Thursday, October 21, 2010

Mulligan Mortgages—The Banks’ Only Way Out

“Would you give this man a mulligan?”
Photo by Mark Pain of the Daily Mail. The man with the cigar was an actual bystander.

We’ve seen this movie so many times already, we can practically recite the ending: The Too Big To Fail banks are once again in the middle of another crisis—another mortgage crisis—that’s breaking like a bad rash. And this new scandal has so many moving parts!
Robo-signings!—Foreclosure mills!—Forged documents!—Attorneys General huffing and puffing!—Too Big To Fail banks tottering!—Foreclosures suspended!—Bond holders freaking out!—Credit default swaps shooting the moon!—
Aaaaaahhhh!!!!! Again. 
As I explained in a long piece discussing the current Mortgage Messall of these different issues are all symptoms of the same disease: The Mortgage Backed Securities—America’s Herpes: The gift that just keeps on oozing. 

Because of how the MBS’s were structured, there was an inherent ambiguity as to who actually held the mortgage notes. This is crucial, because only the note-holder has standing in court to foreclose and evict a delinquent homeowner. No tickee, no laundry applies doubly to mortgage loans: No notee, no standing.
The banks, MERS and everyone else in the sausage factory that created the MBS’s were sloppy and/or greedy, which led to them failing to cross the I’s and dot the T’s. (Did you catch that? Just checking.)
They realized this screw-up during the current Global Depression. In order to foreclose and evict the massive number of delinquent homeowners, the banks hired “foreclosure mills”—bottom-feeding law firms that specialized in foreclosures. 
Since the documentation was either hinky or lost, the foreclosure mills routinely and systematically fabricated and falsified documents: The “robo-signing” scandal is a part of this part of the Mortgage Mess scandal—the thing is as complicated as a Rube Goldberg device on acid. (Yves Smith at naked capitalism has been all over this; the woman should get the Pulitzer—not just for her reporting, but for keeping it all straight in her head!)
Anyway: In the piece I wrote, I argued that we could quite likely be seeing this Mortgage Mess turn into a Foreclosure Crisis, whereby homeowners refuse to pay their mortgages, let alone accept a foreclosure, unless and until the banks produces the note of their mortgage loan. Show Me The Note, Mo-Fo!!, could become the rallying cry of this homeowner revolt. 
Since the chain-of-title on many of these notes is broken because of the process that created the Mortgage Backed Securities, and because in many cases the foreclosure mills irretrievably tainted so much of the documentation, the litigation could draw out for years, not to mention multiply like a cancer. 
This of course would affect Mortgage Backed Securities. After all, MBS’s got their moniker for a reason: Because they’re backed by mortgages. If the bundled mortgage loan notes that created the Mortgage Backed Securities are no longer legally tethered to them, then the MBS are secured by nothing but air. 
All the TBTF banks still have boatloads MBS’s on their balance sheets. There are literally tons of Credit Default Swaps that were written on these MBS’s. So you see, this Mortgage Mess could well get the banks to teetering and tottering once again—it could be the trigger for Global Financial Crisis, Part Duh!: Bigger!—Wider!—Uncut!
Like I said: A movie we’ve seen before, and whose sordid ending—TARP-2 anybody? Maiden Lane CCLXVIII?—we can very well predict. 
In the zoo called Washington, everybody’s making loud noises about this blossoming crisis—but nobody in that God-forsaken town is coming up with a practical solution that would actually work. 
The pundits are doing no better: Paul Krugman—who advocated a housing bubble back in 2002—can hardly contain his glee at the Mortgage Mess, even as he condescendingly tut-tuts about the bad banksters who caused it. 
From the Department of I’m-So-Not-Surprised: The solution Krugman proposed in a New York Times op-ed is a vague lunge at giving “mortgage counselors and other public entities the power to modify troubled loans directly.” In other words, he’s arguing for more government intervention, while blithely ignoring the fact that government regulators—Treasury, the Fed, the SEC, etc.—helped create this mess by not doing their jobs in the first place. 
They didn’t regulate before—so now according to Krugman, they’re gonna get bright magic and Solomonic wisdom, and all of a sudden do their jobs right? Puta huev√≥n, please . . . 
(And please don’t bother telling me that Krugman’s the smartest economist in the world. That’s like saying, “He’s the smartest moron in the world”: Impressive, until you stop to consider that a bright 12 year-old makes more sense than him.) 
From the Department of I’m-So-Even-Less-Surprised: The Left might be putting out stupid ideas, but the Right is putting out no ideas. 
Anyway, it’s an open secret that the politicians on the Right are all in the banksters’ collective back-pocket. Who do you think tried to make law the Interstate Recognition of Notarizations Act, which would essentially have made it legal for banks to commit perjury in order to foreclosure on a homeowner? 
Talk about violating the Rule of Law! By passing that act (via a cowardly voice vote, so as to collectively hide their hand), the Republican senators and congressmen didn’t just try to violate the Rule of Law—they tried to gang-bang it, murder it, and leave it in a heap by the side of the road!
The American political Right is corrupt—beholden to the banksters and the money men. There’s really no other way to look at it.  
Whatever the politicians might say, no solution is going to come out of Washington. Intellectually, both parties are exhausted—they have no new ideas. The only idea both parties cling to is Spend Money!—and that’s no idea at all. 
Washington can’t throw money at the TBTF banks, to fix this problem: Politically, another bailout of the banks is untenable—I think. Actually, I’m not sure. In any other country, I’d say with confidence that another bank bailout would cause widespread rioting. But with the fat, slovenly, slatternly, pathetic American people? Placid as cud-chewing cows, peacefully going through Temple Grandin’s curving contraptions, on their way to their slaughter without a thought in their pretty little bovine heads . . .
Come to think of it, another bank bailout might fly.
But while the pundits and political riff-raff hee-haw and trumpet like donkeys and elephants, but with none of the sense of those fine animals—lo and behold!—the banks themselves are quietly fixing the problem. 
They’re doing it through Mulligan Mortgages. 
I got a first sense of it with the story of Brian and Ilsa—my retired friends in the Southwest, whose home had gone underwater. I wrote about them here, as well as here
Brian and Ilsa qualified under HAMP, the Home Affordable Modification Program—yet though they were at first allowed to modify their loan, they had been later denied the benefits of the program after three months. 
HAMP in many ways has turned out to be a scam for the banks and servicers to make money off the Federal government: For every mortgage accepted into the HAMP, the banks and servicers received a fee from the government. But after 90 days, the banks and servicers could claim that a person did not qualify for HAMP—and therefore exclude them from the program, while keeping the Federal government fee. 
Brian and Ilsa were caught in the middle of this HAMP scam, when they decided to demand to see the note on their home loan—this nice suburban couple said, Show Me The Note, Mo-Fo!! 
Suddenly, frantically, a loan officer from their bank appeared, and magically, their problems were solved: They qualified, they qualified! And soon, they were signing a new mortgage loan—and a new note—with a new mortgage payment close to $700 a month less than before the loan modification. 
I wrote about this—and a flood of other people wrote telling me similar stories. 
For various reasons—occasionally for no reason at all, just out of the blue—the TBTF bank would suddenly expedite a mortgage refinance. The principal would remain the same, but there would be a substantial decrease in their monthly mortgage payment. 
One of these stories came by way of Lars Larson, the terrific radio host in Portland, Oregon. A listener of his, Tim Hope, had had the same thing happen with his mother’s loan. As he told it: “No costs, simply fill out the paperwork (I think they offered to do everything), and ‘presto’ new mortgage and new lower monthly payment (I believe by several hundred [dollars] — $200, $300 — per month).”
Tim Hope’s story wasn’t exceptional, but he did come up with a wonderful name for it: Mulligan Mortgage
The clever turn of phrase captures it exactly: A mulligan is a golf term. It’s when your first shot pretty much sucked—so your golf partner lets you take another shot, with no penalty. It’s the gentlemanly thing to do, as it were. A way to keep a lazy Sunday afternoon game interesting. 
Mulligan Mortgages seem to be how the TBTF banks are keeping their own game alive: They seem to be chasing mortgage holders—whether in default or not—and offering them an expedited refinance of their mortgage loan. 
In order to convince homeowners to sign on the line which is dotted, the banks have to give them something: What they give them is lowered monthly payments of at least a couple of hundred dollars a month. The banks can offer this without touching the principal of the loan by either refinancing the mortgage at a lower interest rate, or a longer term of repayment, or usually both. 
In other words, though the homeowner might still be underwater after signing the Mulligan Mortgage, they’ll still get a reduction in their monthly mortgage payment. 
Now there are several advantages to these Mulligan Mortgages: 
From the banks’ point of view, the Mulligans automatically fix the chain-of-title issue by creating a new note. The whole problem with the current scandal is that a lot of home loan notes were either lost, destroyed or mishandled, or else irremediably tainted by foreclosure mills’ unsavory business practices. 
But all of that goes away, with a new note courtesy of the Mulligans. 
(There are, of course, a whole host of administrative and legal steps that must be followed, in order for this to happen. In this post as well as in my previous post on the Mortgage Mess, I skipped a lot of these legal and administrative steps for two simple reasons: One, they add no insight to the issues at hand, and in fact clutter up the view of the overall situation; and two, the administrative and legal steps are often different in each state.)
A new note by way of a Mulligan Mortgage clears up the issue of standing, which would allow a bank to foreclose on a delinquent borrower. So once a homeowner signs a Mulligan, the bank will have clear standing to foreclose, if the homeowner becomes delinquent. 
For bond holders of Mortgage Backed Securities, Mulligan Mortgages are also a fine idea: By re-establishing the chain of title, MBS holders are once again holding secured bonds—they’re not holding paper which might well be worth nothing. 
This is a non-trivial issue: Considering how PIMCO and the New York Fed started making noises yesterday about the bonds Bank of America sold, I’d say there are a lot of bond holders and CDS underwriters who are very nervous about how this new outbreak of America’s Herpes will affect their MBS positions. 
Mulligan Mortgages are the unguent that will keep bond holders happy—until they realize the cost that they’re payng (I’ll get to this in a moment). 
These Mulligans are also great from the Federal Reserve’s and the Obama administration’s point of view: Mulligan Mortgages mean people will pay less for their home mortgages, and therefore have more disposable income. There’ll be a bump in consumer spending. 
Mulligan Mortgages, of course, can’t fix REO’s that may or may not have been foreclosed illegally—but they’ll get the rest of the housing market back on track. 
But it’s not all sweetness and light—there are some issues with Mulligan Mortgages:
First of all—and most obvious of all—the homeowners the TBTF banks are targeting for Mulligans are probably the very homeowners whose original note is lost or irretrievably ruined by someone in the sausage factory that created Mortgage Backed Securities. I’ll bet a buck to a nickel that they’re precisely the ones where the bank likely has no standing to foreclose. 
So the banks have to do the Mulligans quickly, before people get wise. Homeowners can’t be allowed to realize what the banks are up, or why. If homeowners understand fully why the banks are suddenly so nice to them, they’ll realize that they’ve got the banks by the short-hairs—and then they’ll realize that they can have their way with them, up to and including doing the Show Me The Note, Mo-Fo!! dance. If that happens, the banks are screwed. 
The second obvious issue is, Mulligans represent a severe hit to the TBTF banks’ revenues. 
How much of a hit? Nobody knows—at least not yet—because nobody knows how many mortgages are affected by the current Mortgage Mess. 
CoreLogic says there are something like 11 million underwater mortgages in the United States as of late August. The Wall Street Journal says about $154 billion worth of mortgage loans could be affected by the Mortgage Mess. 
We could extrapolate ‘til the cows come home, but simply put, there is no way to know how many mortgages might be getting a Mulligan. The TBTF banks are completely opaque, ever since the Fed basically rescinded sane accounting rules in March of 2009; when the banks officially turned into zombies. 
But any way you look at it, the Mortgage Mess—even with all the Mulligans needed to fix a lot of this mess—is going to take a bite out of revenues— 
—and not just on the balance sheets of the TBTF banks: On the MBS bond holders too. 
Nobody ever said Bill Gross was stupid: Regardless of how effective the Mulligans are, the Mortgage Backed Securities—and the CDS’s written on them—are all going to take a hit. That’s why PIMCO started making noises, trying to bully BofA into taking back the mortgage bonds: Even with the best solution to the Mortgage Mess, bond holders are going to take a forced haircut. Or a buzzcut, as the case may be. 
Since the Federal government really does not have the political will or inclination to go for yet another round of bank bailouts, and since the bond holders have the political muscle in this corrupt system to get their bacon saved (where’s all that bullshit talk about “capitalism’s creative destruction” now, huh?), it’ll be up to the Fed to make MBS bond holders whole—just like they did the last time. 
So although a lot of people are predicting that the Fed will start buying Treasuries when QE2 is anounced, I beg to differ: I think they’re going to load up on even more Mortgage Backed Securities. In fact, I think a big piece of QE2—maybe a trillion dollars’ worth—will be directed at Mortgage Backed Securities. And I think the Fed is going to pay top dollar for that garbage. 
I think the way the Fed is going to do it is, they’ll go for another round of Stealth Monetization: Buying MBS and other toxic assets off the banks for newly conjured cash, the banks then taking that cash and parking it in Treasuries, thereby funding the Federal government’s deficit. 
Because of the Currency Wars going on around the globe right now, I don’t think the Fed wants to be perceived as accelerating any weakness in the dollar. I think Bernanke and the Lollipop Gang at the Fed want to weaken the dollar, sure, but I don’t think they want the perception to linger that they are out-and-out trashing the dollar. 
Also, I don’t think Bernanke has the votes on the Federal Reserve Board anymore. I think a lot of Board members are discreetly coming to the conclusion that Benny Boy’s strategy of ZIRP, propping up assets, and extreme market liquidity, is a losing one. 
But they’ll be forced to vote in favor of a massive MBS buy, in order to keep the American Zombie banks on their feet. As predicted back in 2008 when they were saved rather than allowed to fail, the TBTF banks really have become “too big to fail”—because they’ve grown, like a cancer. 
So you see, it all goes back to the Mortgage Backed Securities. America’s herpes. See, the problem with herpes is, once you get it, you can never be cured. At best, you can alleviate the symptoms—but the disease is always there. 



  1. The only way the American people will stand for another round of big bank bailouts is if they get a slice - principal reductions. With enough printed money, everyone can be made happy!
    Credit for the first publication of the idea (I thought of it a few days ago) goes to Jim Willie -

    "In the end TARP-2 will pass with at least $500 billion in new big bank rescue aid, which will require the big banks to provide strong meaningful home loan balance reduction. The package will contain a provision to kick in, which will deliver another $500 billion upon other contingencies. The total $1 trillion bank aid package would cause a firestorm. A key provision to win over public support will be promises by the big banks to finally give home loan balance reductions, what the people demand. That will enable the American public to agree to the package, except one year later they will be shown more revolving doors and dead end corridors."

  2. I think the problem is far more systemic than just mortgage backed securities. The herpes goes to the heart of the system: central banking. This collapse isn't an accident. It's grand theft at a massive scale. They're taking the money and running away to their global banking cabal daddies. We will see some pretty nasty war soon. Then the world will be divvied up under just a handful of regional currencies. This is about power much less than it is about money. That is my anonymous opinion, anyway.

  3. GL,
    Your analysis has confirmed my suspicions. The creation of zombie banks and uber-zombie banks is part of the plan. So is the creation of zombie pension funds.

    There is a new banking reg in the hopper - elimination of the reserve requirement. Without the reserve requirement, it doesn't matter any more whether or not banks are solvent. The Fed can just keep buying up bank assets and the banks can just keep buying up treasury issues.

    Doing this establishes the mechanism by which the Fed can continue to routinely buy up all bank assets. Then the Fed will own all the income streams from all the bank generated financial instruments in the US. Watch for the cry for the Fed to do for the zombie pension funds what they are now doing for the zombie banks.

    When the economy turns, this means the income generated by those who create real wealth - the wage earner - will be pouring into the Fed coffers. It will be mega mucho dinero.

    Pretty nifty, huh? It remains to be seen if the public will become aware of the real endgame and stop it from happening.


  4. GL,

    It will be interesting to see how this plays out. While I agree Congress won't approve another bailout, I'm not so sure QE2 will find its way to the MBS market in a big way.

    Let's assume the WSJ is right by half, and the real MBS problem in 300 billion hit to the banks revenues. So what? Considering what they are earning that's nothing. The greatest fix to this problem in targeting ALL of QE2 to Treasuries--the 5-7 year variety they've been doing will likely go a little longer to 7-10.

    You see, if they can get the 30 year conforming fixed rate down to 3%, you will see refi's go ballistic (putting more money into the pockets of note holders) and reseting the chain of note mess triggered by the sausage factory.

    In comparision, bailing out bank revenues and MBS holders seems lame, no? SO what, Bill Gross eats some crow along with slightly smaller bank profits. Even BAC said it wasn't as big as deal as it's being made out to be? So is it the CDS market that would need to be saved by QE2 going to MBS?

    I don't know for sure. But I know one thing for sure, if QE2 isn't a mother of easing the global economy will simply crash faster than the postponmnet game we've been on.

  5. re: "At best, you can alleviate the symptoms—but the disease is always there."

    Unless a cure is found.....and I suspect that cure starts with ending fictional reserve lending.

  6. Maybe they'll just decide to take it all back to the period of "i give you a chicken you give me 10pounds of potatoes", start from zero, its just too messy.

    I admit I know next to nothing about economy and from what I read, I wish I knew nothing at all. It was such a simple idea and now you have people making money from thin air, great system we've created...

    Thanks for the reading though, you've got word.

    Andre, a hope to be ignorant 22-year old

    PS. fear not, you're not the only country where a 2nd bank bail out would fly. I'm from Portugal, a bail out was made here too when it was all coming to shit and now we still see stuff happening that I'm too shy to share, but rioting: 0.

  7. So the choices are, Stiff the banks & walk away with the property scot-free, or,

    Negotiate a new mortgage.

    The first will require a quiet title filing. Which in theory should be successful, but which may, at any time in the future, be challenged for any number of reasons.

    Negotiating a new mortgage has the advantage that the two main parties, you & the bank, have come to terms & even if the result smells, the two most likely parties to challenge the deal are already partners to it. Permanent peace of mind.

    On a long-term basis, I think I like No. 2 better.

    But as long as No. 1 hangs in the air, then I am free to dictate to the bank.

    Such as, 1 or 0 percent interest. 50% reduction in principal - if not 60 or 70. What are they going to do? Present me with the original note? Take their chances on a future maybe?

    Properly defrauded, I expect the banks to turn about and re-securitize the new mortgage. The're bust, they gotta make money on this somehow, and, note carefully, securitization may be dumb, but it ain't illegal. MERS all over again.

  8. I wonder how many shares of BAC pimco went short before pressing for the put back?

    So after someone does a mulligan mortgage with BAC what happens if some other entity shows up with the real note and wants to foreclose?

  9. Why on earth would an underwater McMansion dweller take a Mulligan and sign a NEW note for more than the house is actually worth? Prior to signing said note, the McMansion dweller can walk away from the house having lost only his equity currently in it. Sign a new note, and you are on the hook for that entire amount. Pardon my bluntness, but your friends Brian and Ilsa are complete suckers if they signed a new note.


  10. Congress has the power to abolish the Federal Reserve System and thus destroy the private credit system. However, the people have it within their power to strip the Fed of its powers, rescind private credit and get the banksters to pay off the National Debt should Congress fail to act.
    The key to all this is 12 USC 411, which declares that Federal Reserve notes shall be redeemed in lawful money at any Federal Reserve bank. Lawful money is defined as all the coins, notes, bills, bonds and securities of the United States: 'Julliard v. Greenman' 110 U.S. 421, 448 (1884); whereas public money is the lawful money declared by Congress as a legal tender for debts (31 USC 5103); 524 F.2d 629 (1974).
    Anyone can present Federal Reserve notes to any Federal Reserve bank and demand redemption in public money -- i.e., legal tender United States notes and coins. A Federal Reserve note is a fixed obligation or evidence of indebtedness which pledges redemption (12 USC 411) in public money to the note holder.
    The Fed maintains a ready supply of United States notes in hundred dollar denominations for redemption purposes should it be required, and coins are available to satisfy claims for smaller amounts. However, should the general public decide to redeem large amounts of private credit for public money, a financial melt-down within the Fed would quickly occur.
    The process works like this. Suppose $1000 in Federal Reserve notes are presented for redemption in public money. To raise $1000 in public money the Fed must surrender U.S. Bonds in that amount to the Treasury in exchange for the public money demanded (assuming that the Fed had no public money on hand). In so doing $1000 of the National Debt would be paid off by the Fed and thus canceled.

  11. Hi Gonzalo,
    I have only been reading your articles for a few weeks but I appreciate your take on things. I do wish you would respond to the constructive discussion occasionally. The folks over at interact with their comments to make for some good, thought provoking reading....sometimes. :-)

    I don't think the Mulligan sounds like a good idea unless the home owner intends to stay in the home for decades.

    In fact, I suspect that many of the deals made in the short term will be in the foreclosure mill again in the next year or two as the economy continues to unwind.

    I have no doubt that if I were faced with the situation I'd go jingle mail and Forrest Gump...don't own anything you can rent....until the real recovery starts somewhere off over the horizon.
    -Jahfre Fire Eater

  12. Dave from Maryland seems to be thinking along the same lines as me...
    As I understand it, as a result of all the shoddy paper-work and short-cuts, nobody can establish legal title to a particular house - not the bank, not the MBS holder, not even the people living in the house. So how can the occupants and a bank create a document establishing legal title to said house when neither party could prove legal standing beforehand? It sounds like more fraud to me. What would stop them cooking up some documents to establish title to the neighbour's house?

  13. You like the bash the republicans but the fact of the matter is that both parties are bought and paid for by the bankers. The only reason why Obama used a pocket veto against the Notarization Act is that it allows him to delay the vote until after the November 2 elections, in which case I suspect Congress (Dems and Repubs) will try to once again ram it down our throat. Just go to to find out more.

  14. I have a dream

    I dream we will get a president like Ron Paul, who will conspire with the other world leaders to shut down the central banks once and for all.

    I dream that they will burn them all to the ground and put all the central bankers and their ilk in prison.

    I have a dream that might become reality!

  15. the FED was given unlimited powers by the CONgress. they can and will do anything and everything ..and damn any public discoarse or dislike. the FED must be abolished and they and this government will not go easily or gently.


    clean em load em stack em be prepared

  16. "For every mortgage accepted into the HAMP, the banks and servicers received a fee from the government. But after 90 days, the banks and servicers could claim that a person did not qualify for HAMP—and therefore exclude them from the program, while keeping the Federal government fee."

    A new F-R-A-U-D!: HAMP scam. Financial engineering at its finest.

    GL, it's interesting that you conclude that FED will purchase MBS securities with the QE2.

    Lindsay Williams, who claims a direct source on the "elite" pulling strings behind the curtain, also claimed yesterday (on Alex Jones Show,, yesterday's stream is also available on youtube) that the end game includes FED (which is a private entity owned by the big banks) purchasing ALL of the MBS paper with newly created money.

    This would make, according to Williams, americans neo-serfs, who work for the elite-controlled government and pay for the privilege of inhabiting the elite's land.

  17. the problems we have as a country after all is debated as in dems and rinos will be for the citizens to mint new coins with the following values
    1 .38
    2 .40
    3 .45
    4 3.06
    4 7.6239

    may GOD help us

  18. Times up...check mate on John Doe.

    KATIE BAR THE DOOR. Its 2 minutes to midnight !!!

  19. The refi/mulligan does not apply unless:
    1. The house is appraised at 10% to 20% more than the loan
    2. The borrower has income to service the loan
    3. the FICO score is OK

    Otherwise, there is no refi.

    I doubt many of the properties and borrowers satisfy the conditions.

    Many states have nonrecourse loan laws that make it much more advisable to simply walk away.

    Has no one ever told you these facts?

  20. Well, America Let's Face It:
    We're far worse off than bankrupt, because under bankruptcy we could avoid national debt repayments but the Fed./Treasury doesn't want that to happen do they, because we remain on their hooks for eternal debt repayments, as additional debt loads are being foisted upon future generations as well.
    Federal Reserve, I Owe You Nothings, are not representative of Constitutional money as found in article 1; section 10 calling for gold and silver coin only in lieu of payment of debts. We need our own American Treasury coined money which the Federal Reserve could never provide.
    Our country will not rest; until there's headlines in our paers that read: "The Fed Is Dead!" The Frankinsteine Monster Trojan Horse no longer rides hurd on our land nor its' wounderful peoples. End Congress's dependency on the Fed. and the Fed's enabling of Congress to keep US in the shakles of their debts through deficit spending etc. End it now!!

  21. Mulligan mortgages can never work because as stupid as most Americans are about money, they will be suspicious about banks contacting them about new mortgage workouts after the old ones were stonewalled.
    I think another 2-4 weeks of Foreclosuregate making headlines will put your idea to rest with regards to the general public going for these refi, assuming the Feds dont get behind this. HAMP1 was a failure. This is HAMP2. There is truth to the idea previously discussed that refis require you not to be permanently upside down. If you dont have a job how can the refi be done?
    A more likely scenario is the Fed printing QE 'n' money to cover the gigantic losses on a perpetual basis, covertly.
    Politicians are out of the loop. At some point it ends, and the herpes metastasizes to Hospicecare.

  22. Banks are seldom unable to produce the note. Unless I'm "unusual" the 4 note-slicers that "serviced" my 3 yr. Alt A had impeccable paperwork (I reviewed each turnover of the note with some scrutiny, to try to see if I could unwind any piece of it, and could find no flaws).
    In the final analysis, the risk will be mitigated by the taxpayer. Ultimately, the property owner will get the shaft and the banks will be bailed out.

    So ... "Meet the Homeusers" a typical family like mine, and hear about how their American Dream unfolds.

  23. "Houston, we have a problem." the problem isn't the MBS securities, the fraud by the banks,and the corruption in Government.the problem lies in the Federal Reserve itself which is neither a Federal Institution nor a reserve of much of anything. it is however the issuer of the US Governments currency and supplier of endless amounts of money the politicians want to spend. this is a private institution owned and controlled by FOREIGN banks. why would FOREIGN banks care about the value of the American dollar? the answer, they don't.

  24. Anon
    We meet all these conditions AND have a mortgage with gmac that has a min# from 2003
    We have asked the bank to produce the note.
    Any recommendations?

  25. Interstate Recognition of Notarizations Act Round one in a winner takes all knock-out bout.
    Round Two - begins after election. It will be a brief, debateless round, whereby the rules of the game are summarily changed by the FED referee.
    No use getting the audience involved because if you give them the illusion of a lil' power they may rush in the ring and take out the ref.....So, at the end of round two it will be announced that Freddie and Fannie both dressed in sexy bikinis will purchase all mortgages in doubt and problem solved.
    The fight is over - everybody's happy - That's until the audience realizes that the prices for the next fight will cost 50% more due to the demands of the new ultimate fighting champ, China, demanding more of a cut in the proceeds to show off it's awesome choke hold on the Japanese challenger.

  26. This is completely off topic, but what amazing and thought provoking comments your posts get, Gonzalo. If ever I need a dose of intriguing commentary and you haven't posted, I can just catch up on comments.

  27. Gonzalo,

    Have you read Catherine Austin Fitts? If not, I recommend you start with and follow the embedded links.

    As for the Mulligan mortgages, I think you may be misinterpreting their purpose. I believe they are meant to clean up the paperwork, yes, but then the left hook comes in the form of foreclosure. Go read what mstopa wrote about how the banks are duping homeowners with these loan mods, which include waivers of foreclosure defense. This means that when the bank chooses to foreclose, under any pretext at all, the homeowners have signed away their right to challenge the foreclosure.

    Some of us are coming to believe that the foreclosures will go forward, because they are necessary to cover up the probable fact that other entities took out multiple mortgages on many peoples' homes, for the cash; the phantom loans were sold to FNMA, which then takes the losses. As William K. Black wrote at HuffPo: "Foreclosure fraud is the only thing standing between the banks and Armageddon."

  28. "But they’ll (FED)be forced to vote in favor of a massive MBS buy, in order to keep the American Zombie banks on their feet. As predicted back in 2008 when they were saved rather than allowed to fail, the TBTF banks really have become “too big to fail”—because they’ve grown, like a cancer.

    I agree with your assessment 100%. The FED is under no jurisdiction, has no accountability to the American people . The House and Senate have abrogated the Laws . QEII ala MBS purchases . Then ... the Reverse Repos into the nations money market funds . Let the sheeple be burnt directly . No point in the Feds masters taking a hit on this junk . God save the queen and MBS at all costs .

  29. didn't bother reading the comments as little need to upset my delicate wee stomach anymore. so here's my prediction; $1 or 2 trillion to the MBS holders, $1 or 2 trillion to the home owners to reduce their principal, throw in more when necessary, another $50 to me for my solution. turn on the TV and watch the Chinese do the "dance of joy". now off to get the popcorn ready. (8^)

  30. The first news directed to the average American was shown at 6 pm tonight. This is the local news time spot and it consisted of about 45 seconds of the following information: Even if you do not have a mortage this will cost you, FNM and FRE will need 259 BILLION more to survive, etc.. The scary part is the time slot to make this announcement on a Saturday evening, when most of the local news is watched by the financially uninformed. This is actually old news that was discussed on CNBC for the last week. So in essence what I am saying is that things are really getting to a boiling point, and the American public has now been warned.

  31. I stopped reading when you said the establishment republicans passed the interstate notarizations act. Although I am not fan of the establishment republicans, at least I have the good sense to acknowledge that the republicans are the minority in both the house and senate. How the hell can a minority party pass anything?

  32. Both the mortgage laden intermediate mutual bond funds, such as GSUAX, and the mortgage backed bond ETF, MBB, rose stunningly this last week, giving credence to the concept that the Fed is going to not only be buying short therm bonds, SHY, and those in Pimco’s Mint, MINT, but the mortgage backed bonds as well, in its QE II.

    I appreciate your thoghts here in this blog article, as they tie into what I believe we will see in the future.

    The Dodd Frank legislation established a Federal Financial Regulator, that being the Treasury Secretary, and granted him wide discretionary power of the economy.

    From the Robert Wenzel, EconomicPolicy Journal article Secret SEC Meeting with Goldman Sachs and JP Morgan, I conclude that in the US, through an October 6, 2010, meeting of bankers, investment bankers and SEC officials, that an elite group of stakeholders has arisen to act as a “banking, lending, credit, and investment Regulatory Council”, supporting the Financial Regulator in overseeing the US economy.

    I believe that the Dodd Frank legislation, empowers the Federal Financial Regulator, to intervene in the foreclosure and mortgage securitization issue; and that at some point in the future he will provide a solution that integrates the banks with the Government in state corporate governance over housing, bandking, and mortgage securitization. Perhaps, Annaly Capital Management, NLY, may have a role to play, given that it has done so well in the Government debt field.

    Perhaps this solution will involve purchase of mortgage backed securities, debt foregiveness, and leasing of bank owned properties.

    And of course, the US Dollar, $USD, will go down in flames. All I can ask is: “Got Gold?”

  33. @ theyenguy said...
    "Both the mortgage laden intermediate mutual bond funds, such as GSUAX, and the mortgage backed bond ETF, MBB, rose stunningly this last week, giving credence to the concept that the Fed is going to not only be buying short therm bonds, SHY, and those in Pimco’s Mint, MINT, but the mortgage backed bonds as well, in its QE II."

    MINT has a duration of less than one year, but MINT is not appropriate as a comparison to the other funds listed. MINT is loaded with foreign notes (including lots of 144A guaranteed).

    PIMCO has been moving away from US-based investments this year in several bond funds. (Note: be aware that PIMCO sometimes uses leverage in their funds.)


  34. This sounds similar to something Mish wrote this August. I haven't got an auto refi offer myself from Chase. They claim DTI too high, and LTV is on the edge... DTI was worse a few years ago when we got the loan and qualified, but it's not good enough to refinance. Bunch of bozos...

  35. Unless the lenders reduce principal by a large amount, people doing HAMP modifications will be underwater when they sign, will be underwater tomorrow, and will be underwater for the rest of their natural lives. Then they'll have a BALLOON to pay when the mortgage runs out! This changes your home from an investment into indentured servitude to serve the lenders. Wake up, America! As a bank chairman told me last week, in the last 2 years we've re-set wealth in America. There will be no more middle class, especially with all these greedy corporate thieves shipping every job they possibly can overseas.

  36. Let me get this right

    The Bank cannot prove their standing to foreclose and are offering a Mulligan Mortgage to fix the broken chain and create a new note.

    The homeowner, happy to get a reduction in the mortgage payment signs on the dotted line.

    10 or 15 years down the road, the original note turns up in the hands of a different bank who then foreclose.

    Am I just being stupid or what. Surely if a bank comes to you offering a Mulligan and they cannot prove they own the current mortgage, what the hell are you doing signing another one and getting into debt for property that may not belong to that bank.

    Keep paying your mortgage into an escrow fund, stop paying the bank and unless they can prove they own the mortgage sue them for all the money you have paid them in the past.

  37. Hello Sir/Mam,

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  38. URGENT need for Lawmakers to act! Foreclosure lawyers are officers of the court. Lawyers are required to know applicable laws and civil procedure; this knowledge is not required from mortgage lenders, nor loan servicers. Lawyers are the ones who file those inadequate or questionable foreclosure which lead to useless property deeds and impediments to real estate sales; title insurance companies reluctance to cover foreclosed properties; mortgage default claims disputes due to defective foreclosures.

    1. They don't have knowledge of the law in order to recognize which aspects of foreclosure are legally challengeable or even fraudulent.
    2. And even those who identify wrongdoing lack funds to pay for attorneys to represent them.
    3. Homeowners are told to come to foreclosure auctions with $$$$$$$ that they do not have, SO THEY STAY AWAY from foreclosure auctions.

    These homeowners are oblivious about sometimes "straw buyers" and sometimes lawyers in charge of foreclosures, obtains ILLEGAL ownership of people's homes; and pay literally nothing through "credit bids;" and that those recorded deeds from such auctions are null! For these very reasons, there needs to be a probe of lawyers who file foreclosures.

    Also, the average lay person doesn't know about legal REQUIREMENTS of "standing" that prevents their homes from being repossessed via non-existent lenders or via lenders which have no ownership of promissory notes.

    Yet, COURTS ARE SUPPOSED TO ENFORCE STANDING and compliance with established laws! Illegal, defective, fraudulent foreclosures are the cause of useless property deeds for real estate sales; title insurance companies refuse coverage on foreclosed properties –and more!

    Further, after certain foreclosure auctions (via simulation) result in fraudulent – NOT LENDER ACQUISITIONS, by lawyers or straw buyers, the common scenario becomes property flipping, neighborhood blight, rodents, and so on!

    *Sample of fraudulent foreclosure acts:

    –Deliberately use defunct lenders, lenders without “standing” for false civil and bankruptcy foreclosure proceedings.
    – Create and conceal malpractice foreclosure delays and engineer billable litigation.
    – Orchestrate sham foreclosure auctions; property never acquired by lenders, but 'straw buyers’
    – Commit actionable wrongs (unfair debt collection, fraud, various torts) that create lawsuits
    – Self-dealing foreclosures which certain lawyers themselves obtain foreclosed properties for flipping.
    –Foreclosures naming defunct lenders, illegally recorded property deeds, flipping, blighted communities.
    – Unconscionably create false deficiency judgments against property owners after straw buyers acquire homes for pennies on the dollar.
    – Intentionally false BANKRUPTCY COURT “Motion to Lift” and “Proof of Claim” on behalf of non-existent lenders which conceals fact of “NON-SECURED” mortgage debt.
    –Involved in fraudulent collection of property damage insurance, as well as mortgage-default insurance.
    –Fraudulent foreclosures abet loss of property taxes to city revenue, rodents, vagrants
    – Thousands of families made unlawfully homeless from null foreclosure proceedings.

    *MORE info: Request for Congressional Foreclosure Panel to Examine Foreclosure Lawyers

  39. deborah lee said...I beleive the banks and the fed are joined at the hips. THE CORRUPTION WE ARE ALL EXPERIENCING HAS COME TO A BOIL,SO ITS QUITE NOTICABLE. This problem of monetary rules as i like to call it,dates back to 1913 when the federal reserve was formed by powerful bankers in secrecy and if the people understood,what was going on it most likely would not have happened, bjust like to day they keep sugar coating everthing so we just keep trusting and blindly lead by the nosehey had an inch in 1913(when the fed was formed) now they have a MILE. i beleive that mile cannot be reduced so easily the inflation monster needs a WHOLE lot more food. PLEASE read the book : The Creature From Jeckyl Island by GRIFFIN. This is a true eye opener about how the fed was formed and how manr and banking rules work.

  40. Thank you for sharing..

  41. I really love this article. I find it very interesting and it is really fun to read. I think everyone can fully relate in this kind of issue.

  42. QE 3 is designed to buy up these mortgages and nationalize them. 43 bil. a month will start to add up. They have figured it out and we will be ravaged again and again and again.

  43. There are no Congressional hearings into his violation of the Constitution. There are no prosecutors sharpening their chops, getting ready to indict him on charges of corruption.

  44. Hi ! This is attractive and informative for us. I was searching this type information such a long time. Now i found such a good blog. Mortgage in Houston


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