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Foreclosure Fraud, Now it Gets Deeper: Title Insurance, Wrongful Foreclosures, Bad Title, TBTF Banks, Trustees, and Structurers All One: Concentrated Financial Service Industry Grand Fraud

13 Oct

As the mass media raves about foreclosure moratoriums ‘freezong’ the US economy the unraveling of the greatest cover up and fraud of all time comes rolling down the aisle – if anyone is watching.

Now it turns out, the fraudulent paper and the transferred in blank conveyances on real property debt which cannot be ‘recreated’ in the new world of the present if they were no ever actually transferred in the past, allows us to finally see directly inside the belly of the beast.

So while others clamor about somehow ‘harming’ the economy, we would

First point out the economy is laredy harmed: read the David DeGraw piece already posted and linked here – our population has gone from 41% livign paycheck to paycheck 3 years ago to over 70% now doing so – from less than 30,000.000 people living on some form of anti poverty funding to over 52,000,000 now doing so – add those up.  that’s a hell of a lot of peole – well over the norm – and recognize that anyone suggesting we need to do something to prevent the destruction of our economy is either dead drunk or a flat out liar – the economy has been done. Do the math.

So if that is not the issue, then what is? What is, is that if we do NOT stop the foreclosures and massive stripping of the homes and wealth of the American people we will be in worse shape than we already are. Meanwhile the evidence of the fraud mounts around us.

This piece from Yves Smith on the Title Fall Out is a perfect example. So what happens when the new buyer is not to blame, the lender destroyed the title and the foreclosure was a fraud?

And then, one more question which jumped out at us when we read it:

“Levitin indicated in a Citigroup report, documentation lapses could “cloud title on not just foreclosed mortgages but on performing mortgages.””

Here it is, read it all, and then, maybe, read it again for extra impact.  The basis of this nation is a free people who live and own and hold title to the land they own and thrive upon. Even renters depend on an underlying free holder landlord. Ponder that as you read.

Title Insurance Woes Illustrate Liabilities of Foreclosure Mess Concentrated in TBTF Banks

from naked capitalism by Yves Smith

There are so many fronts to the foreclosure crisis that it’s now becoming difficult to stay on top of all of them.

One development Monday that didn’t get the attention it deserved is the fact that Bank of America is now eating title insurance liability on foreclosed properties sold by its servicer. Per Bloomberg:

Bank of America’s agreement with Jacksonville, Florida- based Fidelity National calls for the lender to cover the title insurer’s costs in the event of an error in the company’s processing of foreclosure documents, Sadowski said. The bank will notify the insurer in each case that the foreclosure complies with state laws and regulations.

Bank of America is in talks with other title insurers for similar agreements, said Richard Bramhall, the bank’s chief title officer. He declined to name the other companies.

This is a big deal for several reasons:

1. The liability in case of a wrongful foreclosure is large. There is no way for the wronged borrower to get his house back, so title insurance is the only recourse. As Bob Lawless explained in Credit Slips:

…most every (or maybe even every–I’ll let someone else do the 50-state survey) state provides the strongest possible finality protections for deeds obtained through foreclosure sales. We also see similar rules for other judicially supervised sales in other contexts such as sales of personal property subject to a security interest or bankruptcy sales….

Suppose Henry and Helen Homeowner lost their home in foreclosure proceeding, and it has since been purchased by Bill and Betty Buyer. Now, Henry and Helen discover the affidavits in their foreclosure proceeding had some of the very same apparently fraudulent signatures reported in the media. When Henry and Helen complain to the court, the answer should be: “Your complaint is against Deutsche Bank (or whoever foreclosed) and not against Bill and Betty. You can recover damages from Deutsche Bank but not eject Henry and Helen from possession.” In turn, this will mean that that Bill and Betty (or their lender) will not have to look to the title insurer for recovery.

2. This means the large banks now effectively have direct exposure to borrowers for screw ups in foreclosures (note that they did earlier, in theory, but this move shortens the process of the money coming from the bank).

3. The liability is via the bank servicer. Note the Bank of American is now the largest servicer in the US (Wells is a close second) by virtue of having bought Countrywide.

4. Some contend that the risk of clouded title means that title insurers may come to require warranties from banks for all properties sold that has securitized mortgages. As Adam Levitin indicated in a Citigroup report, documentation lapses could “cloud title on not just foreclosed mortgages but on performing mortgages.”

It isn’t hard to see that other banks are likely to be required to take the same step as Bank of America, at least if they want to unload foreclosed property.

It isn’t hard to see where this is going. The biggest servicers are part of TBTF banks. The biggest trustees (the folks who were supposed to make sure that the loans all got to the securitization trust properly) are part of TBTF banks. The major structurer/packagers are now all part of TBTF banks.

Isn’t a concentrated financial services industry grand? Any time they screw up, they are too large to be made to pay for their crimes. The die was cast at the beginning of the Obama administration. It was a critical window of opportunity to take over and put new management in the weakest of the big banks (and probably force them to shed operations too) and they instead were coddled and sent back on their merry way.

I guarantee that the losses, between extend and pretend that will no longer be viable (in particular, the unrealistic marks on second mortgages) and the liabilities resulting from this colossal mess, at least one major bank will be insolvent. But the odds of the new special resolution authority being used? I put the odds at pretty much zero.

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