Judge rules against longstanding foreclosure practice

Source: Houston Chronicle/New York Times

Nov. 14, 2007, 11:25PM
Judge rules against longstanding foreclosure practice
By GRETCHEN MORGENSON
New York Times

A federal judge in Ohio has ruled against a longstanding foreclosure practice, potentially creating an obstacle for lenders trying to reclaim properties from troubled borrowers and raising questions about the legal standing of investors in mortgage securities pools.

Judge Christopher A. Boyko of U.S. District Court in Cleveland dismissed 14 foreclosure cases brought on behalf of mortgage investors, ruling that they had failed to prove that they owned the properties they were trying to seize.

The pooling of home loans into securities has been practiced for decades and helped propel real estate prices in recent years as investors sought the higher yields that such mortgage trusts could provide. Some $6.5 trillion of securitized mortgage debt was outstanding at the end of 2006.

But as foreclosures have surged, the complex structure and disparate ownership of mortgage securities have made it harder for borrowers to work out troubled loans, in part because they cannot identify who holds the mortgage notes, consumer advocates say.


Read more: http://www.chron.com/disp/story.mpl/business/5303277.html

....it seems that they've been "hoist by their own petard," so to speak.

Investors go into mortgage securities for all the usual reasons people go into real estate as an investment. Except this way they're able to spread their risk among other investors, and also eliminate the costs associated with actually having to transfer title of ownership. But if the homeowner(s) default (en masse) and the originating lender is facing bankruptcy itself, that risk belongs to whom? Seems it becomes a case of "whose your daddy???"

The bank has little interest in recovering a property that isn't generating income while its also sliding down the tubes, but technically it owns the deed of trust.

What a fine mess....

K&R!!!

with borrowers, lower rates and try a little harder not to be greedy assholes.

they should never have gotten into, then take the property back and resale it to another buyer. I know there are those that say well, these people should never have bought more than they could afford. Well, maybe, but the lender has a duty to make sure the customer understands what he is signing, the lender has the obligation not to make loans they know are going to go bad because the person they are lending money to, they know cannot afford it.

The main problem with credit, esp. mortgages, is that for the most part the money that the bank put into the loan doesn't really exist. i beleive that banks only need to have 1/10th of the money they loan backed by the reserves.

The whole foreclosure business is just an easy way for usurers to get cheap property. If you get to loan $1Million for some poor sap to buy a house, and the guy defaults, the bank gets to have the house. The funny thing is that in reality, the bank only had $100K of their dollars in it, since the rest of the loan was money they literally pulled out of their ass. So the bank gets to have now $1 million in assets, with an investment of only $100K. That is assuming you did not pay a single cent, however you are likely to have paid part of the mortgage by the time you get kicked out of your house. So it is an even better investment for the bank: as they probably got to kick you by the time you paid $80K or thereabouts. So in reality the bank ended up putting just $20K of their money on the line, and getting a $1M return. And that is why it is called usury.


The whole sub prime debacle, was really nothing of the sort. Once these lenders felt a bit of heat, because they got too greedy and were getting too many assets back in the form of foreclosures. They started panicking, but the main reason was that they were ending with assets that were hard to liquidate (real state is a bitch to move quickly). So the fed bailed them out, with a nice infusion of cash so they would have enough liquidity to give plenty of Christmas bonuses. The ironic part, is that not a single cent of that injection went to help the people making the payments, but the people who made the money out of thin air. And that money, at the end of the day belongs to us -- I know it was printed by the fed reserve, but the fiat is with the people of the US of A -- So in other words, we get to be the prostitute and pay for the screw at the same time.

The seriousness of this situation can't be denied. There has been a massive transfer of wealth from poor borrowers that had their assets seized, back to the lenders. This is, the money is being hoarded by the rich, not only via tax cuts and funneling of public money to their enterprises, but also via massive rates of foreclosures. Some experts claim that this decade has seen the biggest transfer of wealth away from the African American community for example.

Now, if we analyze the legality of it all, what is worse someone who could not pay back money that someone pulled out of their ass. Or some bank literally making money out of thin air w/o moving a single finger.

There is a reason, why Jesus the, prince of peace, only got physical with the bankers in the temple.

My husband would like to show this to his students in remedial college English as an example of writing regarding social justice.

Created out of thin air is right.

Money as Debt
http://video.google.com/videoplay?docid=-9050474362583451279


or go look for "The Money Masters" videos (available as DVD or google video).

I'm not a Christian, but the story of the moneychangers in the Temple is one of my favorite parts of the New Testament.

Well, that and the whole "love your neighbor as yourself" message, but that's not very fashionable these days, is it?

:hi:

Banks are the robber barons of our era. Ever wonder why the major networks carried footage of the Chiapas revolt (in Mexico 1994) for a full three days, only to have the coverage stopped mid-day on Friday of the week? At that point Tonya Harding took over the news as a diversion, and it was CitiBank protecting its Mexican financiers.

The banks tell us whether we are good or we are bad. It is called credit ratings, and you probably don't pay much attention to it till you need a loan to buy a house or a car. Or until the system busts you with heavy duty medical bills, and you are wiped out.

These days, you may even be refused for a job if your credit has slumped. After all, poor credit mUst indicate that you are addicted to drugs or that you gamble. For some reason, you aren't allowed to point out that you don't drink or gamble - you have to submit to the credit rating system. (That is why I laughed myself silly when that young and highly desired banking executive brought down the Asian economy in 1997. I mean, I feel for the people who lost everything, but to save 160K Pound Sterling, his bank had eliminated his boss. They knew the young guy was dependable - he had a good credit rating.)

Some on DU have pointed out that the banks are partially responsible for the lack of Universal Single Payer Health care. If some of us are busted with poor credit, we are gonna pay a juicy 19% or higher on any credit cards we may be granted.

And if ya wanna talk usury - those paycheck loan places average in at around 900% a year. Chicago Mafia loan shark interest back when I was growing up was only around 145%.

This is a great post. All banks exist to create money. Plain and simple. It all starts with the Privately owned Federal Reserve Banking System. Check out America freedom to facism sometime.

I'm bookmarking to save your comments.

What a clever judge.

They were basically ridiculously low , interest-only , balloon payment style loans..

I have a friend who GOT one, and they are desperately trying to hold onto "their" house.

When my friend bought the house in 96, she put down $27K on a $99K house.. she was sitting pretty with a house payment of arounf $540 PITI

but she hooked up with a guy who conned her into using that house and the appreciation , as an ATM, and now 11 years later, they owe $265K on it, and have been paying $1000 a month for two years.. when the loan "re-sets" next year, their payments will end up being close to $3K a month.. their credit sucks, so they will not get a "good" loan..if they can even get one..

IF they could sell it, it would probably bring about $220K now..:(

I feel sorry for her, but I am also mad as hell because she let him ruin her credit and possibly lose her house, which she COULD afford before all the nonsense started with him..

He must not have gotten the memo.

IIRC, he used to be a Dem, but switched to GOP. Guess that makes him a RINO.

His hometown, Parma, OH, is famous for politicians that ride the fence and jump parties.

...legislation should be put in place now across the entire country to protect tens of millions of at risk home owners and State Chartered Local Banks against these predatory Central Bank and hedge fund speculators who created the real estate bubble.

court. The republicans have stuffed the courts with rightwing, corporate-friendly judges, so this will be short lived. It's just so refreshing to hear of a ruling by ANY judge that goes against the corporations these days.

They should get just what they deserve! Good job Honorable Boyko!

thinking through what this means. What does it mean for the 6.5 trillion in bad debt? People will be able to keep heir homes and the bank will have to write off the $6.5 trillion. Because the admitted cost of the sub-prime lending disasater is at $1 trillion now, if the $6.5 trillion gets added in, there will be collapse. I don't like the big banks per se, but I don't want to see them collapse either. I would rather the people elect governance for the banks and elected officials change the banking system through legislative change.

fees in the last 6-10 years. Bounced check - up to $30 or more in markets; they bounce the largest check first instead of paying off the smaller checks, resulting in 5 x 30$ instead of 1 x $30. ATM processing fees, fees for balances under $500; so on and so forth.

The banks are the last ones we should feel sorry for. Generally the loss is reduction in earnings per share to the stockholders, not that the bank is going to collapse. The banks lay off people when if they don't make their projected (via Wall Street) earnings. They still make money all the way around.

I am hoping that the state courts find in favor of this ruling also. They should - if the 'lender' doesn't have that piece of paper stating that they are true lender, then they shouldn't go to court and state that they are. ALL parties would have file with the court, which would be the investors of these CDO's, not the trustees of the pools.

I hope the people filing for bankruptcy see this for what it is - a real chance to get relief for several months to pay down their debt. Man, I would love a 6-month reprieve from paying our mortgage - we could be completely debt free.

Also - wouldn't this a wonderful thing to have people living in the homes, waiting to see what happens, rather than walking away and leaving the burden of the empty home to the neighbors, who generally mow the grass and otherwise maintain the home waiting for a sale? There have reports that West Nile cases are up due to people leaving their homes and the water becomes stagnant and murky, thus a rise in mosquitoes.

Isn't this a win-win for everyone, other than the bankers, who have made their money on all ends, first for originating the loan, then selling the loan, then servicing the loan through collections, then finally, funds from the bankruptcy court?

And they also unpost debits from history and keep them under the pillow. And bammm.. I just paid out 72 yesterday fom charges a week ago I no longer even remember.

It's certainly not a winning situation for them.

accounts are insured up to that amount by FDIC.

Maybe it is time for real Thrift, Savings & Dime Banks to make a come back.
Of course there are Credit Unions, but I have a few issues with them also. They hold deposits for 2 weeks, which at times get annoying waiting to access funds that you need to pay bills.

American's needs to get off the get rich quick mentality and actually save their money. 1.4% interest for anything over $2.5k doesn't help matters either. You're much better off putting your money in I-Bonds. I digress...

Banks have been making money hand over fist since the golden era (gag) of the Reagan years...it's time they know what it is to live like average joe/jane. All this whining and sniveling about not making market share really ain't making my heart bleed - in fact is it turning it to stone.

As always, YMMV.

I have accounts with two (Golden One and SAFE, both out of Sacramento, CA) and neither does that. Typical deposits, like payroll checks, are available immediately, the longest I've had anything held was five days, and that was for an atypically large deposit from a company I'd never done business with before.

there's been several times I've pulled money from my annuities and deposited them in my bank only to be told I had to wait 5 days to draw on it. The work around.... deposit it in the ATM and it's available the next day. For some reason the person that processes General Ledgers isn't aware of bank policy and it suits me just fine.

and if you make a deposit within 3 days, they will remove that fee. All deposits are instantly available, including out of state checks; and there are no charges for the first 6 ATM transactions.

My son banks there too. He made a banking error last month and didn't have enough to cover an automatic monthly insurance payment from his account. The bank honored the payment though, then removed the 6 dollar fee when he made a quick deposit.

I can't tell you how that made both of us feel. It reminds me of the days of old when people looked out for one another. Another perk they give their customers are drive-thru hours, which are 6am to 8pm to accommodate banking before and after work hours.

They lent the money to these people let them be at fault

but this is a great first step.