Tanta, I'm not sure you should be insulting anyone's writing skills. I can't understand half of what you write, and your posts are way too long. Seriously, could you please cut down the length of your posts?
Its funny when companies are making easy money how everyone in the chain is too busy partying (having meetings and going to seminars) to actually do the work and remember procedures.
Tanta, you really know how to take the fun out of a situation. At least you left us with the image of a little Tanta with her hands on her hips; that's something.
The thing is, lama, I don't know it it's 1929 all over again or not. That's why I wouldn't make such a claim. I'm not even sure I know what such a claim really means.
However, alleging that the dismissal of one FC suit means that DB engaged in fraud is presumably a matter of observable facts that can be established or not, not sweeping historical analogies or predictions of generalized doom.
It seems to me to say a lot about the mindset going on that people are taking this post so seriously. Even if you don't have my background, I would think that the language used in the original post would make you uncomfortable. I suppose that makes me an elitist pig or something.
Tanta, I'm not sure you should be insulting anyone's writing skills. I can't understand half of what you write, and your posts are way too long. Seriously, could you please cut down the length of your posts?
Justin, thanks for proving my initial point.
Party A makes outraged hyperbolic unsubstantiated claims in a short, easy-to-read blog post. It begins making the net rounds and everyone gets all spastic about it.
Party B tries to explain what's wrong with that post. The only way to do that is to explain about a hundred specialized concepts and practices, so that what looks nefarious from a non-expert position can be understood.
The result? Some joker starts complaining because the explanation is longer than the original post, and involves difficult concepts.
So Party A is off the hook again: nobody wants to take the time and energy to debunk the story or read the debunking of the story.
Justin, tough noogies. Sorry you encountered something you don't get. But don't expect me to be Part of the Problem by pandering to you.
Ooh, Justin is being sent back to the kiddie table for Thanksgiving dinner. Sitting at a card table with his booger-eating cousin michael. Don't mess with Tanta!
I love these posts! It all reminds me of my time spent doing student loan conversions for a large servicer many years ago. It was a great experience for a newly minted accountant. Our employer was serious about due diligence and every piece of paper and signature had to be in place. That has stuck with me through a long and varied career.
We saw a lot of sloppy paper, especially coming out of little Texas banks. Not long afterward, a lot of them got in trouble and ended up being snapped up for pennies on the dollar by our big cross-state rival. That laid the groundwork for them to become one of the two biggest banks in the United States.
Anyway, this whole situation makes me nostalgic - lost youth, I guess..
On the closing date, the depositor will transfer to the trust all of its right, title and interest in and to each of the mortgage loans, together with the related mortgage notes, mortgages and other related documents, including all scheduled payments with respect to each mortgage loan due after the cut-off date. Concurrently with the transfer, the securities administrator, on behalf of the trust, will deliver the certificates to the depositor. Each mortgage loan transferred to the trust will be identified on the mortgage loan schedule prepared by the seller and delivered to the trustee pursuant to the pooling and servicing agreement. The mortgage loan schedule will include the principal balance of each mortgage loan as of the cut-off date, its loan rate and certain additional information.
The pooling and servicing agreement will require that, upon certain conditions and within the time period specified in the pooling and servicing agreement, the seller will deliver to the trustee (or a custodian, on behalf of the trustee) the mortgage notes evidencing the mortgage loans endorsed to the trustee on behalf of the certificateholders, together with other required documents. In lieu of delivery of an original mortgage note, if an original is not available or is lost, the seller may deliver a true and complete copy of the original together with a lost note affidavit.
Tanta, I think you're missing the forest for the trees. Homeowners who are facing foreclosure believe they have some rights to seek forebearance, restructuring, etc. Maybe in some states, they do. But they have no way of identifying the party who holds legal documentation to their notes, which automatically ties one hand behind their backs. It should be a matter of public record.
RESPA gives homeowners gazillion rights to know who is servicing their mortgage and under what terms and with what settlement servicers and at what cost. But what laws give them rights to identify legal note holders? Don't you think it's a huge flaw in the laws that works against consumers?
However, I still think that lawsuits like this might be significant in getting the attention of securities regulators, who (once there is a functional administration in Washington DC) may start poking around at the top of the food chain to see who represented that these securities are actually secured.
I'm just amused by everyone, including Tanta, getting worked up by something that was originally posted at IAmFacingForeclosure.com. Ahh, the good old days . . .
But they have no way of identifying the party who holds legal documentation to their notes, which automatically ties one hand behind their backs. It should be a matter of public record.
OK, I'll bite. What good does it do you to know that legal title to your note is held by CWABS ABS-HE II Series 2007-15? You don't negotiate a workout with CWABS ABS-HE II Series 2007-15. You negotiate with the mortgage servicer.
We can have all kinds of intelligent discussions about how servicing loans for securities has meant that negotiations between borrowers and servicers break down, because servicers claim they can't make decisions. We have in fact discussed that a lot lately.
But the reality of the situation is that you talk to the party to whom you were sending payments back when you were making payments.
I can't tell you how many times somebody has claimed to me that he doesn't even know who his mortgage servicer is. I ask, where did you send your payments? Did your checks get cashed? Seriously.
I don't necessarily object to the requirement that all servicers should have to record an assignment in the public record, so that who the servicer is can be traced. I just don't want to hear all the whining about how this is going to make mortgages more expensive to consumers. Because it will: guaranteed. That's why people are holding recordable but not recorded assignments: they don't want to pay $10 a page.
And I don't want to hear the crying from poor overtaxed property owners whose local Recorders of Deeds are overwhelmed with filings and therefore need to put through a special assessment to hire more people or beef up computerized processes or something. You want everything in the public record? Fine. Fund your public services.
Sorry for the rant, but I've spent too many years listening to the other side of this about how us poor consumers are payin' for too much guvmint interference in the Free Market.
A few months ago, professional homedebtor "advocates" and attorneys reported an unexpected bonanza of foreclosure filings with faulty endorsement chains in a Boston Globe article. (The Globe just revamped its Web site; if my new search is successful I'll post the link.) The lawyers won a fair number of outright dismissals.
To rich's point: Nobody should be allowed to hold consumer debt IMHO unless they can deliver all the necessary capabilities of a consumer lender, either directly or through a partner, originator, servicer, etc. No gaps. This idea that you can enjoy income but can't be bothered during a renegotiation simply has to end.
Tanta, for what it's worth. I like your comments, because they're concise. And I think you have great insight into the mortgage industry, I just think you ramble too much.
I think we've just discovered the funding mechanism for a bailout. Banking regulator fines for chain of custody violations.
I wish I knew who owns my loan. I'd be putting a package together for a buyout offer. Unfortunately I suspect it is ultimately owned 1/100th CalPers, 1/50th Fidelity MM commercial paper loans to CFC, etc.
Tanta is absolutely correct. This is almost certainly a paperwork is inconsistent/incomplete/uncertified/expired/coffee stained. No doubt the coffee spills are due to the basement offices being cleaned out of all the useless backroom personnel with barely time to grab their bunny slippers. That said, this is the first step to uncovering any potential fraud. First you have to clean up those things that are not fraud so you can focus on the remainder that cannot be explained by subcompetence.
And I don't want to hear the crying from poor overtaxed property owners whose local Recorders of Deeds are overwhelmed with filings and therefore need to put through a special assessment to hire more people or beef up computerized processes or something. You want everything in the public record? Fine. Fund your public services.
Not disagreeing, but why shouldn't the people who want to file assignments pay the full cost of those assignments?
Not disagreeing, but why shouldn't the people who want to file assignments pay the full cost of those assignments?
What is "the full cost of the assignments"?
Let's say we pass a law at the federal level that says all servicer assignments have to be recorded. Localities will immediately jack up their mortgage assignment filing fee from $10 a page to $100 a page, because the additional marginal volume of the mortgage assignments will create big costs for these recording offices.
That will mean that everybody who gets a mortgage--everybody--will start paying another $100 or so in closing costs. Not people who default; not people who want to sue their lender; everybody.
You may have no problems with that. I may have no problems with that. Politically? That'll go over like a pregnant pole-vaulter.
i would think we can tell that this is a big pile of nothing just by the fact that non-agency mbs continued to trade yesterday, and they continue to trade today. lawyers don't appear to be telling people "wait a minute, you might not own anything there".
Actually that's known as the 'Project Triangle'... usually presented as:
Scope
Schedule
Cost
Change any one and you effect one or both of the others. The Chain Saw Als of the world have been ignoring this for as long as money's been in circulation.
tanta, it's posts like this that make cr.blog so obviously valuable.
it's altogether too easy to assemble a well-intentioned-but-basically-useless blog that cries doom (or for that matter, clear skies) by viewing well-selected end results.
it's very, very hard (and therefore rare) to assemble a blog with knowledgable and critical-minded insight onto the processes that produce the results.
you and cr and what you do here are beyond valuable. in case no one has said it to you today: thank you.
You may have no problems with that. I may have no problems with that. Politically? That'll go over like a pregnant pole-vaulter.
I think it will vault a lot higher than an an overall increase in property taxes to double the size of the registry of deeds.
I wouldn't necessarily require that every assignment be recorded--just the ones that the debt holder wants to enforce.
There's no free lunch. It costs money to record changes in title and so forth. But it costs a hell of a lot more to adjudicate them in a court of law. Even a motion to dismiss, compared to a few minutes at the registry desk, is no cheap date at all.
Tanta - do explain at as much length as you find necessary. I take the time to read the stuff that you've the time to write.
Separately, indulging in commenting about blogging about blogs for a moment - blogs for me follow the newspaper category model - there are qualities, serious tabloids, porn tabloids and then there are supermarket tabloids like Weekly World News. Usually each inhabits their niche consistently and the world is at peace and the circulations of each reflect the priorities of the populace at large.
Occasionally some go down-market, sometimes disastrously so, in search of readership. When its eyeballs at any cost at play the temptation has to be irresistible.
I just re-categorize them in my model or cross them off my reader and move on.
While you make it clear these are not major legal screw ups, it does sound like the sloppiness of the last few years included recording transfers. This problem is relatively painless for the holders to fix, at least relative to holding mortgages that are in default.
But if things turn awful quickly, it will probably be because of a lack of information causes people to panic. In October 1987 it was a failure for people to price and verify trades in a falling market.
Who knows what could exacerbate a panic here? Personally, I think the huge backlog in recording derivatives orders is a good candidate. But it will probably start over mortgage debt. These problems recording transfers just add another unknown to the equation.
"The only way to do that is to explain about a hundred specialized concepts and practices, so that what looks nefarious from a non-expert position can be understood"
Ah, I great you, Tanta, from the bowels of the "Priesthood Mentality" of Information Technology, which suffers from a similar condition.
Upping the filing requirements might go over better than you think. In the state where I practice law, overcharging on filing fees is what keeps the child welfare and criminal justice systems from grinding to a screeching halt. If the economy and tax collectinos get much worse, extra filing fees would be one way of trying to close the fiscal gap.
I find your blogs extremely informative when I have the time. Unfortunately, I don't always have the time, so, on these days, CR's blogs are only read. Keep up the poetic writing.
"It appears that the holders of CDO's do not have legal title to the properties that have been defaulted on, so they cannot foreclose, so they get a big fat NOTHING."
Incredibly stupid statement, of course they do not have legal title to the properties, the borrower has legal title ... the purpose of the foreclosure proceeding is for the CDO to obtain the legal title.
I imagine the cure for this is something akin to a quiet title action, have all the interested parties join in and get an order from the court establishing who owns the notes.
I would certainly be willing to handle it for $20,000.
Great explaination. However, there are several "Justin's" in the legal field and plenty sitting behind the bench, and plenty more interpreting the initial ruling....all of whom studied more law than loan servicing.
What should happen and what does happen reference legal rulings and their long term impact on future actions are rarely based upon a proper reading of the facts.
Me, I can't wait to use, "fighting bongwater with bongwater" in casual conversation. Great story.
Then again, I thought I was watching the movie Amadeus again when I read Justin's comments... "too many notes".
And hey... hey... isn't iamfacingforeclosure now Aaron's blog? I though he had the poor financial sense to buy it from the lad for 50,000 bucks, didn't he?
Tanta, for what it's worth. I like your comments, because they're concise. And I think you have great insight into the mortgage industry, I just think you ramble too much.
Justin | 11.14.07 - 10:30 am
Emperor Joseph II: My dear young man, don't take it too hard. Your work is ingenious. It's quality work. And there are simply too many notes, that's all. Just cut a few and it will be perfect.
I was to disinterested after the Y I got no where. I mean it's Casey Serin afterall.
and
I'm just amused by everyone, including Tanta, getting worked up by something that was originally posted at IAmFacingForeclosure.com. Ahh, the good old days . . .
Its ironic that this is thought of Casey Serin's work. That blog iamfacingforeclosure was sold to the owner of ml-implode.com{ for the eyeballs I suppose} so this is not Casey's handiwork.
It is 'sweet' justice that owning the brand gives your content the imprimatur of the brand.
Yeah, I follow the lurid details of CS's story with avid interest. Sometimes, as my favorite quote puts it (Dario Fo - Accidental Death of an Anarchist) :
"People love gossip. Its like the smell of their own shit"
Sorry for the rant, but I've spent too many years listening to the other side of this about how us poor consumers are payin' for too much guvmint interference in the Free Market.
Thanks for your reply, which is excellent. But you still missed my main point.
I am an FB heading for foreclosure. I want to negotiate a workout. I call my servicer who says: "I can't help you because ABC owns your paper and isn't willing to deal." But this information is wrong. In fact, XYZ owns the paper, and XYZ is willing to deal.
If I were a judge, I would want to give homeowners at least a shot to work out a deal before foreclosure. To me, this would mean making certain that the note holder is correctly identified. Without correct ID, the courts lack this remedy and the FB is even more F'ed.
I would think we can tell that this is a big pile of nothing just by the fact that non-agency mbs continued to trade yesterday, and they continue to trade today. lawyers don't appear to be telling people "wait a minute, you might not own anything there".
This is a naive statement; it takes time for the wheels of the legal system to turn and I doubt that anyone other than a small set of the blogosphere was paying attention to this story.
Perhaps this isn't the specific case that brings down the whole MBS charade, but all it takes is one good lawyer to convince a judge that the chain of custody has been broken or that somebody's rights got violated and we'll have a new precedent. Think the 9th Circuit Court of Appeals, a group of judges notorious for getting jiggy with the Constitution.
Tanta:
I've been reading every word of your blog ever since I "discovered" you oh so many months ago. My already high opinion of your integrity went up a notch today. The advise to not jump to conclusions without an impartial assessment, while elementary, is all too often lost in the heat of defending vested positions.
Thank you for being such a meticulous, fair-minded and insightful observer of the financial scene.
Now, when do I get to see the hands on hips pose of Julia?
Tanta, please don't pay attention to the imbecilic knuckle-dragging morons who insult the silent majority. Your posts are illuminating, insightful, and an exhaustingly comprehensive good time.
I learn far more from your explanations than any morning real estate chart porn.
You are Teh Internets as they should be - a deep dive into the dank, odiferous underbelly of capitalism.
Save the fluff for your slippers, and keep on keepin' on.
C_S -- I wouldn't say that non-agency MBS is the greatest thing since sliced bread, but it's hardly a 'charade', either.
I doubt if it will ever be 'brought down'. If anything will be 'brought down' it may be derivitives of non-agency MBS (read: CDOs) that exist mainly to further obfuscate risk. As Jamie Dimon would say, "they have no business purpose."
If I were a judge, I would want to give homeowners at least a shot to work out a deal before foreclosure. To me, this would mean making certain that the note holder is correctly identified.
Yes. Absolutely. This is why I'm about to post a love letter to Judge Boyko.
But the fact remains that ownership of the note doesn't appear in the public record, just assignment of the mortgage to the servicer. So the noteholder has to be established in court for each case.
As Judge Boyko just ran a big truck over Deutsche Bank for failing to do.
You get no argument from me that an investor should be identified. It's just that "the investor" is really a bunch of people, relying on the language in the securitization documents. So it does come down to how well those documents were written.
"Tanta, for what it's worth. I like your comments, because they're concise. And I think you have great insight into the mortgage industry, I just think you ramble too much.
Justin | 11.14.07 - 10:30 am"
Perfect! Yeah, Tanta. You cut that rambling concision down now, hear?
Tantissima has wielded her sword to cut the Gordian knot of loan docs and drained the Augean stable of internet manure in one post, proving she is mightier than Alexander and Hercules put together. (In my style manual, the phrase "Detail Obsessed Literal-Minded etc. etc." is all hyphenated. Justin wouldn't get to the end, though.)
"Party A makes outraged hyperbolic unsubstantiated claims in a short, easy-to-read blog post. It begins making the net rounds and everyone gets all spastic about it.
Party B tries to explain what's wrong with that post. The only way to do that is to explain about a hundred specialized concepts and practices, so that what looks nefarious from a non-expert position can be understood.
The result? Some joker starts complaining because the explanation is longer than the original post, and involves difficult concepts.
So Party A is off the hook again: nobody wants to take the time and energy to debunk the story or read the debunking of the story.
Justin, tough noogies. Sorry you encountered something you don't get. But don't expect me to be Part of the Problem by pandering to you.
Tanta
"For every complex problem there is a short explanation. That explanation is usually wrong."
Kinda sums it up doesn't it?
dryfly
Jeezus. Any way we could convince you two to run for national political office? I'd love to see Karl Rove just try to deal with this.
This is a naive statement; it takes time for the wheels of the legal system to turn and I doubt that anyone other than a small set of the blogosphere was paying attention to this story.
you're probably right, trading desks and their lawyers are notoriously slow to pick up on things...
(Slightly OT) "My" source in the credit risk-assessment business has re-settled himself after a job-relocation, and has posted some "color" about what's going on in his area. S.
"My apologies for not posting recently, but I've been pretty busy in my new position w/ Aviva. As a structured credit risk analyst, I've been inundated w/ questions from our CIO and other institutional investors on our subprime exposure, our marking-to-model, and so on. We've been fortunate enough to have had the foresight to reduce our subprime exposure late last year to near nothing.
Most recent has been downgrades by the rating agencies on ABS CDOs. The downgrades reflect the deterioration in the collateral of many of these CDO deals, and some downgrades actually result in what is called "Event Of Default" where the collateral quality is so poor that the CDO is forced to unwind or divert cash flows from the junior tranches to the most senior. This has significant consequences - the underlying MBS securities in these CDOs are forced-sold at distressed levels and unfortunately perpetuates the selling that's already going on in the RMBS and CMBS markets (see Bookstabber's book on 1987 portfolio insurance-type selling). So while the structures are still intact, cash flows are still flowing, and delinquencies rise (BUT no defaults on most ABS CDOs), the CDO is forced to unwind and dissolve due to certain "triggers" that were put in place. Again, the selling that's happening is forced and putting even more pressure on the mortgage market than what should be.
On the financials side, I'm certain 4Q is going to be ugly, ugly, ugly. Most financial co's caught up in this subprime debacle have already blown their year as far as earnings go (see ResCap/GMAC, Radian, MGIC, BAS, Citi, Wachovia, JPMorgan, Lehman, Bear, and on and on). So there's nothing stopping them from throwing the proverbial "kitchen sink" in with already distressed 4Q numbers. Next years comps will be so easy, and thus the "turn around" can be called by Summer '08. I think these co's have it in their interest to build up very big loss reserves to eventually take them back in future earnings when the mortgage markets stabilize.
Just to give you an idea, I'm struggling right now at valuing an TABX (40 credits comprising the 06-2 and 07-01 ABX constituents) 60-100% tranche. For the principal in this deal to even begin to be written down due to losses, we'd have to see 34 of the 40 underlying deals default, assuming a conservative 30% recovery rate (34/40*( 1-0.3)). Given the cash spreads on the underlying 40 credits, the PV of this - say $1MM - position is $600k. Yet the market, when it even does trade and most of the time I'm having to use bid/offers that don't even exist, the PV is $200k. Now, assume this position is a more average size of $5 billion. Now you're forced from a financial institution's perspective of either marking-to-market at $1 bill
"Now, assume this position is a more average size of $5 billion. Now you're forced from a financial institution's perspective of either marking-to-market at $1 billion or marking-to-model at $3 billion. Now do this same analysis for $30-50 billion in MBS securities. That's the issue right now facing BAS, JPMorgan, Wachovia, Carlyle, MS, and so on. Which value is the correct one? Does it even matter at this point?
Final point: any trade/security that has more than even a few inputs to "model" the true value for buying/selling is NOT TRADING at this time. There is no margin for error on these trades, and everyone is running in one direction - SELL. The credit markets have long gone from trading on the traditional ways of valuation to now trading solely on emotion and the forced elimination/reduction of certain exposures. And the "bath" to be taken by these firms has yet to even really happen. It's going to get much worse before it gets better, and I'd bet we see a capitulation in the credit markets within 3 months time. Recession is probably inevitable given credit availability will be nonexistent (see the latest Loan Officer Survey), unemployment will begin to tick up, and inflation will be higher NOT lower due to the forced hand of the Fed to cut rates (read dollar crash). Stagflation is the best we can hope for. Has anyone coined the term "Stagpression" yet?
Just one mans thoughts. Best to everyone, and I still read this thread daily!"
The original article was written by the union of ambulance chasing lawyers graduated from the Velvet Jones school of technology. The intent is to squeeze fees out of home owners in foreclosure in exchange of a few more months of free rent.
Tanta, I have a question: do you believe that there are cases where the owner of the mortgage CAN'T prove ownership? Perhaps the original mortgage papers the borrower signed can't be found, or there's no clear paper trail that connects the original owner of the mortgage to the present owner and all the people who would know any of the history don't work at any of banks in the chain anymore.
You get no argument from me that an investor should be identified. It's just that "the investor" is really a bunch of people, relying on the language in the securitization documents. So it does come down to how well those documents were written.
Thanks, Tanta. As long as the owner(s) of the note can be compelled to identify themselves clearly in court when compelled, the borrower is protected. To me, this is what the case is all about, aside from technicalities. It just seems to be a basic right to know who is on the other side of a foreclosure. It's not the servicer.
Sebastian - or whoever your "source" is - the market is NOT trading on emotion right now. Unfortunately for you, the market is trading on FUNDAMENTALS.
You know, the same fundamentals that you casually ignored while that ignorance was lining your pocket with massive fees. Now, economic fundamentals return and you're shocked? Get bent.
A 20-year bull market is not fundamental. Fraudulently recording risk exposure is not fundamental - I want 100% of all SIV's on the balance sheet of the bank backstopping their liquidity.
"As I said, I might be wrong about the specifics of the DB case, because I haven't seen the actual court order."
I say, "Wow, and you went on a torid rant about the authors (Aaron Krowne yes of ML-Implode, April Charney, Legal Aid Attorney and myself)without reading the ACTUAL order.. wow, and you question the source?????
Is that how the blog world works? This is all new to me.
"If someone sends me a copy and it turns out that I'm wrong and this is a Big Deal instead of a Little Deal, I'll be the first to post a mea culpa."
It's a bigger deal than you can even imagine.
"Until then I will ask everyone to develop the habit of reading past the hype and evaluating the credibility of a source. Me included."
Exactomundo Tanta. Words to live by.
By the way Casey Serin does not have anything to do with Iamfacingforeclosure.com.
It will be operated by Aaron Krowne myself and many to notch mortgage law attorneys that are going to turn the mortgage world upside down.
Unsympathetic - unfortunately you've got it all wrong. I've traded MBS for a number of years, right now its all emotion. There's a new risk in the market and its called memo risk. (The risk that you'll have to write a memo to your boss on why you own it). The majority of traders in the distressed stuff have to mark to mark it (Good luck doing that) and find a buyer of it (Good luck part 2 ). There are a lot of smart guys out there, but so if fundamentals mattered there would be a bid. But there isn't for many pieces and its because its not worth the headache. Maybe if you're Warren Buffett, you can ride it out becaue you answer to no one. But for the vast majority of investors who have boards, and answer to the public and shareholders, and deal with the questions on why you bought subprime (whether its good or bad or the right price) its a non starter right now now matter how cheap the assets get.
I defend foreclosures, more as a hobby than anything else, and I have one against Deutche Bank right now, in which, in its complaint states,not that it owns and holds the mtg, but that it will be assigned the mtg (someday).
Oops. Motion to dismiss filed. Hearing scheduled and cancelled a month ago, not rescheduled. But this is a little deal, not a big deal, as the homeowner is close to negotiating a sale, and Deutche Bank (or somebody) will be paid off and that will be the end of that.
On another one, HNBC, I actually got the case dismissed--temporarily, I assume--because they filed a count for lost note and didn't include a copy of the note they were trying to reestablish. Mind you, they really do have that note somewhere, they're just too lazy or understaffed to go looking for it.
The real reason the judge granted the dismissal was that the sloppy title company missed a couple of liens that should have been dealt with when the mtg was granted in the first place. My title searcher did find them. There is a procedure in Florida to temporarily get rid of the liens of homestead property (don't ask, lives have been spent figuring out Florida's homestead law), and I explained to the judge that the sloppy plaintiff's sloppy title company resulted in the borrower's not being able to refinance the loan, and that everything would turn out ok.
So the judge dismissed making clear that he would reinstate once they found the note. This gives me time to do the lien-challenging procedure.
I suppose that with all the chaos, they could lose the note permanently, but sooner or later the attys will figure out how to plead a note reinstatement count, and kick my lady out, but she plans to refi long before that happens.
Given some of the awful products, I am looking for a case where the borrower was treated so badly, so as to constitute fraud, with neg am, most of income used by loan, and fake income submitted unbeknowst to borrower, yes, this does happen occasionally.
Keep those posts long and difficult, Tanta.
If you would care to post even a sentence on the Irvine Housing blog, all the blogsters there will be simply thrilled.
Hi Tanta,
I have been a silent reader for some time, and your posts are both instructive and funny. I don't mind about the long, complicated stuff - no way to escape it if one is to work seriously - but sometimes as a non-English native speaker some of your expressions generate a lot of perplexity!
Or maybe it is a welcome addition to my stiff English courses in the lycée.
Keep on bloggin'.
Good article, but DB's problem isn't as laid out as you have stated, in that they simply didn't prove they were the successor in interest as of the date of the filing of the foreclosure complaint with the Court. Federal Rule 17(A) requires DB prove "standing" as of the date it files the foreclosure complaint.
DB has the ability to refile when it gets the assignment done, as the cases were dismissed without prejudice.
In my experience with DB, it will locate whoever is on record with the county recorder as the current Mortgage holder (generally still the original holder), and execute an allonge or assignment directly to it from them - irrespective of how complicated the chain of title is behind the scenes. They will effectively "short-cut" around the dramatic issues you bring up with not having these endorsements done.
They do this to avoid having each link in the chain of title picked apart, which would cause a worst-case scenerio that you could imagine.
Finally, I'm aware of very, very few attorneys who defend these, and seriously doubt anyone is out there defending foreclosures the way they could. Even the Court states in its decision that DB's conduct has gone unchecked too long, demonstrating a lack of interest defending these. Also noteworthy is the fact that the Court was the party to question standing; it was not on motion from defendant's counsel.
I just got my foreclosure suit dismissed because I filed suit against Deutsche. They sent a schedule of my new payment, with a past due balance that was MUCH lower than the previous amount they claimed, but no explanation of what the charges were for. Chase is servicing the loan. @#$()(&^^*#!!!
Tanta, thank you for your article. Now if you can tell me how to get my hands on this "note" that the Mtg. Co. has......you said a sharp lawyer might spot any "goof ups" but I don't believe I got a copy of the note when it changed hands, just a notification that so and so was taking over the loan.
Hmmm..next thing Tanta will be telling us it's not 1929 all over again.
first!
Tanta, I'm not sure you should be insulting anyone's writing skills. I can't understand half of what you write, and your posts are way too long. Seriously, could you please cut down the length of your posts?
Smart AND sexy - you are sooo hot!
Its funny when companies are making easy money how everyone in the chain is too busy partying (having meetings and going to seminars) to actually do the work and remember procedures.
Tanta, you really know how to take the fun out of a situation. At least you left us with the image of a little Tanta with her hands on her hips; that's something.
The thing is, lama, I don't know it it's 1929 all over again or not. That's why I wouldn't make such a claim. I'm not even sure I know what such a claim really means.
However, alleging that the dismissal of one FC suit means that DB engaged in fraud is presumably a matter of observable facts that can be established or not, not sweeping historical analogies or predictions of generalized doom.
It seems to me to say a lot about the mindset going on that people are taking this post so seriously. Even if you don't have my background, I would think that the language used in the original post would make you uncomfortable. I suppose that makes me an elitist pig or something.
Oink.
"I can't understand half of what you write, and your posts are way too long. Seriously, could you please cut down the length of your posts?"
The USA Today constituency weighs in.
Tanta, I'm not sure you should be insulting anyone's writing skills. I can't understand half of what you write, and your posts are way too long. Seriously, could you please cut down the length of your posts?
Justin, thanks for proving my initial point.
Party A makes outraged hyperbolic unsubstantiated claims in a short, easy-to-read blog post. It begins making the net rounds and everyone gets all spastic about it.
Party B tries to explain what's wrong with that post. The only way to do that is to explain about a hundred specialized concepts and practices, so that what looks nefarious from a non-expert position can be understood.
The result? Some joker starts complaining because the explanation is longer than the original post, and involves difficult concepts.
So Party A is off the hook again: nobody wants to take the time and energy to debunk the story or read the debunking of the story.
Justin, tough noogies. Sorry you encountered something you don't get. But don't expect me to be Part of the Problem by pandering to you.
Ooh, Justin is being sent back to the kiddie table for Thanksgiving dinner. Sitting at a card table with his booger-eating cousin michael. Don't mess with Tanta!
I don't eat boogers...anymore. Well, maybe the odd one, every now and then. Comfort food.
I love these posts! It all reminds me of my time spent doing student loan conversions for a large servicer many years ago. It was a great experience for a newly minted accountant. Our employer was serious about due diligence and every piece of paper and signature had to be in place. That has stuck with me through a long and varied career.
We saw a lot of sloppy paper, especially coming out of little Texas banks. Not long afterward, a lot of them got in trouble and ended up being snapped up for pennies on the dollar by our big cross-state rival. That laid the groundwork for them to become one of the two biggest banks in the United States.
Anyway, this whole situation makes me nostalgic - lost youth, I guess..
here's some prospectus language:
On the closing date, the depositor will transfer to the trust all of its right, title and interest in and to each of the mortgage loans, together with the related mortgage notes, mortgages and other related documents, including all scheduled payments with respect to each mortgage loan due after the cut-off date. Concurrently with the transfer, the securities administrator, on behalf of the trust, will deliver the certificates to the depositor. Each mortgage loan transferred to the trust will be identified on the mortgage loan schedule prepared by the seller and delivered to the trustee pursuant to the pooling and servicing agreement. The mortgage loan schedule will include the principal balance of each mortgage loan as of the cut-off date, its loan rate and certain additional information.
The pooling and servicing agreement will require that, upon certain conditions and within the time period specified in the pooling and servicing agreement, the seller will deliver to the trustee (or a custodian, on behalf of the trustee) the mortgage notes evidencing the mortgage loans endorsed to the trustee on behalf of the certificateholders, together with other required documents. In lieu of delivery of an original mortgage note, if an original is not available or is lost, the seller may deliver a true and complete copy of the original together with a lost note affidavit.
what party?
Tanta, I think you're missing the forest for the trees. Homeowners who are facing foreclosure believe they have some rights to seek forebearance, restructuring, etc. Maybe in some states, they do. But they have no way of identifying the party who holds legal documentation to their notes, which automatically ties one hand behind their backs. It should be a matter of public record.
RESPA gives homeowners gazillion rights to know who is servicing their mortgage and under what terms and with what settlement servicers and at what cost. But what laws give them rights to identify legal note holders? Don't you think it's a huge flaw in the laws that works against consumers?
[nudging Justin gently and whispering]
Jeezus, Justin, be quiet! You're gonna get us all detention.
I agree with everything in this post.
However, I still think that lawsuits like this might be significant in getting the attention of securities regulators, who (once there is a functional administration in Washington DC) may start poking around at the top of the food chain to see who represented that these securities are actually secured.
Good point, rich.
I'd bet 1929 has many meanings for different people, just as the PPT and other abstracts.
In other words, "Oink" (agreed).
Is anyone in the room NOT shorting C?
Quite a long post. The highlight for me:
Will Julia Roberts play Tanta in the movie version?
Who will play Shiloh? I was thinking the guy from Capote.
Tanta,
I often wonder how clean my house would be if you worked for molly maid....
wink!
I'm just amused by everyone, including Tanta, getting worked up by something that was originally posted at IAmFacingForeclosure.com. Ahh, the good old days . . .
Oh Tanta,
Rock on with your bad self!
Never ascribe to malice, that which can be explained by incompetence. Napoleon Bonaparte
But they have no way of identifying the party who holds legal documentation to their notes, which automatically ties one hand behind their backs. It should be a matter of public record.
OK, I'll bite. What good does it do you to know that legal title to your note is held by CWABS ABS-HE II Series 2007-15? You don't negotiate a workout with CWABS ABS-HE II Series 2007-15. You negotiate with the mortgage servicer.
We can have all kinds of intelligent discussions about how servicing loans for securities has meant that negotiations between borrowers and servicers break down, because servicers claim they can't make decisions. We have in fact discussed that a lot lately.
But the reality of the situation is that you talk to the party to whom you were sending payments back when you were making payments.
I can't tell you how many times somebody has claimed to me that he doesn't even know who his mortgage servicer is. I ask, where did you send your payments? Did your checks get cashed? Seriously.
I don't necessarily object to the requirement that all servicers should have to record an assignment in the public record, so that who the servicer is can be traced. I just don't want to hear all the whining about how this is going to make mortgages more expensive to consumers. Because it will: guaranteed. That's why people are holding recordable but not recorded assignments: they don't want to pay $10 a page.
And I don't want to hear the crying from poor overtaxed property owners whose local Recorders of Deeds are overwhelmed with filings and therefore need to put through a special assessment to hire more people or beef up computerized processes or something. You want everything in the public record? Fine. Fund your public services.
Sorry for the rant, but I've spent too many years listening to the other side of this about how us poor consumers are payin' for too much guvmint interference in the Free Market.
Tanta - I've sent you a copy of the order in question.
This is not the first such report I've seen.
A few months ago, professional homedebtor "advocates" and attorneys reported an unexpected bonanza of foreclosure filings with faulty endorsement chains in a Boston Globe article. (The Globe just revamped its Web site; if my new search is successful I'll post the link.) The lawyers won a fair number of outright dismissals.
To rich's point: Nobody should be allowed to hold consumer debt IMHO unless they can deliver all the necessary capabilities of a consumer lender, either directly or through a partner, originator, servicer, etc. No gaps. This idea that you can enjoy income but can't be bothered during a renegotiation simply has to end.
Tanta, for what it's worth. I like your comments, because they're concise. And I think you have great insight into the mortgage industry, I just think you ramble too much.
Tanta said: "...Until then I will ask everyone to develop the habit of reading past the hype and evaluating the credibility of a source..."
All I've ever really asked for.
Nice post.
S.
I think we've just discovered the funding mechanism for a bailout. Banking regulator fines for chain of custody violations.
I wish I knew who owns my loan. I'd be putting a package together for a buyout offer. Unfortunately I suspect it is ultimately owned 1/100th CalPers, 1/50th Fidelity MM commercial paper loans to CFC, etc.
Tanta is absolutely correct. This is almost certainly a paperwork is inconsistent/incomplete/uncertified/expired/coffee stained. No doubt the coffee spills are due to the basement offices being cleaned out of all the useless backroom personnel with barely time to grab their bunny slippers. That said, this is the first step to uncovering any potential fraud. First you have to clean up those things that are not fraud so you can focus on the remainder that cannot be explained by subcompetence.
And I don't want to hear the crying from poor overtaxed property owners whose local Recorders of Deeds are overwhelmed with filings and therefore need to put through a special assessment to hire more people or beef up computerized processes or something. You want everything in the public record? Fine. Fund your public services.
Not disagreeing, but why shouldn't the people who want to file assignments pay the full cost of those assignments?
You'd think with all the money we're paying Tanta, she would be careful to be as concise as possible.
Anne Rulz.
The thing that caught my attention isn't that DB had screwed-up paperwork--it's that they were told to fix their screwed-up paperwork and didn't.
Somehow, I doubt JPMC or even BofA will make such a mistake twice.
Ah yes, Quality work, Quickly done, and As cheap as possible.
Choose any two.
"For every complex problem there is a short explanation. That explanation is usually wrong."
Kinda sums it up doesn't it?
Not disagreeing, but why shouldn't the people who want to file assignments pay the full cost of those assignments?
What is "the full cost of the assignments"?
Let's say we pass a law at the federal level that says all servicer assignments have to be recorded. Localities will immediately jack up their mortgage assignment filing fee from $10 a page to $100 a page, because the additional marginal volume of the mortgage assignments will create big costs for these recording offices.
That will mean that everybody who gets a mortgage--everybody--will start paying another $100 or so in closing costs. Not people who default; not people who want to sue their lender; everybody.
You may have no problems with that. I may have no problems with that. Politically? That'll go over like a pregnant pole-vaulter.
Anne, thank you very much for the document. Follow-up post in the works.
After I get done congratulating myself for having good instincts, that is. I guess it's my day to be a pig. Oink.
i would think we can tell that this is a big pile of nothing just by the fact that non-agency mbs continued to trade yesterday, and they continue to trade today. lawyers don't appear to be telling people "wait a minute, you might not own anything there".
Actually that's known as the 'Project Triangle'... usually presented as:
Scope
Schedule
Cost
Change any one and you effect one or both of the others. The Chain Saw Als of the world have been ignoring this for as long as money's been in circulation.
tanta, it's posts like this that make cr.blog so obviously valuable.
it's altogether too easy to assemble a well-intentioned-but-basically-useless blog that cries doom (or for that matter, clear skies) by viewing well-selected end results.
it's very, very hard (and therefore rare) to assemble a blog with knowledgable and critical-minded insight onto the processes that produce the results.
you and cr and what you do here are beyond valuable. in case no one has said it to you today: thank you.
Post on Project Triangle was referring to this:
Ah yes, Quality work, Quickly done, and As cheap as possible.
Choose any two.
Not disagreeing, but why shouldn't the people who want to file assignments pay the full cost of those assignments?
What is "the full cost of the assignments"?
Are we seeing the Genesis of another Ubernurdatorial in the making? One can only hope!
You may have no problems with that. I may have no problems with that. Politically? That'll go over like a pregnant pole-vaulter.
I think it will vault a lot higher than an an overall increase in property taxes to double the size of the registry of deeds.
I wouldn't necessarily require that every assignment be recorded--just the ones that the debt holder wants to enforce.
There's no free lunch. It costs money to record changes in title and so forth. But it costs a hell of a lot more to adjudicate them in a court of law. Even a motion to dismiss, compared to a few minutes at the registry desk, is no cheap date at all.
Tanta - do explain at as much length as you find necessary. I take the time to read the stuff that you've the time to write.
Separately, indulging in commenting about blogging about blogs for a moment - blogs for me follow the newspaper category model - there are qualities, serious tabloids, porn tabloids and then there are supermarket tabloids like Weekly World News. Usually each inhabits their niche consistently and the world is at peace and the circulations of each reflect the priorities of the populace at large.
Occasionally some go down-market, sometimes disastrously so, in search of readership. When its eyeballs at any cost at play the temptation has to be irresistible.
I just re-categorize them in my model or cross them off my reader and move on.
-K
"Will Julia Roberts play Tanta in the movie version?"
LOL
Tanta,
Thanks for the clear explanation.
While you make it clear these are not major legal screw ups, it does sound like the sloppiness of the last few years included recording transfers. This problem is relatively painless for the holders to fix, at least relative to holding mortgages that are in default.
But if things turn awful quickly, it will probably be because of a lack of information causes people to panic. In October 1987 it was a failure for people to price and verify trades in a falling market.
Who knows what could exacerbate a panic here? Personally, I think the huge backlog in recording derivatives orders is a good candidate. But it will probably start over mortgage debt. These problems recording transfers just add another unknown to the equation.
"The only way to do that is to explain about a hundred specialized concepts and practices, so that what looks nefarious from a non-expert position can be understood"
Ah, I great you, Tanta, from the bowels of the "Priesthood Mentality" of Information Technology, which suffers from a similar condition.
Upping the filing requirements might go over better than you think. In the state where I practice law, overcharging on filing fees is what keeps the child welfare and criminal justice systems from grinding to a screeching halt. If the economy and tax collectinos get much worse, extra filing fees would be one way of trying to close the fiscal gap.
I find your blogs extremely informative when I have the time. Unfortunately, I don't always have the time, so, on these days, CR's blogs are only read. Keep up the poetic writing.
Nice post Tanta, but after seeing this thing yesterday I couldn't even get worked up to type:
Yawn,
Cheers,
I was to disinterested after the Y I got no where. I mean it's Casey Serin afterall.
Cheers,
"It appears that the holders of CDO's do not have legal title to the properties that have been defaulted on, so they cannot foreclose, so they get a big fat NOTHING."
Incredibly stupid statement, of course they do not have legal title to the properties, the borrower has legal title ... the purpose of the foreclosure proceeding is for the CDO to obtain the legal title.
I imagine the cure for this is something akin to a quiet title action, have all the interested parties join in and get an order from the court establishing who owns the notes.
I would certainly be willing to handle it for $20,000.
Florida Holds $2.2 Billion of Debt Cut to Junk Status
Florida Holds $2.2 Billion of Debt Cut to Junk Status (Update3) - Bloomberg.com
Is this the start "credit squeeze" part 2?
Tanta,
Great explaination. However, there are several "Justin's" in the legal field and plenty sitting behind the bench, and plenty more interpreting the initial ruling....all of whom studied more law than loan servicing.
What should happen and what does happen reference legal rulings and their long term impact on future actions are rarely based upon a proper reading of the facts.
"it's Casey Serin afterall."
Not anymore... that domain was purchased, for a tidy sum, by the Implode-o-meter gang... FWIW
Me, I can't wait to use, "fighting bongwater with bongwater" in casual conversation. Great story.
Then again, I thought I was watching the movie Amadeus again when I read Justin's comments... "too many notes".
And hey... hey... isn't iamfacingforeclosure now Aaron's blog? I though he had the poor financial sense to buy it from the lad for 50,000 bucks, didn't he?
Tanta, for what it's worth. I like your comments, because they're concise. And I think you have great insight into the mortgage industry, I just think you ramble too much.
Justin | 11.14.07 - 10:30 am
Emperor Joseph II: My dear young man, don't take it too hard. Your work is ingenious. It's quality work. And there are simply too many notes, that's all. Just cut a few and it will be perfect.
=============================
I was to disinterested after the Y I got no where. I mean it's Casey Serin afterall.
and
I'm just amused by everyone, including Tanta, getting worked up by something that was originally posted at IAmFacingForeclosure.com. Ahh, the good old days . . .
Its ironic that this is thought of Casey Serin's work. That blog iamfacingforeclosure was sold to the owner of ml-implode.com{ for the eyeballs I suppose} so this is not Casey's handiwork.
It is 'sweet' justice that owning the brand gives your content the imprimatur of the brand.
Yeah, I follow the lurid details of CS's story with avid interest. Sometimes, as my favorite quote puts it (Dario Fo - Accidental Death of an Anarchist) :
"People love gossip. Its like the smell of their own shit"
-K
casey no longer has any interest in that blog, he sold it to the mortgage implodimeter guy.
Thanks for your reply, which is excellent. But you still missed my main point.
I am an FB heading for foreclosure. I want to negotiate a workout. I call my servicer who says: "I can't help you because ABC owns your paper and isn't willing to deal." But this information is wrong. In fact, XYZ owns the paper, and XYZ is willing to deal.
If I were a judge, I would want to give homeowners at least a shot to work out a deal before foreclosure. To me, this would mean making certain that the note holder is correctly identified. Without correct ID, the courts lack this remedy and the FB is even more F'ed.
lawyers don't appear to be telling people "wait a minute, you might not own anything there".
Dontcha mean OWE?
Is that 'n' still giving you troubles, baco?
I would think we can tell that this is a big pile of nothing just by the fact that non-agency mbs continued to trade yesterday, and they continue to trade today. lawyers don't appear to be telling people "wait a minute, you might not own anything there".
This is a naive statement; it takes time for the wheels of the legal system to turn and I doubt that anyone other than a small set of the blogosphere was paying attention to this story.
Perhaps this isn't the specific case that brings down the whole MBS charade, but all it takes is one good lawyer to convince a judge that the chain of custody has been broken or that somebody's rights got violated and we'll have a new precedent. Think the 9th Circuit Court of Appeals, a group of judges notorious for getting jiggy with the Constitution.
Tanta:
I've been reading every word of your blog ever since I "discovered" you oh so many months ago. My already high opinion of your integrity went up a notch today. The advise to not jump to conclusions without an impartial assessment, while elementary, is all too often lost in the heat of defending vested positions.
Thank you for being such a meticulous, fair-minded and insightful observer of the financial scene.
Now, when do I get to see the hands on hips pose of Julia?
JBR ,
No kidding. I did not know that. Not that I've given to following that blog or Casey.
Cheers,
Tanta, please don't pay attention to the imbecilic knuckle-dragging morons who insult the silent majority. Your posts are illuminating, insightful, and an exhaustingly comprehensive good time.
I learn far more from your explanations than any morning real estate chart porn.
You are Teh Internets as they should be - a deep dive into the dank, odiferous underbelly of capitalism.
Save the fluff for your slippers, and keep on keepin' on.
C_S -- I wouldn't say that non-agency MBS is the greatest thing since sliced bread, but it's hardly a 'charade', either.
I doubt if it will ever be 'brought down'. If anything will be 'brought down' it may be derivitives of non-agency MBS (read: CDOs) that exist mainly to further obfuscate risk. As Jamie Dimon would say, "they have no business purpose."
If I were a judge, I would want to give homeowners at least a shot to work out a deal before foreclosure. To me, this would mean making certain that the note holder is correctly identified.
Yes. Absolutely. This is why I'm about to post a love letter to Judge Boyko.
But the fact remains that ownership of the note doesn't appear in the public record, just assignment of the mortgage to the servicer. So the noteholder has to be established in court for each case.
As Judge Boyko just ran a big truck over Deutsche Bank for failing to do.
You get no argument from me that an investor should be identified. It's just that "the investor" is really a bunch of people, relying on the language in the securitization documents. So it does come down to how well those documents were written.
Frankly I'm surprised anyone at CR took the original link seriously.
"Tanta, for what it's worth. I like your comments, because they're concise. And I think you have great insight into the mortgage industry, I just think you ramble too much.
Justin | 11.14.07 - 10:30 am"
Perfect! Yeah, Tanta. You cut that rambling concision down now, hear?
Tantissima has wielded her sword to cut the Gordian knot of loan docs and drained the Augean stable of internet manure in one post, proving she is mightier than Alexander and Hercules put together. (In my style manual, the phrase "Detail Obsessed Literal-Minded etc. etc." is all hyphenated. Justin wouldn't get to the end, though.)
"Party A makes outraged hyperbolic unsubstantiated claims in a short, easy-to-read blog post. It begins making the net rounds and everyone gets all spastic about it.
Party B tries to explain what's wrong with that post. The only way to do that is to explain about a hundred specialized concepts and practices, so that what looks nefarious from a non-expert position can be understood.
The result? Some joker starts complaining because the explanation is longer than the original post, and involves difficult concepts.
So Party A is off the hook again: nobody wants to take the time and energy to debunk the story or read the debunking of the story.
Justin, tough noogies. Sorry you encountered something you don't get. But don't expect me to be Part of the Problem by pandering to you.
Tanta
"For every complex problem there is a short explanation. That explanation is usually wrong."
Kinda sums it up doesn't it?
dryfly
Jeezus. Any way we could convince you two to run for national political office? I'd love to see Karl Rove just try to deal with this.
This is a naive statement; it takes time for the wheels of the legal system to turn and I doubt that anyone other than a small set of the blogosphere was paying attention to this story.
you're probably right, trading desks and their lawyers are notoriously slow to pick up on things...
The longer posts are the ones I enjoy most. Collect and publish, collect and publish.
Just don't charge $10 a page for it.
(Slightly OT) "My" source in the credit risk-assessment business has re-settled himself after a job-relocation, and has posted some "color" about what's going on in his area. S.
"My apologies for not posting recently, but I've been pretty busy in my new position w/ Aviva. As a structured credit risk analyst, I've been inundated w/ questions from our CIO and other institutional investors on our subprime exposure, our marking-to-model, and so on. We've been fortunate enough to have had the foresight to reduce our subprime exposure late last year to near nothing.
Most recent has been downgrades by the rating agencies on ABS CDOs. The downgrades reflect the deterioration in the collateral of many of these CDO deals, and some downgrades actually result in what is called "Event Of Default" where the collateral quality is so poor that the CDO is forced to unwind or divert cash flows from the junior tranches to the most senior. This has significant consequences - the underlying MBS securities in these CDOs are forced-sold at distressed levels and unfortunately perpetuates the selling that's already going on in the RMBS and CMBS markets (see Bookstabber's book on 1987 portfolio insurance-type selling). So while the structures are still intact, cash flows are still flowing, and delinquencies rise (BUT no defaults on most ABS CDOs), the CDO is forced to unwind and dissolve due to certain "triggers" that were put in place. Again, the selling that's happening is forced and putting even more pressure on the mortgage market than what should be.
On the financials side, I'm certain 4Q is going to be ugly, ugly, ugly. Most financial co's caught up in this subprime debacle have already blown their year as far as earnings go (see ResCap/GMAC, Radian, MGIC, BAS, Citi, Wachovia, JPMorgan, Lehman, Bear, and on and on). So there's nothing stopping them from throwing the proverbial "kitchen sink" in with already distressed 4Q numbers. Next years comps will be so easy, and thus the "turn around" can be called by Summer '08. I think these co's have it in their interest to build up very big loss reserves to eventually take them back in future earnings when the mortgage markets stabilize.
Just to give you an idea, I'm struggling right now at valuing an TABX (40 credits comprising the 06-2 and 07-01 ABX constituents) 60-100% tranche. For the principal in this deal to even begin to be written down due to losses, we'd have to see 34 of the 40 underlying deals default, assuming a conservative 30% recovery rate (34/40*( 1-0.3)). Given the cash spreads on the underlying 40 credits, the PV of this - say $1MM - position is $600k. Yet the market, when it even does trade and most of the time I'm having to use bid/offers that don't even exist, the PV is $200k. Now, assume this position is a more average size of $5 billion. Now you're forced from a financial institution's perspective of either marking-to-market at $1 bill
End of prior truncated post. S.
"Now, assume this position is a more average size of $5 billion. Now you're forced from a financial institution's perspective of either marking-to-market at $1 billion or marking-to-model at $3 billion. Now do this same analysis for $30-50 billion in MBS securities. That's the issue right now facing BAS, JPMorgan, Wachovia, Carlyle, MS, and so on. Which value is the correct one? Does it even matter at this point?
Final point: any trade/security that has more than even a few inputs to "model" the true value for buying/selling is NOT TRADING at this time. There is no margin for error on these trades, and everyone is running in one direction - SELL. The credit markets have long gone from trading on the traditional ways of valuation to now trading solely on emotion and the forced elimination/reduction of certain exposures. And the "bath" to be taken by these firms has yet to even really happen. It's going to get much worse before it gets better, and I'd bet we see a capitulation in the credit markets within 3 months time. Recession is probably inevitable given credit availability will be nonexistent (see the latest Loan Officer Survey), unemployment will begin to tick up, and inflation will be higher NOT lower due to the forced hand of the Fed to cut rates (read dollar crash). Stagflation is the best we can hope for. Has anyone coined the term "Stagpression" yet?
Just one mans thoughts. Best to everyone, and I still read this thread daily!"
No time to read all the comments above, so this probably doesn't fit in the flow, but I just have to say:
Oh, Tanta!
Oh, what a splendid post.
The original article was written by the union of ambulance chasing lawyers graduated from the Velvet Jones school of technology. The intent is to squeeze fees out of home owners in foreclosure in exchange of a few more months of free rent.
Tanta, I have a question: do you believe that there are cases where the owner of the mortgage CAN'T prove ownership? Perhaps the original mortgage papers the borrower signed can't be found, or there's no clear paper trail that connects the original owner of the mortgage to the present owner and all the people who would know any of the history don't work at any of banks in the chain anymore.
Are there cases that can't be fixed?
You get no argument from me that an investor should be identified. It's just that "the investor" is really a bunch of people, relying on the language in the securitization documents. So it does come down to how well those documents were written.
Thanks, Tanta. As long as the owner(s) of the note can be compelled to identify themselves clearly in court when compelled, the borrower is protected. To me, this is what the case is all about, aside from technicalities. It just seems to be a basic right to know who is on the other side of a foreclosure. It's not the servicer.
first time home buyers
revenge of the nerds was the best movie!
Sebastian - or whoever your "source" is - the market is NOT trading on emotion right now. Unfortunately for you, the market is trading on FUNDAMENTALS.
You know, the same fundamentals that you casually ignored while that ignorance was lining your pocket with massive fees. Now, economic fundamentals return and you're shocked? Get bent.
A 20-year bull market is not fundamental. Fraudulently recording risk exposure is not fundamental - I want 100% of all SIV's on the balance sheet of the bank backstopping their liquidity.
Tanta Says
"As I said, I might be wrong about the specifics of the DB case, because I haven't seen the actual court order."
I say, "Wow, and you went on a torid rant about the authors (Aaron Krowne yes of ML-Implode, April Charney, Legal Aid Attorney and myself)without reading the ACTUAL order.. wow, and you question the source?????
Is that how the blog world works? This is all new to me.
"If someone sends me a copy and it turns out that I'm wrong and this is a Big Deal instead of a Little Deal, I'll be the first to post a mea culpa."
It's a bigger deal than you can even imagine.
"Until then I will ask everyone to develop the habit of reading past the hype and evaluating the credibility of a source. Me included."
Exactomundo Tanta. Words to live by.
By the way Casey Serin does not have anything to do with Iamfacingforeclosure.com.
It will be operated by Aaron Krowne myself and many to notch mortgage law attorneys that are going to turn the mortgage world upside down.
Plain and simple.
Great blog by the way .
Unsympathetic - unfortunately you've got it all wrong. I've traded MBS for a number of years, right now its all emotion. There's a new risk in the market and its called memo risk. (The risk that you'll have to write a memo to your boss on why you own it). The majority of traders in the distressed stuff have to mark to mark it (Good luck doing that) and find a buyer of it (Good luck part 2 ). There are a lot of smart guys out there, but so if fundamentals mattered there would be a bid. But there isn't for many pieces and its because its not worth the headache. Maybe if you're Warren Buffett, you can ride it out becaue you answer to no one. But for the vast majority of investors who have boards, and answer to the public and shareholders, and deal with the questions on why you bought subprime (whether its good or bad or the right price) its a non starter right now now matter how cheap the assets get.
I defend foreclosures, more as a hobby than anything else, and I have one against Deutche Bank right now, in which, in its complaint states,not that it owns and holds the mtg, but that it will be assigned the mtg (someday).
Oops. Motion to dismiss filed. Hearing scheduled and cancelled a month ago, not rescheduled. But this is a little deal, not a big deal, as the homeowner is close to negotiating a sale, and Deutche Bank (or somebody) will be paid off and that will be the end of that.
On another one, HNBC, I actually got the case dismissed--temporarily, I assume--because they filed a count for lost note and didn't include a copy of the note they were trying to reestablish. Mind you, they really do have that note somewhere, they're just too lazy or understaffed to go looking for it.
The real reason the judge granted the dismissal was that the sloppy title company missed a couple of liens that should have been dealt with when the mtg was granted in the first place. My title searcher did find them. There is a procedure in Florida to temporarily get rid of the liens of homestead property (don't ask, lives have been spent figuring out Florida's homestead law), and I explained to the judge that the sloppy plaintiff's sloppy title company resulted in the borrower's not being able to refinance the loan, and that everything would turn out ok.
So the judge dismissed making clear that he would reinstate once they found the note. This gives me time to do the lien-challenging procedure.
I suppose that with all the chaos, they could lose the note permanently, but sooner or later the attys will figure out how to plead a note reinstatement count, and kick my lady out, but she plans to refi long before that happens.
Given some of the awful products, I am looking for a case where the borrower was treated so badly, so as to constitute fraud, with neg am, most of income used by loan, and fake income submitted unbeknowst to borrower, yes, this does happen occasionally.
Keep those posts long and difficult, Tanta.
If you would care to post even a sentence on the Irvine Housing blog, all the blogsters there will be simply thrilled.
Hi Tanta,
I have been a silent reader for some time, and your posts are both instructive and funny. I don't mind about the long, complicated stuff - no way to escape it if one is to work seriously - but sometimes as a non-English native speaker some of your expressions generate a lot of perplexity!
Or maybe it is a welcome addition to my stiff English courses in the lycée.
Keep on bloggin'.
Tanta,
Here's a humorous one on MERS standing in foreclosure.
Broken Credit Blog — Mortgage Foreclosure Short Sale Credit Report Loan Modification » MERS Foreclosures Dismissed
Excellent post. It is truly enjoyable to read a well-written explanation like this, unlike some of the trash that passes for "blogging" lately.
It's blogging. It's not as if this is the NYT's.
Tanta,
Good article, but DB's problem isn't as laid out as you have stated, in that they simply didn't prove they were the successor in interest as of the date of the filing of the foreclosure complaint with the Court. Federal Rule 17(A) requires DB prove "standing" as of the date it files the foreclosure complaint.
DB has the ability to refile when it gets the assignment done, as the cases were dismissed without prejudice.
In my experience with DB, it will locate whoever is on record with the county recorder as the current Mortgage holder (generally still the original holder), and execute an allonge or assignment directly to it from them - irrespective of how complicated the chain of title is behind the scenes. They will effectively "short-cut" around the dramatic issues you bring up with not having these endorsements done.
They do this to avoid having each link in the chain of title picked apart, which would cause a worst-case scenerio that you could imagine.
Finally, I'm aware of very, very few attorneys who defend these, and seriously doubt anyone is out there defending foreclosures the way they could. Even the Court states in its decision that DB's conduct has gone unchecked too long, demonstrating a lack of interest defending these. Also noteworthy is the fact that the Court was the party to question standing; it was not on motion from defendant's counsel.
If you still need the doc, I can get you a copy.
I just got my foreclosure suit dismissed because I filed suit against Deutsche. They sent a schedule of my new payment, with a past due balance that was MUCH lower than the previous amount they claimed, but no explanation of what the charges were for. Chase is servicing the loan. @#$()(&^^*#!!!
Tanta, thank you for your article. Now if you can tell me how to get my hands on this "note" that the Mtg. Co. has......you said a sharp lawyer might spot any "goof ups" but I don't believe I got a copy of the note when it changed hands, just a notification that so and so was taking over the loan.
Thanks a lot.
Have you read this?
Federal judges toss foreclosures, say “Prove you own the mortgage” « Foreclosing Cleveland