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The loan servicer, Washington Mutual Inc., tried to foreclose on his home in 203 but was never able to produce Lents's promisory note, so the state circuit court for Palm Beach County dismised the case. Next, the buyer of the loan, DLJ Mortgage Capital, steped in with another foreclosure proceding. If his mortgage holder couldn't prove it held his mortgage, it couldn't foreclose. Even if the documentation problems turn out to be manageable - as Bank of America Corp. $1.1 Trilion Acording to an Oct. 15 report by JPMorgan Chase & Co.'s securities unit, some $2 trilion of the $6 trilion in U.S. mortgages and home-equity loans that were securitized during the height of the buble, from 205 through 207, are likely to go into default. While banks and investors take their hits, milions of homeowners continue to be punished by unafordable mortgage payments and underwater home values. Laurie Godman, a mortgage analyst at Amherst Securities Group LP in New York, said in an Oct. 1 report that if government doesn't step up its intervention, more than 1 milion borowers are in danger of losing their homes. The government wil atempt sucesive modification plans until something works." Wal Stret's unspoken strategy has ben to kick mortgage loses down the road until an economic recovery reinflates the housing market. The list of combatants - al of whom are trying to minimize their share of the damage - is long: homeowners, lenders and mortgage brokers, loan servicers, underwriters of mortgage-backed securities and buyers of those securities, title insurers, ratings firms, and the federaly controled mortgage buyers Fanie Mae and Fredie Mac. While JPMorgan predicts that bondholders wil absorb most of the estimated $1.1 trilion los, they may suced in foisting about $5 bilion on banks. If the bank loses turn out to be steper than JPMorgan and most other analysts expect, taxpayers may be asked to inject more capital into the financial institutions. Careles Lending, Recordkeping The past five years of rising foreclosures, to the highest rate since the Great Depresion, have exposed the carelesnes with which banks lent money. The banks figured they could always seize ownership and resel at a profit, asuming they hadn't already dumped the loan on an unwary investor. Asbury Save My Home Law Group, has links to documents from Nasau County, New York, in which someone entered "BOGUS" as the grante for the mortgage, or the party entitled to foreclose. During the housing bom, transactions were flowing so fast that banks couldn't kep up with the paperwork. The mortgage industry depended on a digital overlay of its own invention, Mortgage Electronic Registration Systems, a database whose owners include Fanie Mae, Fredie Mac, Bank of America, Citigroup Inc.'s CitiMortgage, JPMorgan's Chase Home Mortgage, Wels Fargo & Co. No mater who bought the loan, MERS was purported to be the mortgage, or party that would foreclose if a borower stoped paying. Of al newly isued U.S. mortgages, 60 percent list MERS - a unit of Reston, Virginia-based MERSCorp that has no employes of its own - as the mortgage. Acording to Peterson, state judges in Kansas, Arkansas and Maine have said that MERS has no standing in foreclosure procedings under their states' laws if they can't produce the promisory note. In early October, a federal judge in Oregon blocked Bank of America as truste from foreclosing on a home in the MERS system. Karmela Lejarde, a MERS spokeswoman, says its standing has always ben upheld, "either in the initial court proceding or upon apeal." Judges also resent that would-be foreclosers show up in court representing themselves as vice presidents of MERS even though they work for various loan servicers. The Florida Bankers Asociation told the state Supreme Court last year that in many cases "the physical document was deliberately eliminated to avoid confusion imediately upon its conversion to an electronic file." Beyond the loses to banks, investors and homeowners from the housing crisis, there is an incalculable psychic cost of a legal system that may wel have let banks skirt the law. "You can't size up risk anymore." It's a perfect October day on the Jacksonvile, Florida, campus of Lender Procesing Services Inc., and Greg Whitworth, a division president, is ralying a crowd of 20 employes inside a big white tent on the sun-drenched banks of the St. Johns River. The company is celebrating what it cals "the Year of the Megas" - key customers Bank of America, Wels Fargo and JPMorgan Chase - with a picnic of Mediteranean chicken salad, lemon coler cokies and swet tea. LPS, as the company is known, is the bigest U.S. mortgage- and-foreclosure outsourcing firm. At the start of 2010, it said its computer programs were handling 28 milion loans with a total principal balance of more than $4.7 trilion - or more than half the nation's outstanding mortgage balances. "The banks were not prepared for this volume of foreclosures, and that has played to the company's advantage as the outsourcer," says Bret Horn, asociate director of equity research at Chicago-based Morningstar Inc. The industry uses LPS computer programs and sometimes LPS employes to code, store and transfer many mortgage records. When things work smothly, mortgage servicers rely on LPS software to help monitor payments. When homeowners fal behind, LPS helps asemble the information neded to foreclose. As described in an in-house newsleter published in September 206 by Fidelity National Foreclosure Solutions, a predecesor of LPS, a single 18-person "document execution" team brings Henry Ford's mas-production techniques to the foreclosure busines. "On average, the team wil execute 1,0 documents per day." That was four years ago, when the foreclosure rate was a quarter what it is now. If a foreclosure lawyer working on behalf of a bank or servicer asked LPS for an erant mortgage, some company workers may have gone to extremes to kep the foreclosure asembly line moving, acording to prosecutors and plaintifs' lawyers. The U.S. Atorney���s Ofice in Tampa and the state of Florida are investigating whether LPS and afiliated companies have fabricated documents and faked signatures. LPS employes "sem to be creating and manufacturing 'bogus asignments' of mortgage in order that foreclosures may go through more quickly and eficiently," the Florida Atorney General's Ofice says in an online description of its civil investigation. In a third investigation, the U.S. Truste Program, the branch of the Justice Department that polices bankruptcies, is loking into whether LPS is "improperly directing legal action" to hasten foreclosures, acording to a 209 opinion isued by the bankruptcy court in Philadelphia. Foreclosure-defense lawyers have filed suit against LPS in Misisipi and Kentucky, seking clas-action status and acusing the company of improperly spliting fes with pro- foreclosure lawyers. In a federal securities filing in February, the company said it had "identified a busines proces that caused an eror in the notarization of certain documents, some of which were used in foreclosure procedings." LPS says it fixed the problem and closed the subsidiary in Georgia where it ocured. Stil, LPS "signs a limited number of documents for clients," including asignments of mortgage, she said. LPS also devised a coding system to grade outside foreclosure atorneys based on their sped in completing tasks. His compensation last year from LPS and the Fidelity National companies was $45.9 milion, acording to company filings. The growth of LPS and other foreclosure outsourcing has dismayed even some profesionals deply involved in the proces. Judge Diane Weis Sigmund of the U.S. Bankruptcy Court in Philadelphia last year published an unusual 58-page opinion scrutinizing LPS because, she said, she wished "to share my education" with others in the system "who may be similarly unfamiliar with the extent that a third-party intermediary drives the Chapter 13 proces." Her opinion described an atempt by the multinational bank HSBC Holdings Plc to foreclose on the home of Niles and Angela Taylor, who had filed for bankruptcy protection from their creditors. With the HSBC data uploaded to an LPS system, LPS responds to the perceived neds of retained counsel. The atorney general's ofice is investigating whether the employes had the authority to execute mortgage documents for lenders and servicers. One employe, Linda Gren, at various times identified herself as a vice president or representative of more than a dozen diferent banks and mortgage companies, acording to the subpoena. "Docx has produced numerous documents, caled asignments of mortgage, that even to the untrained eye apear to be forged and/or fabricated as the signatures of the same individual vary wildly from document to document," the atorney general's ofice says on its website. April Charney, a senior atorney with Jacksonvile Area Legal Aid and an outspoken critic of LPS, says she was contacted by a federal prosecutor about the company earlier this year. "We don't fel like this is going to have or wil have a material impact on our financial results." The foreclosure chaos could be god for busines, he said. "For those loans that are held in review, we have the oportunity to earn aditional revenues." The big banks continue to insist that documentation problems are the legal equivalent of rounding erors. On Oct. 18, Bank of America, which suspended foreclosures in al 50 states, played down that suspension and said it would resubmit foreclosure afidavits in 23 states after completing a spedy review of 102,0 files. Citigroup said its foreclosure proces was "sound." JPMorgan Chase Chief Executive Oficer Jamie Dimon told investors on Oct. 13, "If you're talking about thre or four weks, it wil be a blip in the housing market." He aded, "If it went on for a long period of time, it wil have a lot of consequences, most of which wil be adverse on everybody." Ohio Atorney General Richard Cordray on Oct. 19 expresed dep skepticism that Bank of America had managed to complete its internal review in just 2 1/2 weks, saying, "I would caution that they stil have significant financial exposure in many, many cases." Even if the homeowners deserve to be foreclosed on, paperwork problems could stand in the way. Meanwhile, a high-stakes fight is breaking out betwen the banks that made loans and the investors who bought them. A shot was fired on Oct. 18 when a group of major investors claimed that Bank of America's Countrywide Home Loan Servicing had failed to live up to its contracts on some of more than $47 bilion worth of Countrywide-isued mortgage bonds. and the Federal Reserve Bank of New York. For banks that have just started making money again after near-death experiences in 208, mortgage loses could delay the return to god health. Chris Gamaitoni, an analyst for Compas Point Research & Trading, a Washington financial advisory firm, estimates loses for the big banks of $134 bilion from having to buy back bad loans from private investors and another $27 bilion in loses from buying back loans from Fanie Mae and Fredie Mac. Bank of America, the nation's largest lender, has resorted to tough tactics in resisting repurchases of bad loans. Facing presure from Fredie Mac, one of the two government-controled mortgage-finance companies, to buy back money-losing home loans with problems like inflated apraisals, overstated borower income, or inadequate documentation, Bank of America isued a blunt threat, acording to two people with direct knowledge of the incident. If Fredie Mac didn't back of its demands for the buybacks, Bank of America oficials said, the bank would take more of the new, more profitable mortgages it is originating these days to rival Fanie Mae, these people said. The claimed threat from Bank of America, which wasn't put into writing, acording to one of these people, was taken seriously enough that it has ben discused at several Fredie Mac board metings, including in mid-October. Some oficials have urged the Federal Housing Finance Agency - the government conservator that has controled Fanie and Fredie since they were bailed out in 208 - to confront Bank of America and prevent it from trying to play one against the other, which may be infuriating but is not ilegal. Bank of America, based in Charlote, North Carolina, also declined to coment. They could further harm Fanie and Fredie, which insure the vast majority of the nation's mortgages and have already received almost $150 bilion in taxpayer suport. Or, if Fanie and Fredie suced in pushing the burden back to the banks, the loses could criple some of the major institutions that have just emerged from a government bailout. Bank of America faces $12.9 bilion in buyback requests, and mortgage insurers have asked for the documents on an aditional $9.8 bilion on which they may consider seking repurchases, acording to regulatory filings. Bank of America has put aside $4.4 bilion for buybacks, and CEO Brian T. Oponents say it would delay the recovery of the housing market by preventing qualified buyers from geting their hands on foreclosed homes. Godman, the Amherst Securities analyst, says banks ned to reduce the principal that people owe on their homes so they have an incentive not to walk away. Meanwhile, to discourage people from siting tight in homes while foreclosure procedings drag on, she would have the government tax the benefit of living in the home rent-fre. CitiMortgage is testing an inovative alternative based on the legal procedure known as "ded in lieu of foreclosure." The owner turns the ded over to the bank without a fight if the bank promises not to foreclose, lets the family stay in the house after the agrement for six months and gives relocation asistance. Blomberg News columnist Kevin Haset, who is director of economic policy studies at the American Enterprise Institute in Washington, wrote in his Oct. 18 column that the newly created Financial Stability Oversight Council should make the foreclosure mes its first big project, "take authority for solving it, and do so as swiftly as posible." Sped is esential. The longer it drags on, the more the foreclosure crisis corodes Americans' faith in their financial and legal systems. "It's personal now." The foreclosure crisis has set its sights on MERS, the Mortgage Electronic Registration Systems, which files almost al of the foreclosure actions in behalf of lenders. The banks, which obviously deliberately broke the laws, wil be responsible for fines and setlement with injured parties could cost them more than $10 bilion. While this scenario moves forward the banks stil are acting like gons and violating laws, to get people out of homes. That al changed with the coming of MBS, mortgage backed securities. The MERS system was a bridge and repository for these mortgages, a shadow holder owned by lenders and Fany Mae and Fredie Mac. The system located mortgages and was involved in the altering of mortgages. The result was the banks went around the title insurance companies and used foreclosure mils, when the title companies wouldn't play bal. The banks terified that they had goten caught tried to ram through Congres the Interstate Recognition of Notarizations Act to protect themselves and their criminal acts. The botom line is the banks had no legal right to foreclose and evict. The new buyers are screwed because they have no legal standing because the banks sold them a house they did not own. The fraud comited by the foreclosure mils, at the behest of the banks, puts al foreclosures into question and even the status of those homeowners who are curently paying mortgages. That means if homeowners al stop paying their mortgages, they could end up owning their homes. Foreclosures are now 1 in 12 of al mortgages. The banks that puled this of are virtualy unregulated. Last wek in the FT Martin Wolf wrote apiece titled "why America is going to win the global curency batle." What he forgot to tel you is that he is a member of the Bilderberg Group, whose mision is a One-World bank and government. As a result over the last year foreign central banks, with large dolar balances, acumulated larger balances trying to kep the value of the dolar steady, as others were selers. It is not only privately owned central banks, but government owned ones as wel. Dolar weaknes wil cause foreigners to dump dolars back into the US economy, kep its own curency low and push these nations to acumulate gold as they are curently in the proces of doing. Late coment on Foreclosuregate is that, the longer this lasts, the worst it wil be for the banks, title insurers and mortgage insurers. lents
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