In many foreclosure cases, it’s usually clear that the homeowner did not pay the mortgage. Sometimes there are reasonable explanations for this such as the borrower’s inability to identify who to pay the mortgage to. (Remember that as of May 2009, the lender is required to provide to borrower an Assignment of Mortgage under the Federal Truth in Lending Act…The lender’s failure to do so could give rise to a real defense to foreclosure, an issue we’re currently researching, but that’s a whole ‘nuther blog.)
Who Has a Right To Foreclosure on a Mortgage?
If you borrowed from Downtown Bank and didn’t pay, it would be clear they have a right to foreclose. In the current Alice in Wonderland, Acid Trip environment of frakenstein lenders and shadowy ill-defined foreclosing plaintiffs, it’s very difficult just who is foreclosing and even more difficult to figure out who is entitled to be paid.
A typical foreclosing Plaintiff name may be (1)US Bank, as (2)trustee for (3)The IXIS 2006-E Mortgage Trust, (4)Certificateholders. I’ve placed those numbers in parenthesis because there are at least four different parties listed in that name. Now just who among them is entitled to foreclose and even after you answer that question which among them will receive the actual proceeds of a foreclosure sale? The fact of the matter is no-one has any idea. By and large judges don’t care and quite frankly even the most sophisticated foreclosure defense attorneys are beginning to ask these questions. The questions are even more important when the foreclosing Plaintiffs are a servicer like Aurora Loan Servicing or Litton Loan Servicing. Is anyone policing these companies to see if the investors in the pools are actually receiving any of the proceeds of foreclosures or modifications? The first step in answering any of these important questions is to force plaintiffs to plead the capacity of each party, then in discovery force them to conclusively establish the relationship among all parties. Capacity is a winner of an issue even at the Motion to Dismiss stage and even in front of the most hostile judge…this is especially the case in complicated securitized mortgage cases.
What if The Loans Really Are Paid?
Beyond those issues, please consider some very thought provoking questions presented by a very astute reader of this blog. It’s very complex stuff, but it all boils down to do we have any faith that the well-connected powers that put all this in play have not crafted themselves an “out” strategy that still has them winning? If you can’t answer that question do you wonder why the lenders won’t accept reasonable short sales? Do you wonder why there are virtually no mortgage modifications being completed? Read on and consider:
The tranche structure of the entire pool has numerous ” credit enhancements” which layer the risk from bottom to top. Once a lower level dies out the certificates then become dead and uncollectable.
If each of the lower level tranches die out and losses on those investments are claimed by the individuals would that loss claim with the IRS essentially wipe out percentages of the obligation as well?
If not why not?
These were tax exemption vehicles that were propped up through lies and negligence for the sake of the bankers.
When they fell apart the IRS let the bankers slide. What about the rest of America?
Would it be possible to file an FOIA with the IRS as to what losses have been claimed on the pools to verify if the debt has been wiped out?
My pool has taken about an 800M loss of the 2.3B total invested so would I not automatically be entitled to a 25% reduction in principle for the losses claimed?
How about the third party payments such as CDS contracts? That would continue the income stream as long as the ratings are below AAA for the Certificates while the servicer steals the house and the money from the REO liquidation.
I have read that under IRC 860 that since the pool is static and can only accept exact replacement mortgages, that the REO money is actually to be invested by the servicer or master servicer since to pay the entire balance down would void the REMIC status.
Would that mean that all of the loans that had servicing rights transferred to say JPM(I think they received servicing rights of about 468B in WAMU loans on top of the free 191B in owned loans) give JPM the right to the REO and proceeds while the tax payer backed Default Swaps keep the income stream going to the top level tranches.
Now maybe we can start to see why JPM and others have helped create LPS to keep the ugly theft machine rolling.
Oh and it helps when the FDIC gives you a 1.5-2B litigation slush fund to keep LPS churning out the fraud.
I wonder how much of that goes to the judicial campaign contributions?
I wouldn’t mind if I got a 1.5B dollar slush fund to fight back with. How ’bout you Matt? Think we could use that for a good legal team?
Maybe Obama would give us some TARP money that we could use to take care of his electorate?