Legal Perspective on the RE fiasco

[SD Transplant]

A must watch video from a legal perspective vis-a-vis real estate:

[bearishgurl]

Good video. Gillies really explained the securitization of recent mortgages in layman’s terms, as well as the elements of a contract.

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.

What I have seen is that these “distressed” borrowers’ closing costs, fees and subsequent mortgage payments were SO HIGH (after a brief “teaser period”) that they probably ended up making 4+ years of *true* (prime 30-yr fixed) payments in the 12-18 months that they struggled to make payments after last refinancing (before they stopped making pymts). We’re all claiming they’re currently “squatting,” which is technically true. But they gave up so much of their equity in lender points and fees and exhorbitant interest payments in their *new* monthly payments. Not all these “squatters” took out cash for themselves. In several cases I am familiar with, they were forced to buy out a tenant-in-common if they wanted to retain their longtime home. Of course, all these longtime (non-residential) tenants-in-common came out of the woodwork for appraisals when the local market values were sky high, preying on the single-mom (residential) TIC with kids enrolled in school. This is just another reason NOT to take title in this manner.

I don’t advocate hanging out on the courthouse steps and trying to ask the trustee’s rep questions like Gillies suggests doing. It won’t do any good. If the law should evolve in CA to where the lenders have to prove the ownership of a trust deed upon foreclosure, they will just go thru MERS and get all their ducks lined up in a row, file one or more assignments from the originating lender to the current TD holder(s) and then file the NOD and NOT. On the steps, the talented fast-talking trustee’s reps might then read off the chain on title on the steps before returning the property to the rightful beneficiarie(s).

I don’t see MERS going away because TD’s are still being recorded today in the name of MERS.

I don’t see CA ever adopting a judicial foreclosure process where lenders have to prove all the owners of a mortgage in succession. The CA court system is swamped and doesn’t have the resources to deal with this.

[bearishgurl]

Good video. Gillies really explained the securitization of recent mortgages in layman’s terms, as well as the elements of a contract.

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.

What I have seen is that these “distressed” borrowers’ closing costs, fees and subsequent mortgage payments were SO HIGH (after a brief “teaser period”) that they probably ended up making 4+ years of *true* (prime 30-yr fixed) payments in the 12-18 months that they struggled to make payments after last refinancing (before they stopped making pymts). We’re all claiming they’re currently “squatting,” which is technically true. But they gave up so much of their equity in lender points and fees and exhorbitant interest payments in their *new* monthly payments. Not all these “squatters” took out cash for themselves. In several cases I am familiar with, they were forced to buy out a tenant-in-common if they wanted to retain their longtime home. Of course, all these longtime (non-residential) tenants-in-common came out of the woodwork for appraisals when the local market values were sky high, preying on the single-mom (residential) TIC with kids enrolled in school. This is just another reason NOT to take title in this manner.

I don’t advocate hanging out on the courthouse steps and trying to ask the trustee’s rep questions like Gillies suggests doing. It won’t do any good. If the law should evolve in CA to where the lenders have to prove the ownership of a trust deed upon foreclosure, they will just go thru MERS and get all their ducks lined up in a row, file one or more assignments from the originating lender to the current TD holder(s) and then file the NOD and NOT. On the steps, the talented fast-talking trustee’s reps might then read off the chain on title on the steps before returning the property to the rightful beneficiarie(s).

I don’t see MERS going away because TD’s are still being recorded today in the name of MERS.

I don’t see CA ever adopting a judicial foreclosure process where lenders have to prove all the owners of a mortgage in succession. The CA court system is swamped and doesn’t have the resources to deal with this.

[bearishgurl]

Good video. Gillies really explained the securitization of recent mortgages in layman’s terms, as well as the elements of a contract.

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.

What I have seen is that these “distressed” borrowers’ closing costs, fees and subsequent mortgage payments were SO HIGH (after a brief “teaser period”) that they probably ended up making 4+ years of *true* (prime 30-yr fixed) payments in the 12-18 months that they struggled to make payments after last refinancing (before they stopped making pymts). We’re all claiming they’re currently “squatting,” which is technically true. But they gave up so much of their equity in lender points and fees and exhorbitant interest payments in their *new* monthly payments. Not all these “squatters” took out cash for themselves. In several cases I am familiar with, they were forced to buy out a tenant-in-common if they wanted to retain their longtime home. Of course, all these longtime (non-residential) tenants-in-common came out of the woodwork for appraisals when the local market values were sky high, preying on the single-mom (residential) TIC with kids enrolled in school. This is just another reason NOT to take title in this manner.

I don’t advocate hanging out on the courthouse steps and trying to ask the trustee’s rep questions like Gillies suggests doing. It won’t do any good. If the law should evolve in CA to where the lenders have to prove the ownership of a trust deed upon foreclosure, they will just go thru MERS and get all their ducks lined up in a row, file one or more assignments from the originating lender to the current TD holder(s) and then file the NOD and NOT. On the steps, the talented fast-talking trustee’s reps might then read off the chain on title on the steps before returning the property to the rightful beneficiarie(s).

I don’t see MERS going away because TD’s are still being recorded today in the name of MERS.

I don’t see CA ever adopting a judicial foreclosure process where lenders have to prove all the owners of a mortgage in succession. The CA court system is swamped and doesn’t have the resources to deal with this.

[bearishgurl]

Good video. Gillies really explained the securitization of recent mortgages in layman’s terms, as well as the elements of a contract.

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.

What I have seen is that these “distressed” borrowers’ closing costs, fees and subsequent mortgage payments were SO HIGH (after a brief “teaser period”) that they probably ended up making 4+ years of *true* (prime 30-yr fixed) payments in the 12-18 months that they struggled to make payments after last refinancing (before they stopped making pymts). We’re all claiming they’re currently “squatting,” which is technically true. But they gave up so much of their equity in lender points and fees and exhorbitant interest payments in their *new* monthly payments. Not all these “squatters” took out cash for themselves. In several cases I am familiar with, they were forced to buy out a tenant-in-common if they wanted to retain their longtime home. Of course, all these longtime (non-residential) tenants-in-common came out of the woodwork for appraisals when the local market values were sky high, preying on the single-mom (residential) TIC with kids enrolled in school. This is just another reason NOT to take title in this manner.

I don’t advocate hanging out on the courthouse steps and trying to ask the trustee’s rep questions like Gillies suggests doing. It won’t do any good. If the law should evolve in CA to where the lenders have to prove the ownership of a trust deed upon foreclosure, they will just go thru MERS and get all their ducks lined up in a row, file one or more assignments from the originating lender to the current TD holder(s) and then file the NOD and NOT. On the steps, the talented fast-talking trustee’s reps might then read off the chain on title on the steps before returning the property to the rightful beneficiarie(s).

I don’t see MERS going away because TD’s are still being recorded today in the name of MERS.

I don’t see CA ever adopting a judicial foreclosure process where lenders have to prove all the owners of a mortgage in succession. The CA court system is swamped and doesn’t have the resources to deal with this.

[bearishgurl]

Good video. Gillies really explained the securitization of recent mortgages in layman’s terms, as well as the elements of a contract.

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.

What I have seen is that these “distressed” borrowers’ closing costs, fees and subsequent mortgage payments were SO HIGH (after a brief “teaser period”) that they probably ended up making 4+ years of *true* (prime 30-yr fixed) payments in the 12-18 months that they struggled to make payments after last refinancing (before they stopped making pymts). We’re all claiming they’re currently “squatting,” which is technically true. But they gave up so much of their equity in lender points and fees and exhorbitant interest payments in their *new* monthly payments. Not all these “squatters” took out cash for themselves. In several cases I am familiar with, they were forced to buy out a tenant-in-common if they wanted to retain their longtime home. Of course, all these longtime (non-residential) tenants-in-common came out of the woodwork for appraisals when the local market values were sky high, preying on the single-mom (residential) TIC with kids enrolled in school. This is just another reason NOT to take title in this manner.

I don’t advocate hanging out on the courthouse steps and trying to ask the trustee’s rep questions like Gillies suggests doing. It won’t do any good. If the law should evolve in CA to where the lenders have to prove the ownership of a trust deed upon foreclosure, they will just go thru MERS and get all their ducks lined up in a row, file one or more assignments from the originating lender to the current TD holder(s) and then file the NOD and NOT. On the steps, the talented fast-talking trustee’s reps might then read off the chain on title on the steps before returning the property to the rightful beneficiarie(s).

I don’t see MERS going away because TD’s are still being recorded today in the name of MERS.

I don’t see CA ever adopting a judicial foreclosure process where lenders have to prove all the owners of a mortgage in succession. The CA court system is swamped and doesn’t have the resources to deal with this.

[SK in CV]

[quote=bearishgurl]

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.

[/quote]

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.

[SK in CV]

[quote=bearishgurl]

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.

[/quote]

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.

[SK in CV]

[quote=bearishgurl]

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.

[/quote]

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.

[SK in CV]

[quote=bearishgurl]

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.

[/quote]

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.

[SK in CV]

[quote=bearishgurl]

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.

[/quote]

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.

[bearishgurl]

[quote=SK in CV] . . . 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.)…[/quote]

Yes, SK, I meant LENDERS and usually always use the word “lenders” as it pertains to trust deeds. Most of the trust deeds I’ve seen filed in conjunction with MERS as a beneficiary list the “servicer” as a “too-big-to-fail bank” (aka “WAMU/Chase) and MERS” but are IN REALITY “REIT and/or individual investor and MERS.”

In a couple of transactions I am currently involved in with B of A (formerly “Countrywide Funding”), Servicer B of A will NOT consummate a deal (in favor of the delinquent borrower) until the owner of the 2nd TD accepts .06 on the dollar. That is their policy and the instructions their “contractors” working on these deeds-in-lieu/modifications have been given. This is one reason why these transactions are taking so long (while the foreclosure process is held at bay).

I’m finding myself sympathizing with all the homeowners making timely payments in states that espouse judicial foreclosure :=(

[bearishgurl]

[quote=SK in CV] . . . 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.)…[/quote]

Yes, SK, I meant LENDERS and usually always use the word “lenders” as it pertains to trust deeds. Most of the trust deeds I’ve seen filed in conjunction with MERS as a beneficiary list the “servicer” as a “too-big-to-fail bank” (aka “WAMU/Chase) and MERS” but are IN REALITY “REIT and/or individual investor and MERS.”

In a couple of transactions I am currently involved in with B of A (formerly “Countrywide Funding”), Servicer B of A will NOT consummate a deal (in favor of the delinquent borrower) until the owner of the 2nd TD accepts .06 on the dollar. That is their policy and the instructions their “contractors” working on these deeds-in-lieu/modifications have been given. This is one reason why these transactions are taking so long (while the foreclosure process is held at bay).

I’m finding myself sympathizing with all the homeowners making timely payments in states that espouse judicial foreclosure :=(

[bearishgurl]

[quote=SK in CV] . . . 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.)…[/quote]

Yes, SK, I meant LENDERS and usually always use the word “lenders” as it pertains to trust deeds. Most of the trust deeds I’ve seen filed in conjunction with MERS as a beneficiary list the “servicer” as a “too-big-to-fail bank” (aka “WAMU/Chase) and MERS” but are IN REALITY “REIT and/or individual investor and MERS.”

In a couple of transactions I am currently involved in with B of A (formerly “Countrywide Funding”), Servicer B of A will NOT consummate a deal (in favor of the delinquent borrower) until the owner of the 2nd TD accepts .06 on the dollar. That is their policy and the instructions their “contractors” working on these deeds-in-lieu/modifications have been given. This is one reason why these transactions are taking so long (while the foreclosure process is held at bay).

I’m finding myself sympathizing with all the homeowners making timely payments in states that espouse judicial foreclosure :=(

[bearishgurl]

[quote=SK in CV] . . . 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.)…[/quote]

Yes, SK, I meant LENDERS and usually always use the word “lenders” as it pertains to trust deeds. Most of the trust deeds I’ve seen filed in conjunction with MERS as a beneficiary list the “servicer” as a “too-big-to-fail bank” (aka “WAMU/Chase) and MERS” but are IN REALITY “REIT and/or individual investor and MERS.”

In a couple of transactions I am currently involved in with B of A (formerly “Countrywide Funding”), Servicer B of A will NOT consummate a deal (in favor of the delinquent borrower) until the owner of the 2nd TD accepts .06 on the dollar. That is their policy and the instructions their “contractors” working on these deeds-in-lieu/modifications have been given. This is one reason why these transactions are taking so long (while the foreclosure process is held at bay).

I’m finding myself sympathizing with all the homeowners making timely payments in states that espouse judicial foreclosure :=(

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