big name (and big ego) foreign journalist if he thought his paper would be interested in a story I had (in a country where I had long experience and spoke the language). He said they might, but if so, they would undoubtedly send him or another big name to cover it.
My experience living abroad and seeing how American journalists operate there explained a great deal to me about why our news media gets the big foreign stories so wrong, so often. Tanta's work here is giving me the nuts and bolts on how they manage to screw up the domestic stories so badly.
And Bob-- bite your tongue!
"I have heard of instances where the same loan is in two or three pools.
To whom did he report these breaches as is his supposed fiduciary duty?
GM=GeneralMotors
Yeah, I just wish one of the two "GMs" would get delisted so as to reduce confusion. Too bad you can only short one of them.
Bob_in_MA:If that last line is true, the sloppiness here has definitely reached a serious level and could well provide a little more fuel for the fire if the current uncertainty leads to panic.
A pretty big IF. How come he heard about it, but Gretchen didn't think that this was the big story? Or do you believe she is holding back, just placing a teaser for her follow up? If so, she sure buried the lede.
Otherwise, it sounds like something to add to a story to make it a bit more salable. Tanta may not have the respectful attitude you demand of your amateurs, but I'm suprised to find you coming down so hard on her for demanding proof of allegations and a bit of support by the facts of the case, as it were. Personally, that's why I come here, and not the NYT.
I think it's significant that I'm reading this blog and not the NYT. The blogs have been way out in front of the Housing Bubble story and now the Credit Crisis story (Doug Noland at PrudentBear has been on top of that one for, literally, years.) I realize how tired the MSM vs bloggers story is, but the bloggers are way out in front in this area, and the MSM is only catching up.
I also think that Tanta is correct in essence, that GM (among other MSM writers) has been lifting her material from other sources. Of course she's smart enough to get away with it; lift the ideas but don't lift any of the wording or anything that can be traced directly back to the blog source, and add a little original research and an original quote or two. It can't be proven, but the general feeling is that the MSM journalists are having the bloggers do the sort of heavy lifting that they themselves used to do.
Unsympathetic,
I diagree. You and Tanta both want to focus on all the little nits and nats that happen before this case reaches court. I'm not saying that's not important. I'm saying there's another separate issue, which is only what happens when two parties stand up in court (and anything that follows).
I once heard a judge in court say to a plantiff: "Don't bring me your problems or your history. Just evidence." Most judges don't know all the details you and Tanta know, and don't ever want to know. But they recognize it's a pretty big deal when people in their towns lose their houses, and they also know it may not be the end of the legal line for those people. Big class actions are coming, you know.
Mike, an assignment is a legal document that gives the assignee the ability to exercise the rights given to the original mortgagee.
The rights given to the original mortgagee, in the mortgage, pretty much boil down to the right to foreclose. That is the right to force the borrower to sell the property at public auction in order to satisfy the debt secured by the mortgage.
That right can be exercised only if the borrower fails to pay the debt as agreed.
Therefore, the right granted by the assignment may never ever be exercised. In the overwhelming majority of cases, it never is.
Therfore, assignments can go unrecorded until the day the borrower pays the loan off. As long as the servicer files a Release of Lien when the borrower pays off, either in a lump sum via refi or by making the last payment, it doesn't actually matter who held the potential right to foreclose during the time that loan performed.
Therefore, a lot of mortgage market participants have taken the approach that an assignment may be in recordable form (completed, executed, attested, signed, sealed and delivered) but not actually recorded in the land records unless and until it is needed. It is needed when someone wishes to foreclose. Therefore, the practice has been that the FC department first pulls that recordable assignment from the custodian, records it, then files the FC.
I am not defending that practice; obviously it's hugely error-prone and it means that you can't rely on the public records to know who has FC rights at any given point. So please understand I am not defending this practice. I am explaining it.
I have some sympathy with the argument that all assignments should be recorded at the time the loan/servicing rights are sold. That would mean the business would be very different, and the "true costs" of managing risk would emerge. This is my hobbyhorse, after all: the costs of doing business.
"Yes, homeowners are hurt by stuff like this. So is every investor owning a mortgage-backed bond. False pool certs are a huge deal."
I agree that DB, if all that has been stated is true, really has a problem that the compliance team needs to correct quickly, however I am not feeling it for the homeowner and "they should know who is foreclosing on them" arguement. If they want to make their mortgage payment, they know where to send it. This is ownership perfection process issue, not a predatory complaint.
Tanta,
I rely on you to explain in detail the mistakes and misstatements that characterize business reporting in the Times. Please do not let any nay-saying mutts deter you from making your appointed rounds. Thanks.
It's curious that neither DB nor its lawyers have made any comment re the whole episode. I'm guessing there's some fingerpointing going on. DB is probably barking at the lawyers that by not making sure all the docs were properly lined up before filing they've generated a national news story with DB's name all over it(and the suggestion that they've lost track of the very thing they are paid to keep track of). The lawyers are probably saying "We don't generate and control mortgages, we just file foreclosure actions." It's easy to second-guess the lawyers in hindsight (i.e., you should have insisted on a properly documented chain of title on the notes before filing a FEDERAL LAWSUIT, what with Rule 11 and all). I'm guessing going forward lawyers will be a lot more picky on this kind of thing (much as everyone bashes lawyers, in some circumstances they do serve as gatekeepers).
As to whether there are pools of original notes, mortgages, assignments, etc. flying around, from my experience (mostly with pools of defaulted commercial mortgages and corporate credits), the documents nerds try their best until there is some sort of deluge of activity and the investment bankers are screaming at them to "just do it and we'll fix it later." I've seen more than one eight-figure loan where no one could find the parts and pieces of the original loan documents. Usually it's a non-issue for the very reason that the lawyers for DB probably thought it was a non-issue: no one ever questions whether the lender, or assignee(s), really have the original notes, own the debt, etc. But it does get challenged now and then, if only as a stalling tactic by the borrower/debtor.
As to the "blog v. newspaper" debate, I've found that I read the blogs (this one in particular) before I read the papers these days. Which says something (in fact, I don't even read GM anymore, except when Tanta calls her out and even then I sometimes pass on it). I have noticed however, that the WSJ cites/credits blogs much more frequently than any other MSM. Maybe they don't feel as threatened. Interesting that the NYT (and soon the WSJ) have stopped charging for "premium content"...it seems the real "premium content" is being generated by folks in their pyjamas (housecoats? track suits?) with "tip jars."
As for Tanta's annoyance with GM, I share it. Not sure I'd be as cranky, but, then, it's Tanta's blog. If she wants to get up at the crack of dawn to write these things while I'm snoring like Homer Simpson (Uncle Festus?), more power to her.
"All I know about journalistic practice tells me that if this story had originally been reported in the Podunk Inquirer, GM would have credited the ol' PI in her story."
Why? This isn't a scoop -it's a court case, and GM could confirm that it happened.
The general rule in these situations - quote somebody if you use their original ideas.
I thought the piece did a reasonable job. The mistake you point out may be galling to you as an insider, but it doesn't really kill the premise of the article. It seems as silly as me saying that I should ignore your post Tanta, because your understanding of the rules for attribution is wrong. The point is, you aren't an insider, so I cut you some slack - if the mistake is germain, then it needs correction. Otherwise, it just shows how much there is to learn in the world.
No way would DB's lawyers ever say anything about it, lawyers are in the business of keeping their mouths shut.
Re DB, to them it is a flea on an elephant's ass to them, they have billions of dollars at risk, a short delay in 15 foreclosures means nothing to them.
...a short delay in 15 foreclosures means nothing to them.
Unless those notes are securitized several times over, hey?
I hate it when I agree with Banker.
Tanta:
I have spent nearly 20 years in the financial journalism business developing nche products for the investment community, and reporters ripping off ideas from blogs without attribution is not specific to blogs. Before the internet (and actually still), major newspapers would regularly use niche newsletters as source material for ideas and stories. Ethically, if they get the idea and go look up the facts themselves, there is no need for them to site the source of their inspiration.
Morally, well, everyone can have their own view of that.
That all said, I agree with the poster who advised that this blog not become like Daily Kos and others who rail against the MSM for not recognizing the greatness of blogs or giving them enough credit.
And as for poor Gretchen, understand that unlike you, she is not an expert in the material she covers. Her job as a reporter is to dig out and communicate the views of experts to her audience. That doesn't required the kind of detailed knowledge that you possess -- it is quite a different skill. That is not intended as an excuse for her, merely an explanation of what, in my view, reporters do. Blogggers, the good ones at least, do something different. They (you) provide us with the benefits of your understanding of how the market works.
This is a long-winded way of saying Gretchen, if your reading this, you could do worse than to use Tanta as a source.
Aznew
Rob, I defer to your expertise as a journalist.
But there are a jillion court orders entered in dockets all day in this country. IAFC.com caught this one, apparently because an attorney emailed them and alerted them to its significance.
GM jumped on the story after that. Am I supposed to believe that she just reads PACER filings all day in case one turns out to be important? I do not believe that.
Either the same lawyer who tipped off IAFC tipped off GM, or GM picked up the "relevance" of this story from IAFC.
What's killing me about the "giving credit" issue is that I personally disliked IAFC's post quite thoroughly. I would not have based my own claims about what's going on here and what the underlying issues are on that blog post.
I am also a bit tired of the "this is just inside baseball" stuff. Of course it's inside baseball stuff. I'm trying to share what insiders know, so that you all can understand whether this stuff is a tempest in a teapot or something you should care about, either as a homeowner or as an investor or as a bank customer or whatever.
I thought GM's purpose was supposed to be the same as mine: not just tell me about some obscure thing like document custody, but tell me why I as a reader of the Times should give a shit about it.
I happen to believe that you all, lord love you, don't know what you don't know when it comes to secondary mortgage market archana. Why should you?
So I picked up on something that is, as written, misleading. I believe that the practice of third-party custody is an important investor protection that is rather expensive, not a failure of the marketplace in pursuit of ever faster and cheaper securitizations.
You are free to care or not. But I just don't think you'd have had any idea whether GM's description of document custody was good bad or indifferent if I had not told you.
Nor would GM have had the first idea why the DB order is germane if IAFC hadn't told her.
As far as being a bit cranky, well, hell, it's a blog. It's supposed to be hours of entertainment for you and me both. Clearly, what entertains me is not always what entertains my readers. The age-old problem of every writer. Sadly, for everyone like Bob who dislikes that part, there are others who enjoy it. I'd like to make everyone happy all at once all the time without fail, but I am aware that that is not a possible goal.
Bob, I'm glad you're here and reading the blog and participating. I'm glad you feel comfortable making blunt criticism of my posts. All I can say is that I am happy to discuss why this issue is or is not important. I can't argue about what does or does not bore you (or me). About taste there is only assertion, not disputation.
I think the concern is that borrowers are going to put the lenders to the proof in many more cases, and the administrative delay and cost will increase for the lenders accross the board. That would be news, given that there are a few million foreclosures looming on the horizon.
A related issue, by the way, is that in many state courts lawsuits by credit card companies are dismissed at trial because the credit card company doesn't bring a competent witness who can testify regarding the business records proving the debt. Similar to the DB case, some judges say that even if you're a big credit card company with lots of fancy printouts, you need actual testimony from an actual human being who is competent to testify.
The other angle to this is if thousands of people begin reading this blogg i cant help feeling there will be pressure on the blogg and an invasion of louts to ensure it becomes harder and harder to read.
And people will find out who you all are somehow. GM is walking up and down mainstreet as a public figure. Imagine the pressure she has to deal with
And another thing, what is inside baseball matters to those who play the game. And many more people are playing the FC game than was the case.
I agree that DB, if all that has been stated is true, really has a problem that the compliance team needs to correct quickly, however I am not feeling it for the homeowner and "they should know who is foreclosing on them" arguement.
Banker, I doubt you and I disagree on that much, end of the day. I started this whole line of posts because I was frustrated by something that seems to me mostly a practice that hurts investors being hyped as "predation on little guys." So I am recognizing that individual mortgagors can be harmed, while also trying to talk about other kinds of harm, too.
But remember the dust-up over workouts? What keeps getting reported is that borrowers talk to servicers, but servicers can't say yea or nay on a workout because they don't know if they have the authority to do so. They have to go to the trustee. The trustee has to go to the bondholders. Like, years later, after it's too late, someone might have made a decision.
You don't think this might be complicated if a trustee's report shows that it owns a loan it doesn't own? And that foulups like that don't hurt borrowers?
So, we've lost the share certificate for British Airports Authority stock and since its been bought out we need it to get the proceeds. We are going to have to jump through a variety of hoops to establish our ownership. That's the way it should be.
Now, if the custodian of the document(not ME
had done her(
) job properly, we'd have been ok. But, we can't go out and say.. c'mon - you KNOW we own the stock, you've been sending us dividends etc - we STILL have to do the necessary stuff.
This is about being able to prove, as per law, ownership isn't it ?
-K
How about this "It doesn't matter who is foreclosing on you if they can prove that they can legally do so."?
How about: this is about how we all love book-entry because it's fast and cheap and technologically cool until the day it fails, then we all want to know who has the actual original physical certificate of ownership tucked away in a vault somewhere.
Does anyone else remember that troll we had a while ago who kept accusing CR of being a "coupon clipper"? I remember having to explain to at least one of our readers what a coupon is and how you used to have to cut them off the physical bond with a pair of scissors and send them in to get your interest payment. Everyone chuckled over such a quaint thing. It's a book-entry world, and coupon clippers are Old Farts.
Rich's problem is that he thinks this should be about a preoccupation with the facts alleged in a specific courtroom about a specific foreclosure.
I am trying to say that while the facts of a specific FC are undoubtedly important to the parties involved, the rest of us should care, if we do care, for other reasons.
Re notes getting securitized several times over, I don't see how that can happen unless the company doing the securitizing just grabs notes at random from the public records and sells them. The units of interests in the trusts are in fact sold over and over (and nobody really knows who owns those, it's a series of book entries with DTC holding the actual certificates), but that's very different from selling the same note over and over.
Rich -
DB's process of document retrieval necessarily started before the foreclosure was filed.. otherwise they have no legal case to say that they own the properties in question. The results of the document storage and retrieval process only are visible during this court case -- however, all the clerical errors brought to light during this court case happened long before the court case began.
" I'm saying there's another separate issue, which is only what happens when two parties stand up in court (and anything that follows). "
What are you talking about? DB had already lost the case before they entered the courtroom -- their lawyers simply didn't know it due to their shoddy document storage and retrieval processes.
' "Don't bring me your problems or your history. Just evidence." '
Thank you for making my point for me. The reason why this happened to DB is because they couldn't provide the evidence required. If they had the evidence the judge requested, this wouldn't have been news.
To all the MSM reading this blog and comments -- it should not be a surprising conclusion that DB's document storage and retrieval processes are faulty. When you report this in your papers, however, be sure to include the fact that DB's processes have been faulty for YEARS. However, DB's management chose to ignore that fact and move merrily along their way, assuming (hoping?) this type of result wouldn't occur.
This court case proves conclusively that DB's document storage processes have been faulty for some time now. As Tanta's answers above have been describing, it would serve the homeowner's interests for DB to fix their processes. However, it took this result for DB to internally realize document storage is an issue for them.
It remains to be seen, of course, if DB will fix their process.
seminole, what stops the same loan from being sold to two or more parties is, exactly and precisely, document custodians.
You cannot sell a security until a document custodian has "certified" that there is a valid original endorsed note for every loan, and a loan record for every note.
The only possible way that pool A and pool B could both show the same loan is if one custodian certified on a copy note or a fraudulent duplicate original note or no note at all.
I guess I didn't make it clear why I flipped my snark lid this morning over that throwaway line about custodians.
Rosen seems to be implying that the only solution is to have One National Custodian. Therefore there would be only One National Pool List.
I happen to think that we could handle this problem just fine by dealing with what Uncle Festus brought up: let the nerds be nerds, and stop pressuring them to go ahead and certify without docs in hand.
Trivial detail, but notes never end up in the public record. Only mortgages/DOTs and their assignments.
The last thing CR needs is exposure in a major newspaper. The blog could devolve pretty fast.
The last thing CR needs is exposure in a major newspaper. The blog could devolve pretty fast.
Not if I keep writing long boring tedious posts about archane matters of securities law and market practices before breakfast, it won't.
You broke the code. I am going out of my way to be boring, in hopes that the comments do not become infested with riffraff.
As I said yesterday, oink. I'm an elitist pig. It's a feature, not a bug.
Great as always.
About a month ago I posted an item in the comments section that was interesting...I'll try to find it.
Basically a large bank (I think it was Wells F) that was moving by tractor trailer mort. files from TX to Mexico for copying and storage. This was part of an outsourcing business decision to save money on custodial services.
While the slant of the story was about personal information and identity theft, I just found it odd that a bank would house docs in a foreign jurisdiction. My sense is that the person who did the outsourcing rfp did not think this though...a US judge has no abiltiy to... well you get the drift
The cold pit in the stomach part is what worries me. What if Rosen is right? What if the reason DB couldn't produce the paper is because these were some of the loans he claims that were sold more than once and therefor only one of the buyers has the original paperwork? That sort of extreme speculation leads to all kinds of interesting situations. Maybe the borrowers are not in default, maybe they are dutifully paying their mortgage every month on time to the other pool that also bought this same mortgage note. Lawyers full employment act of 2007 v.2.
"You don't think this might be complicated if a trustee's report shows that it owns a loan it doesn't own? And that foulups like that don't hurt borrowers"
180 days later since the last payment they managed to make(or not if they were a FPD)? I think they had more than enough time to figure it out before judicial foreclosure proceedings, don't you think?
"As I said yesterday, oink. I'm an elitist pig. It's a feature, not a bug."
I would say it's more of an affliction.
I'm a trained Joe 6P, however I also am a realist and understand that only the best liars should attend law school.
180 days later since the last payment they managed to make(or not if they were a FPD)? I think they had more than enough time to figure it out before judicial foreclosure proceedings, don't you think?
But, Banker, it's not just nonperforming loans.
Here's a quite common scenario: you make a large curtailment (prepayment of principal) on your loan. You would like the servicer to recast the payment on the lower balance (which requires a modification).
Or your LTV has gotten much lower since inception and you want to drop MI. Or you used to escrow for T&I but you would now like to change that and pay it yourself.
You call your servicer, the party to whom you have been making payments, and ask for what you want. The servicer says, I'll have to check with the investor and get back to you.
It would sure help matters if the servicer's records about who the investor actually is are up to date, no?
I don't want to overstress this issue one way or the other. I'm just saying that the whole process breaks down for everyone if record-keeping about note ownership gets fouled up.
And being a pig is a feature. Being a whiny puppy is an affliction.
Regarding the comments about not seeing the forest for the trees...
being a forester of a sort, there are "emergent properties" of the forest that cannot be determined by even the most intense study of individual trees. Total leaf area of the forest is an example. TLA remains about the same regardless of the number or age of individual trees.
However, one does not learn about or understand such emergent properties of the total forest until after one learns about and understands the properties of individual trees first. Forests are built on trees and mortgage industries are built on individual loans.
What Tanta says is important, at least to me, because she understands and can explain clearly the properties of the individual trees in the forest of the mortgage industry.
The forests of the United States would not be in such poor health if more of the "concerned citizens" understood the principles of forest health management, which are built on the management of individual trees,l instead of reacting in horror at the sight of one dead tree laying on a logging truck.
Tanta strikes me as being a voice in the wilderness trying to bring light and understanding to a complex topic. What a pity such a momentous work cannot be done in two lines of pithy sound bite.
A trout in the milk and counting spoons,..makes me want to re-read Thoreau and Emerson. Thanks, Tanta
"But, Banker, it's not just nonperforming loans"
You're right, I guess I was just being a bit myopic on this particular case.
You're the servicing expert, but my limited experience is that our servicers have carte blanche to waive impounds on most loans (if performing of course) and have a detailed process to waive MI without a letter from Mom...?
A while back in my career, I ran both the Mortgage Custody and Trustee areas of the Corporate Trust Division of a national bank, and we specialized in certifying pools of mortgages for securitization. Tanta is exactly correct in her classification of the group I ran as the red-tape line of ubernerds with document checklists, although I've never counted teaspoons personally. I can't tell you how many times I've been howled at by some MD at a bulge bracket because we were bouncing 2% of his pool for document exceptions, but when we were insistant, they always relented and cleaned up the loans they could. (The ones they couldn't got tossed.)
First, the "heard of instances where the same loan is in two or three pools. issue is a red herring. For reasons too tedious to explain, the possibility that the same loan could wind up in two or three different securitizations is extremely remote at best. The same ubernerds who are checking the documents are also in a lot of cases the ones charged with receiving and processing the actual payments associated with said loans. They don't receive a $1000 mortgage payment and then make 3 $1000 disbursements. Any implication that it may have happened on anything other than a de minimus level is patently false, period. Enough on this subject.
The DB "false pool certification" thing aside for a moment (which would be a big deal), I agree with Tanta that this is generally a tedious paperwork issue. It will require the current owner of the mortgage to make sure it has a proper chain of note endorsements from the original lender to the current owner, and a matching set of recorded assignments on file with the county clerk before beginning foreclosure proceedings. In a typical foreclosure in which the mortgage had only been transferred once, it might add a month or two to the procces. Multiple transfers obviously complicate the issue.
Let's say for a moment that the Ohio ruling becomes well-publicized and is seized on by attorneys and consumer advocates as a foreclosure-delaying tactic. The thing that's been bothering me, and what prompted me to write - what if one of the entities in the chain no longer exists? If ABC Mortgage Co. sold the loan without a note endorsement or assignment to DB as part of a securitization pool, and then became one of the many subprime lenders to go under or shutter its operations, how does DB establish ownership? ABCs officers and principals are gone, and its records would be difficult to obtain - there's little evidence of the legal sort that DB is the owner of the loan. What's to stop a reasonably ambitious attorney, acting on behalf of the stockholders of ABC Co., from using this standard to claim that all of the loans ABC ever sold were never legally transferred?
I think JJC has hit the real issue on the head. Given that many of the entities in the chains of title have croaked, getting the paper trail cleaned up could be a nightmare. Each assignment of a lien (endorsement of a note) needs to be signed by an actual human bean with legal authority to do so.
I've been wondering how this issue might surface as a problem in states with non-judicial foreclosure. I guess it would come down to the title insurers...but only if some resistant borrower had objected somehow prior to the non-judicial foreclosure sale.
A trout in the milk and counting spoons,..makes me want to re-read Thoreau and Emerson.
Oh Captain! My Captain!
Nothing improves my day more than an American Lit Nerd. Nothing.
jjc, that is why in Tanta's world you don't let those mistakes go: you fix them at the time, not later. For a lot of reasons, including the big one that an entity might not be around to send me an updated endorsement several years later.
My example from yesterday's post, actually, was about something like that. An entity who had endorsed the note no longer actually existed. In this case, it was lucky that the current noteholder was the one who absorbed that no-longer-existing entity, and so therefore had successorship of interest.
Had that not been the case, it wouldn't have been a $20,000 problem. It would have been a $20,000,000 problem. I have been involved with having to go to court to establish some fact regarding a defunct lender, to whom no one is claiming successorship. You want the definition of a Bad Day? Yikes.
Anyway, all these hedge funds wanting to bid on NEW and AHM's assets at the BK sale might want to pause and think about this first. No?
jjc- you are correct- I saw a really ambitious attorney use this already in AZ BK court in October while awaiting my little problem. And the opposing attorney said it could take a couple of months. But then confusion reigns in this wide open field.
As for my operation- I feel better today than I did before I lost my little stones. Miracles of modern medicine.
Tanta, keep right on blogging as you are apt to do- dumbing down the process only encourages the ignorant. I do notice nobody mentioned MERS during this entire discussion- perhaps an ubernerd post on them is due?
Of course, I believe that I should be able to find the trust holder and make an offer for my paper without having the servicer stand in between and obfuscate the issue to keep making the 6 bucks a month. But then I believe that if you are pricing it on the open market for $0.25, I should be able to buy it for that without a huge fiasco of a runaround.
Someday this war's gonna end...
I do notice nobody mentioned MERS during this entire discussion- perhaps an ubernerd post on them is due?
I have been thinking that very same thing.
I'm glad you're better. I hope no one tried to make you eat Jello. Unless, uh, you like Jello. But you've never struck me as that sort.
Just a note.... GM stands for General Motors.....
I do notice nobody mentioned MERS during this entire discussion- perhaps an ubernerd post on them is due?
I have been thinking that very same thing.
well, that should finish off the riff raff.
No jello-that is for children- pudding is ok, but I just ate cheerios last night and kept that down. I already chucked the prescription stuff and went to aleve- Codone makes me jittery.
As for food- I am contemplating another bagel- ate one for breakfast with my coffee and felt much better. An entire day without caffiene was almost too much.
Yes bacon, mers is based in the midwest and is run by some extremely boring folks. That ubernerd post will provide me some entertainment, but will in all probability be the antidote to GM's article.
Time to move on, this article is getting buried;-] too much bad news still on the way- and CPI was today!
Someday this war's gonna end...
Oh, cool, MERS, I have been hoping that would come up. That entity confuses the whole issue of Assignments so this should be fun.
AllenM, you're clearly not recovered yet...you threw out your miracel durgs and then requested an UberNerd on MERS? i once made the mistake of reading the document linked below, which science has since proven is not humanly possible without the help of miracel durgs (two people died in the experiments, but don't worry, they were just mortgage brokers):
http://www.mersinc.org/filedownload.aspx?id=176&table=ProductFile
...two people died in the experiments, but don't worry, they were just mortgage brokers.
Which was it? People or Mortgage Brokers? [ducks]
Re: individual loans in multiple securitizations
Isn't is possible to slice and dice the income stream from a single loan and assign the rights to different securitizations? For example, security #1 gets the first three years of payments received on the loan, security #2 gets the next seven years of payments received on the loan, and so on...
Which was it? People or Mortgage Brokers? [ducks]
well it wasn't ducks, i don't know where you got that from, but interestingly, it is also the experiment that led to the controversial conjecture that 1 mortgage broker's soul = 0.5 lab rat souls.
Now I know you are just kidding. It was those very same experiments that scientifically proved that there are just some things a rat won't do.
The sad part was that the testers sometimes got emotionally attached to the rats.
Isn't is possible to slice and dice the income stream from a single loan and assign the rights to different securitizations?
Short answer? No.
What you are describing would be something like a "participation interest" in a mortgage loan. Participations do happen, as do syndicated loans (where there is one loan and many lenders). Mostly these days on big commercial loans.
If that were happening, the security would not own an undivided interest in a pool of loans, and the note endorsement would have to say something like "pay to the order of an X% interest in" or something like that. The prospectus of the security would also have to inform everyone that it owns only a fraction of the collateral.
I think jjc is right: Rosen heard of some screwed-up set of pool reports once, and from that claims that there are really loans being multiply securitized.
The Judge's order may be accessed on the web site of the US District Court for the Northern District of Ohio, under the caption Foreclosure Information.
Tanta,
Keep up the great work. As someone who spends my days educating college students in the dynamics of social stratification and inequality, I have observations on this thread:
1) Many of the today's posts offer introductory textbook examples of the sexism women face in professional contexts. Instead of addressing the issues at hand, someone plays the gender card (e.g., vendettas, cat fights, bitch sessions...). Often, the strategy attempts to push women off balance and lose their place in the debate. Often, the guys, and some gals, who pull these stunts do so because they can't follow the lines of argument. They use humor as a way of questioning the status of those in the debate and as a way of leveling the playing field. It's a classic strategy of the incompetent.
Second, we should expect greater expertise and greater attention to detail from reporters at the New York Times. Too much is a stake for Times reporters to make such simple but profound mistakes. They must have taken something away from Judith Miller saga. In general, one does not get to be a Times reporter unless one possesses marked intellectual acumen. Frankly, it's surprising that Morgenson can't grasp the issues here. I don't have a mortgage or banking or business background, but I can see the problem in how she framed the Deutsche Bank case. Unfortunately, as in the Miller case, such incompetence feeds conspiracy theory and poor decision making both among policy makers and among the electorate.
Christopher Carrington, PhD
Professor of Sociology
Sorry, I meant Countrywide, not Deutsche Bank in my previous post.
Tanta, quit pulling GMs pigtails.
Comparing her and your roles is like comparing the description of a roller coaster ride to a technical manual explaining what keeps it on its tracks. She is writing to an audience of millions that has a lot on its collective minds, the legal ramifications of a case relating to mortgage foreclosures is pretty low on their list for most of them. She has x number of words to give them some context and to make them aware that this may become an issue to watch for in the future.
A (small) fraction of that audience will care enough to dig deeper than a general daily newspaper can provide (even if it is the NYT). Theyre going to seek out other sources, and if they are really lucky theyll find CR.
And theyll find Tanta (and all the knowledgeable commenters) and theyll learn a lot more about something that they care about. And the number of words allowed is a lot larger than GM's "x".
The other GM readers? Theyll go on with their lives with a little more knowledge about mortgages than they had before and continue to pay attention to what matters most to them. And whatever that may be, God bless them because there are other issues that need expertise and theyre the ones providing it.
Cramer on CDO valuation - OT but he notes "servicing has 1/10th of the staff needed. No one wants to be in servicing because it doesn't generate revenue"
Cramer: Why We Can't Figure Out CDOs
Tanta, quit pulling GMs pigtails.
Oh, lovely. Another sexist attempt to patronize me. By all means, that's a great setup for the rest of your comment.
Comparing her and your roles is like comparing the description of a roller coaster ride to a technical manual explaining what keeps it on its tracks. She is writing to an audience of millions that has a lot on its collective minds, the legal ramifications of a case relating to mortgage foreclosures is pretty low on their list for most of them. She has x number of words to give them some context and to make them aware that this may become an issue to watch for in the future.
So who forced her to put that Rosen quote in, and then further to drop that line about document custody that is, charitably, misleading and uncharitably, ass-backwards? If you do not have the time and space to explain an explosive accusation, then surely good sense tells you to not mention it at all?
Goddam, and I thought I was being patronized. You just infantilized a million Times readers. (A lot on their "collective minds"? What are they, Borg?) I'm guessing most readers of the business section of the Times are investors. You are telling me investors don't care whether grossly illegal things (multiple securitization of same loan) are going on in the market? That they're just too busy to wonder if this is an important allegation or some throwaway line to juice up the article?
You know my line about the elitist pig thing? It's a joke. I don't really think that other people who are not industry insiders are too stupid to understand what the issues are here.
And no, I'm not going to stop demanding that reporters report facts correctly and in context just because you think that little girls should be nicer to each other. And I find your analogy quite telling: you really seem to think that the business section of the Times is about entertainment. If that is so, I don't know what I could tell you that would make you happy.
Tanta, if you haven't started drinking yet today, you should.
The reason GM doesn't cite you is because if she did the traffic would shift from her to you. Newspapers are sinking like stones for the very reason that you, Tanta, are no more mouseclicks away than she, GM. Her "research" seems to consist of reading a few blogs and other sites to find out the news (note that Reuters ran an article about the Ohio yesterday before GM's article was published...the Reuters article was linked on Drudge). Then she calls an "expert" for a quote so that it looks like she's done some "research." If journalists are just aggregators ("intelligent agents") who pick up on the story of the day from other sources and provide their own take on the meaning of the news, then they're no different than bloggers (I mean that in a good way) and should be judged by the same standards.
The argument that it's ok for GM to garble the facts because her readers probably can't tell the difference and are only looking for "truthiness" instead of actual truth makes as much sense as the "pigtail" comment. And it's equally offensive.
Dear Miss Tanta!
Yes, this is true. And not only about the business section, and not only about the NYT. Although I prefer to use the phrase "making feel good about themselves (readers, viewers, listeners, etc.)" instead of "entertaining".
I say the above as someone was professionaly involved in the field (of broadly understood entertainment) for 10 years.
All Em Ess Em (as you've said earlier) is really in a business of providing the "make me feel good service" to the owners of eyes and ears. They charge the said {eye,ear}-owners by inserting advertisements into the streams of {enter,edu,info,...}-tainment. The ability to insert something is then monetized on the secondary market. This is what makes them "Em Ess".
Please try to understand the above without prejudice. You will then see
that many seemingly irrational things in Em Ess Em are really rational ways of maximizing the stream of "make me feel good"-ness that can be resold.
And finally, many thanks for your very informative writing and beautiful writing style.
Tanta,
Keep up the good coverage. You're the best source I have of what is actually going on in the financial markets. I've always hated newspaper coverage of topics I'm familiar with (mostly engineering related topics) because they always get the story wrong because the reporter doesn't really understand it. You've amply demonstrated that this is also the case with the financial press and have inspired me to research my own investments much more thoroughly.
Thanks.
Tanta,
During the refi boom in 2003 and 2004, a mortgage broker in Manhattan complained that her job was greatly complicated by faulty paperwork. She said clients would apply for refis, be approved, everything would be moving along -- and then the current mortgagee would say, "Oops, we don't have our paperwork in order. The refi will have to be delayed." It drove her nuts.
Are the headaches that this broker had during the refi boom a consequence of what you wrote above: "Therefore, a lot of mortgage market participants have taken the approach that an assignment may be in recordable form (completed, executed, attested, signed, sealed and delivered) but not actually recorded in the land records unless and until it is needed."?
This is indeed a big deal. For many years foreclosing lenders have been alleging in Miami foreclosures that they have lost the note. Every single time. I thought that the Plaintiffs were simply too lazy to find the note, because, if forced they do eventually come up with it.
Now what I think is happening is that there is no chain of endorsements on the backs of the notes and the allegation that they can't find them is to cover this up. Also, no proper chains of assignments of mtges.
I did get ahold of and read the judge's decision, and I think it is dead on. I suspect that if push comes to shove, it make be that things got so sloppy that it really isn't clear who actually owns the note.
I have been closing loans for years, and I defend foreclosures when I am convinced that the money to bring the mtg current will eventually come in.
I am defending one right now that sounds exactly like the Deutche Bank situation, only in state court (Florida). This is a very very big deal, not because of the judge's decision which really is a very ordinary garden variety decision, but what it says about the inability of Deutche Bank to find the notes, endorsements and assignments. They could have asked for more time to find them, but didn't bother. You also don't get that arrogant with a judge. . . unless you want your head handed to you, which is what happened.
GM won't stand for General Motors anymore once GMAC/Rescap/RFC goes belly up....How much of a writedown do you think $62b of subprime mortgages merits?
Gretchen will have the ticker symbol all to herself soon enough.
I hear that servicers are swamped, not a lot of outgoing calls trying to restructure borrowers before an ARM resets/defaults.
Does Tanta think that servicing fees of 50bp for subprime & 25bps for Prime & AltA are adequate for the current environment? It does not appear so.
I am taunting Tanta for a tantalizingly detailed servicing fee post, pretty please.
Well, as Tanta predicted, the GM story has hit the blogs (Credit Slips, The Real Estate Bloggers) complete with the misleading conclusions. Seems everyone is jumping on the nefarious angle when, as Tanta has shown us, it is most likely sloppy business. They also missed the elephant in the room of having to sort out assignments when an assigner in the chain has gone under. I guess it works to drag up the evil banker story rather than dig into the real facts of the current situation.
I also like how they latch on to the quote that notes were sold to two or three pools. This defies logic even without the excellent explanation by jjc. If the note was placed in several different pools, someone isn't getting paid when they expected and would have complained by now. I also believe that if homes were being foreclosed on when payments were made on time to another party with a legitimate claim, that would have made the news as well.
Ditto to Prof. Carrington's post. Tanta, you've done a first-rate job in providing a very timely and insightful analysis on this curious DB court case and its possible implications (and wrongly perceived implications). Kudos!
Tanta,
For whatever its worth, I do not think youre a horses ass and I appreciate you at least had the professional respect to give us credit. It was just how that credit was portrayed and the fact that you did bash and attack our character for no reason in your first post.
I felt compelled to comment for the first time (even though I have been a regular reader for over a year) and I received the tongue lashing from the CR rapid fire comment crew. (as expected)
We reported on how we interpreted it along with April Charney. You then picked up the story and reported on the decision based on your professional opinion. Then Gretchen did the same.
Keep up the good work and thanks for reporting on what are a very serious issues and a landmark decision.
the thing that's bizarre about this is that DB was both the trustee and the custodian in this pool. how could they not have the note?