I understand that these banks knew borrowers couldn’t pay when they loaned them the money. But I am failing to understand, in the absence of PMI, how they thought they could fare better by foreclosing, so made these marginal loans. In hindsight, the banks had no way of knowing back in 2003 (when rampant “loose lending” began) that they would be “bailed out” by the Feds.
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Good comment. I agree with you on MERS not going away, at least in CA. Other states could be very problematic. I’m not sure if the standing issue could be a problem in CA. (More on MERS later)
As far as the banks (or more precisely, the lenders, because most were NOT banks) faring better with foreclosure, I think he’s just wrong on that. Many lenders had little risk (as compared to the volume of loans they were originating) because they unloaded the loans almost as fast as they could fund them. For their held inventory, some purchased CDS’s to cover the risk. It’s the loan servicers that fare better with foreclosure. He is correct to the extent they were the same party (Countrywide, now BofA comes to mind.).
Nationwide, MERS is still a potentially huge problem on probably 1/2 a dozen different fronts. The standing issue. The failure to record in jurisdictions which require it. The possible inability to actually locate original documents in jurisdictions which require it. The potential loss of security interests are a possibility is some jurisdictions, possibly resulting in gagillions of dollars of put-backs, and/or civil fraud claims. Investor claims for those who bought interests in REITs, where ultimately the loans end up not being secured, voiding their REIT status. The list goes on and on and on. All different possible problems, all possible nightmares. Though not specifically related to MERS, the due process issues and possible fraud related to the robo-signing, which I suspect hasn’t really stopped. (I think it was at Naked Capitalism i saw a bit about how Countrywide, as a company policy, never even attempted to forward original documents on sold loans.) All seemed like a good idea at the time. But i’s weren’t dotted, t’s not crossed.
