Wednesday, October 13, 2010

The Second Leg Down of America’s Death Spiral

I swear to God Almighty: Mortgage Backed Securities are America’s Herpes—the gift that keeps on oozing. 
Last Friday, Bank of America announced that it was suspending all foreclosure proceedings, presumably until further notice. Other banks have already suspended foreclosures in a whole truckload of states. A nationwide moratorium on foreclosures might soon happen—which would be a big deal: Global Financial Crisis, Part II—Longer, Wider and Uncut
“It’s oozing from where?
“Man, you guys are fucked.”
But the mainstream media—surprise-surprise—has downplayed the whole shebang. They’re throwing terms out there into the ether, but devoid of context or explanation: “Robo-signings”, “foreclosure mills”, forged signatures, “double booking”, MERS—it’s confusing as all get-out. 
So the mainstream media just mentions it casually—“and in other news tonight . . .”—like it’s no big deal: A couple-three lines, lots of complicated, unfamiliar terms, an attitude like it’s a brouhaha over paperwork of all things!—and then zappo-presto-change-o!: They’re showing video footage of a cute koala nursing in the arms of a San Diego zookeeper. 
But even the koalas know that something awful is heading America’s way. Smart little critters, they’re heading for the treetops, to get away from this mess. 
So what the hell is going on with the God forsaken mortgage mess in the United States? 
It’s got a lot of bells and whistles, but it’s basically quite simple: It’s all about the fucking Mortgage Backed Securities (MBS). Again
So this is what happened, more or less—the short version: 

In the crazed frenzy to get as many mortgages securitized during the Oughts, banks took shortcuts with the paperwork necessary for the Mortgage Backed Securities. The reason was because everyone in the chain of this securitization mania got a little piece of the action—a little slice of the MBS pie in the shape of commissions.
So in the name of “improved efficiencies” (and how many horror stories are we finding out, carried out in the name of “improved efficiencies”), banks digitized the mortgage notes—they didn’t physically endorse them, like they were supposed to by the various state and Federal laws. 
Plus—once the wave of foreclosures broke, and the holes in this bureaucratic paperwork became evident and relevant—some of the big law firms handling the foreclosures for the banks started doing some document fabrication and signature forgery, in order to cover up the mistakes—which is definitely illegal. 
Long story short (since this is the short version): A lot of the foreclosed properties might not have been foreclosed legally. The people evicted might still have a right to their old houses. The new buyers might not actually own the REO’s they bought off the banks. The banks could be on the hook for trillions of dollars, and in the sights of literally millions of lawsuits. 
In short: This could become another massive oozing sore, complete with yellow-green pus drip-drip-dripping out of some unmentionable places on the Body Economic. 
Now—the long version: 
Homeowners can only be foreclosed and evicted from their homes by the person or institution who actually has the loan paper—only the note-holder has legal standing to ask a court to foreclose and evict. Not the mortgage—the note, which is the actual IOU that people sign, promising to pay back the mortgage loan. 
Before Mortgage Backed Securities, most mortgage loans were issued by the local Savings & Loan. So the note usually didn’t go anywhere: It stayed in the offices of the S&L down the street. 
But once mortgage loan securitization happened, things got sloppy—they got sloppy by the very nature of Mortgage Backed Securities. 
The whole purpose of MBS’s was for different investors to have their different risk appetites satiated with different bonds. Some bond customers wanted super-safe bonds with low returns, some others wanted riskier bonds with therefore higher rates of return. 
Therefore, as everyone knows, the loans were “bundled” into REMIC’s (Real-Estate Mortgage Investment Conduits, a special vehicle designed to hold the loans for tax purposes), and then “sliced & diced”—split up and put into tranches, according to their likelihood of default, their interest rates, and other characteristics. 
This slicing and dicing created “senior tranches”, where the loans would likely be paid in full, if past history of mortgage loan statistics was to be believed. And it also created “junior tranches”, where the loans might well default, again according to past history and statistics. (A whole range of tranches were created, of course, but for purposes of this discussion, we can ignore all those countless other variations.)
These various tranches were sold to different investors, according to their risk appetite. That’s why some of the MBS bonds were rated as safe as Treasury bonds, and others were rated by the ratings agencies as risky as junk bonds. 
But here’s the key issue: When an MBS was first created, all the mortgages were pristine—none had defaulted yet, because they were all brand new loans. Statistically, some would default and some others would be paid back in full—but which ones specifically would default? No one knew, of course. If I toss a coin 1,000 times, statistically, 500 tosses the coin will land heads—but what will the result be of, say, the 723rd toss specifically? I dunno. 
Same with mortgages. 
So in fact, it wasn’t that the riskier loans were in junior tranches and the safer mortgage loans were in the senior tranches: Rather, all the loans were in all the tranches, and if and when a mortgage in a given bundle of mortgages defaulted, the junior tranche holders would take the losses first, and the senior tranche holder take the loss last. 
But who was the owner of the junior tranche bond and the senior tranche bond? Two different people. Therefore, the mortgage note was not actually signed over to the bond holder. In fact, it couldn’t be signed over. Because, again, since no one knew which mortgage would default first, it was impossible to assign a specific mortgage to a specific bond. 
Therefore, how to make sure the safe mortgage loan stayed with the safe MBS tranche, and the risky and/or defaulting mortgage went to the riskier MBS tranche? 
Enter stage right, the famed MERS—the Mortgage Electronic Registration System. 
MERS was the repository of these digitized mortgage notes that the banks originated from the actual mortgage loans signed by homebuyers. MERS was jointly owned by Fannie Mae and Freddie Mac (yes, those two, again, I know, I know: Like the chlamydia and the gonorrhea of the financial world—you cure ‘em, but they just keep coming back). 
The purpose of MERS was to help in the securitization process. Basically, MERS directed defaulting mortgages to the appropriate tranches of mortgage bonds. MERS was essentially the operating table where the digitized mortgage notes were sliced and diced and rearranged so as to create the Mortgage Backed Securities. Think of MERS as Dr. Frankenstein’s operating table, where the beast got put together. 
However, legally—and this is the important part—MERS didn’t hold any mortgage note: The true owner of the mortgage notes should have been the REMIC’s. 
But the REMIC’s didn’t own the note either, because of a fluke of the ratings agencies: The REMIC’s had to be “bankruptcy remote”, in order to get the precious ratings needed to peddle Mortgage Backed Securities to insitutional investors. 
So somewhere between the REMIC’s and the MERS, the chain of title was broken. 
Now, what does “broken chain of title” mean? Simple: When a homebuyer signs a mortgage, the key document is the note. As I said before, it’s the actual IOU. In order for the mortgage note to be sold or transferred to someone else (and therefore turned into a Mortgage Backed Security), this document has to be physically endorsed to the next person. All of these signatures on the note are called the “chain of title”. 
You can endorse the note as many times as you please—but you have to have a clear chain of title right on the actual note: I sold the note to Moe, who sold it to Larry, who sold it to Curly, and all our notarized signatures are actually, physically on the note, one after the other. 
If for whatever reason, any of these signatures is skipped, then the chain of title is said to be broken. Therefore, legally, the mortgage note is no longer valid. That is, the person who took out the mortgage loan to pay for the house no longer owes the loan, because he no longer knows whom to pay. 
To repeat: If the chain of title of the note is broken, then the borrower no longer owes any money on the loan
Read that last sentence again, please. Don’t worry, I’ll wait. 
You read it again? Good: Now you see the can of worms that’s opening up. 
The broken chain of title wouldn’t have been an issue if there hadn’t been an unusual number of foreclosures. Before the housing bubble collapse, the people who defaulted on their mortgages wouldn’t have bothered to check to see that the paperwork was in order. 
But as everyone knows, following the housing collapse of 2007–‘10-and-counting, there’s been a boatload of foreclosures—and foreclosures on a lot of people who weren’t sloppy bums who skipped out on their mortgage payments, but smart and cautious people who got squeezed by circumstances. 
These people started contesting their foreclosures and evictions, and so started looking into the chain of title issue . . . and that’s when the paperwork became important. So the chain of title became important. So the botched paperwork became a non-trivial issue. 
Now, the banks had hired “foreclosure mills”—law firms that specialized in foreclosures—in order to handle the massive volume of foreclosures and evictions that occurred because of the Housing Crisis. The foreclosure mills, as one would expect, were the first to spot the broken chain of titles. 
Well, hell, whaddaya know—turns out that these foreclosure mills might have faked and falsified documentation, so as to fraudulently repair the chain-of-title issue, thereby “proving” that the banks had judicial standing to foreclose on a delinquent mortgage. These foreclosure mills might have even forged the loan note itself— 
—wait, why am I hedging? The foreclosure mills actually, deliberately and categorically faked and falsified documents, in order to expedite these foreclosures and evictions. Yves Smith at naked capitalism, who has been all over this story, put up a price list for this “service” from a company called DocX—yes, a price list for forged documents. Talk about your one-stop shopping!
So in other words, a massive fraud was carried out, with the inevitable innocent bystander getting caught up in this fraud: The guy who got foreclosed and evicted from his home in Florida, even though he didn’t actually have a mortgage, and in fact owned his house free-and-clear. The family that was foreclosed and evicted, even though they had a perfect mortgage payment record. Et cetera, depressing et cetera. 
Now, the reason this all came to light is not because enough people were getting screwed that the banks or the government or someone with power saw what was going on, and decided to put a stop to it—that would have been nice, to see a shining knight in armor, riding on a white horse. 
But that’s not how America works nowadays. 
No, alarm bells started going off when the title insurance companies started to refuse to insure the title. 
In every sale, a title insurance company insures that the title is free-and-clear: That the prospective buyer is in fact buying a properly vetted house, with its title issues all in order. Title insurance companies stopped providing their service because—of course—they didn’t want to expose themselves to the risk that the chain-of-title had been broken, and that the bank had illegally foreclosed on the previous owner. 
That’s when things started gettin’ innerestin’: That’s when the Attorneys General of various states started snooping around and making noises (elections are coming up, after all). 
The fact that Ally Financial (formerly GMAC), JP Morgan Chase, and now Bank of America have suspended foreclosures signals that this is a serious problem—obviously. Banks that size, with that much exposure to foreclosed properties, don’t suspend foreclosures just because they’re good corporate citizens who want to do the right thing, with all the paperwork in strict order—they’re halting their foreclosures for a reason
The move by the United States Congress last week, to sneak by the Interstate Recognition of Notarizations Act? That was all the banking lobby—they wanted to shove down that law, so that their foreclosure mills’ forged and fraudulent documents would not be scrutinized by out-of-state judges. (The spineless cowards in the Senate carried out their Master’s will by a voice vote—so that there’d be no registry of who had voted for it, and therefore no accountability, the corrupt pricks.)
And President Obama’s pocket veto of the measure? He had to veto it—if he’d signed it, there would have been political hell to pay, plus it would have been challenged almost immediately, and likely overturned as un-Constitutional in short order. (The jug-eared milquetoast didn’t even have the gumption to veto it—he pocket vetoed it.)
As soon as the White House announced the pocket veto—the very next day!—Bank of America halted all foreclosures, nationwide. 
Why do you think that happened? Because the banks are screwed—again. By the same fucking thing as the last time—the fucking Mortgage Backed Securities!
The reason the banks are fucked again is, if they’ve been foreclosing on people they didn’t have the legal right to foreclose on, then those people have the right to get their houses back. And the people who bought those foreclosed houses from the bank might not actually own the houses they paid for. 
And it won’t matter if a particular case—or even most cases—were on the up-and-up: It won’t matter if most of the foreclosures and evictions were truly because the homeowner failed to pay his mortgage. The fraud committed by the foreclosure mills casts enough doubt that now, all foreclosures come into question. Not only that, all mortgages come into question
People still haven’t figured out what this all means—but I’ll tell you: If enough mortgage-paying homeowners realize that they may be able to get out of their mortgage loan and keep their house, scott-free? Shit, that’s basically a license to halt payments right the fuck now. That’s basically a license to tell the banks to fuck off. 
What are the banks gonna do—try to foreclose and then evict you? Show me the paper, motherfucker, will be all you need to say. 
This is a major, major crisis. This makes Lehman’s bankruptcy look like a spring rain, compared to this hurricane. And if this isn’t handled right—and handled right quick, in the next couple of weeks on the outside—this crisis could also spell the end of the mortgage business altogether. Of banking altogether. Hell, of civil society. What do you think happens in a country when the citizens realize they don’t need to pay their debts?
If this isn’t handled right, then this will be the second leg down, in the American Death Spiral.

Oh dear Lord, he said, calm yet despondent. Look at it, he said. I mean just look at it! Have you ever seen anything like it?!?
No, said the koala—truthfully. And you know, uh . . . it’s . . . It’s pretty disgusting, actually. So would you mind putting that thing away? 
«««  •  »»»
Note: Next post, I’ll discuss a possible—I emphasize, a possible—silver bullet that will fix this whole Mortgage Mess—but it’ll have to be done soon, and have to be carried out fast, and sold under the guise that it’s this great new program that everybody—and I mean everybody—will simply just love to be a part of!—
Streamlined Refinance.


  1. Great summary. We were just starting the process of refinancing, given the 50-year interest low, but as all this become public, the question arose, "Are we even paying the entity that holds our note, who can give it to us when the loan is paid?"

    If that answer isn't discovered for "x" number of years, then how does all that play out?

    Looking forward to your next post, "Streamlined Refinance". The only thing that could get "everyone" to buy into it, is an option for super low rates, which is a far larger return for the banks than super high defaults they can't do anything about...

    The sky may not be falling, but a giant fan is about to be hit with high velocity fecal matter...

    1. America's death zones hits If this is the state of our nation during relative peacetime and perceived prosperity, imagine what it’ll look like in the midst of financial, economic or political turmoil. Americans living east of the Mississippi River will likely experience the brunt of it. But anyone residing in and around any major U.S. city will, likewise, have a tough road ahead of them. So for want to know more about America's death zones hits being with us....

  2. Wow. I pay pretty close attention to economics and politics and the significance of this "Crisis" was not fully appreciated until right now. I knew it was big but not THIS big. Let the horsemen come, this shit needs unwound BAD.

  3. You detailed the problem very eloquently, well done. I, for one, did not realize the magnitude of the issue at hand before this.

    According to the SIFMA (, there are about $8.9 trillion in total U.S. mortgage-related securities outstanding.

    $8.9 trillion.

    All the major U.S. banks are effectively bankrupt (if the transfer of title is broken in all of the MBS securities) provided that the laws on the books are held up, as they should be.

    The Fed could print that amount up, but that would be the end of the dollar as a usable currency.

  4. There's a bigger problem. The banks are realizing losses on the foreclosures. There have been a lot of them, and so a lot of loss realized. And more down the line with each foreclosure they do now.

    So they stopped.

    That's why Bank of America called a halt. They are not worried about chain of title; they are bleeding money and have to stop before anyone notices.

    That's why you have this incredible, and I mean incredible anomaly. Bank of America stops foreclosing on Americans, and the president sends his minions out to the Sunday talk shows to express disapproval and the hope that foreclosures can get back on track. See Sunday's Face the Nation.

    It's bizarre but true. The country's leading politician encouraging the banks to foreclose on voters' homes. Never seen anything like it. The world has never seen anything like it.

  5. Now that America has officially become a Banana Republic, someone at the Business Insider comments suggested that the new national anthem is "Dueling Banjos" ( from the movie Deliverance.

  6. Sounds like it's time to call a lawyer and make them show me the note.

  7. Well done Gonzalo. Excellent explanation of the details involved, certainly the best I've seen so far. I'll start on my ark in the morning.

  8. This looks like the Black Swan I've been expecting for the past year or so now. Totally unexpected by everyone. Except Denniger.

  9. Thanks for a great overview in easy to understand form !!
    I did not realize how serious the issue has become , nor the fraud perpetrated and endorsed by the Senate......criminals !!...........criminals acting against the very people who put them there, the bastards !

  10. I'm not sure I entirely agree with 2 points

    1) the fact that the chain of title is broken does not necessarily mean that the borrower gets the house free and clear. The last entity who has the "wet signature" note still has claim on the house, no?
    so let's pretend it was SUPPOSED to go from A to B to C to D to E... and E tries to foreclose but the note never went from A to B.
    The borrower doesn't get the house for free... does A still not clearly have a claim?

    2) the borrower would still owe E money even if E can't prove that it owns the note... It's just that instead of the note being a secured loan (with the house as asset) the loan is now an UNSECURED loan.

    Thus, the borrower may get to keep the house (depending on of A is around and willing to enforce their rights) but still owes E a large unsecured loan. The unsecured loan can clearly be discharged in Bankruptcy... but that might not be a better alternative for the borrower.

    depending on the borrower's assets/finances it may be better to just walk away from the house than to go through BK and keep the house.

    just saying that this stuff is complicated, and I'm not sure that your conclusions are entirely accurate.

    that said: I AM NOT A LAWYER and thus I'm happy to be corrected.

  11. You are being played again. This is like a magician who distracts you while they do their sleight of hand. The banks were indeed swamped with bad mortgages and they rushed the paperwork but no one is denying that these mortgages are indeed in foreclosure. This who propaganda effort by the government is to convince you that the banks are the bad guy but the politicians are on your side. There is a blizzard of paperwork in a mortgage and if one piece of paper is missing or incorrect it creates a legal problem but it does not change the fact that the borrower is in default and the bank needs to foreclose to rid themselves of the debt. If the government is successful in delaying this it will ONLY make things worse. It will take longer for this crisis to end and it will be a deeper crisis because of it. Make no mistake the great depression lasted 11 years because the government did everything wrong. The only thing that pulled us out of the great depression was WW II. The government is about to make everything worse and if you think that banks will be the ones who suffer most you are a fool.

  12. Agree with prior comment, think you're jumping the gun to suggest the borrower is relieved of liability. Clearly SOMEONE holds a valid interest in the note. it doesn't just disappear in a wisp of smoke.

  13. "...a measure of wheat for a penny, and three measures of barley for a penny, and spare ye not the oil and the wine." Revelations 6:6

    good luck to us all, I quit paying, today.
    Thanks Gonzalo, what we need is a JUBILEE, but it'll have to be a bottom up, enforced by the little guy, nobody has our back...

  14. I believe there is a much larger issue here, along the lines of ownership, which most fail to see.

    Yes, I think we can see that ultimately, securitization degrades ownership, but not by chance.
    Rather, by design.

  15. This was very enlightening. I bought my first home in 2007 after just being married. The loan was financed by a local title company and then sold to Countrywide. The loan was then transfered to BoA when they bought Countrywide. Almost as soon as the loan was purchased, we started getting solicitation to refinance.

    We eventually took the offer about 4 months ago for a very minimal charge, a much improved interest rate and cutting our loan to a shorter term. I wonder if BoA saw this coming and was trying to refinance as many mortgages as they could to prove ownership?

  16. Speaking of mortgage fraud, this post has a link to send an e-mail to your company to ask who owns your note. The post is through zero hedge ( ). Note that the website is operated by SEIU.

  17. The latest Black Swan to come in for a landing is the Foreclosuregate
    Clusterfuck. So far this appears to have had negligible impact on the Capital
    Markets, but you can smell Sulfur in the air here. Everybody from the TBTF
    Banks, the McMansion Dwellers, the Servicers and the MBS holders are Lawyering
    Up. Whether or not Obama-sama declares a National Moratorium on foreclosures or
    not, on a State by State basis this is going to completely lock up the
    Foreclosure system. Unless of course CONgress passes some Law which with a
    stroke of the pen absolves the TBTF Banks of the fraud and then proceeds to make
    EVERYONE whole here in this mess by printing an ungodly amount of Funny Money.
    I can't see Helicopter Ben doing that, but ya never know.

    The biggest disaster is in the so called "Chain of Title" of ownership, which
    appears to have been irretrievably broken here. At this point from a Legal
    Point of view, it appears close to impossible to determine WHO actually "owns"
    any of these properties or has clear title to them in the event of a default.
    Title Insurers are walking away from this mess like the Plague it is destined to
    become....more on Reverse Engineering


  18. Remember when the government took over AIG because the TBTF banks and China had a lot of these mortgage backed securities. The FED/government to give the appearance of solvency for the TBTF banksters, and to appease their foreign creditors - the FED assumed responsibility of this huge leveraged pile of dog excretions.
    Also, some of these MBS were also bought by big mofo investors for pennies on the dollar, and these investors have big shot lawyers on retainer.
    I bet that we see a theatrical dog and pony show with all the special effects of smoke n' mirrors put on by the FED/US government that will some how extend by pretending the fiat Ponzi currency game just a lil' bit longer.
    Can't wait for the next episode before we get to the really grand finale

  19. Fannie Mae and Freddy Mac did the crap-ass mortgages (a.k.a Casino chips)which the To-Big-Too-Fail banks promptly scooped up to play high-stakes poker in the leverage-up-'til-the-cow-come-home market (a.k.a the Wall Street casino). The SEC looks the other way (as usual) and the middle-class tax payer is left holding the bag. Now not only to we not know what anything's worth (no mark to market), but we don't even know WHO owns it.

    If that's truth, justice, and the American way, I'm ready to emigrate.

  20. Show me the note...doesn't really work anymore;

    ...never was a "loan" was a 'currency exchange'; your sig for a house. They then monitized your signature & scammed you into another agreement- for which you have been paying monthly

  21. So if I pay CCO Mortgage every month but my credit report says my loan is held by Fannie is there a problem? I was never informed that Fannie owned any of the loan but I blindly give my money every month to someone who I'm not sure deserves it.

  22. Do not be fooled by the "chain of title" red herring. these mortgages are not in limbo forever. At worst all this means is more courts and more lawyers. In those few cases where that chain of title was actually broken all that is required will be to prove that the intent was to pass title to the last person to purchase it and the paperwork will be annointed by a judge. You cannot benefit from a lost or flawed piece of paperwork when the intent was clear both parties acted in good faith and one of the two parties did indeed complete their part of the bargin in total. This is nothing more then a delay and it is being exploited by politicians who are either too stupid to know how badly they are screwing the pooch or they do not care that they contribute to the problem.

    To the person who said they quit paying today: The clock is ticking. You have some months to live there for free but you aren't going to get the house for free. Don't worry, the taxpayers and depositers will pay for your free ride.

  23. Can anyone actually name a court case in which the MERS system was successfully challenged in favor of the home owner?

  24. I ask the above question, because my mortgage was transferred numerous time in the MERS system, and now the value of the home has lost 110k value in two years. The bank refuses to negotiate on reducing the principle of the loan, however claim they will accept a short sale.

  25. From:

    The United States Bankruptcy Court for the Eastern District of California has issued a ruling dated May 20, 2010 in the matter of In Re: Walker, Case No. 10-21656-E-11 which found that MERS could not, as a matter of law, have transferred the note to Citibank from the original lender, Bayrock Mortgage Corp. The Court’s opinion is headlined stating that MERS and Citibank are not the real parties in interest.

    The court found that MERS acted “only as a nominee” for Bayrock under the Deed of Trust and there was no evidence that the note was transferred. The opinion also provides that “several courts have acknowledged that MERS is not the owner of the underlying note and therefore could not transfer the note, the beneficial interest in the deed of trust, or foreclose on the property secured by the deed”, citing the well-known cases of In Re Vargas (California Bankruptcy Court), Landmark v. Kesler (Kansas decision as to lack of authority of MERS), LaSalle Bank v. Lamy (New York), and In Re Foreclosure Cases (the “Boyko” decision from Ohio Federal Court).
    (end quote)

    So you are still on the hook to the original lender, but anybody else who claims rights through MERS is not legally a creditor of yours.

    It's probably safer to pay into escrow pending litigation (and you need a good lawyer beforehand) than to just stop paying.

  26. I'd like to see the gov kill off freddie and fannie and refinance everyone at 2%/ today's realistic market value (thus killing all the TBTFs....resolution trust, baby!) with the gov taking all the interest.

    What's the interest on 80% of all loans?

  27. This comment has been removed by the author.

  28. Someone said, and here I paraphrase, that Denninger was the only one who saw this in advance.

    Au contraire. Denninger isn't the only one. Reggie Middleton has been on this for a while, and there are more. Denninger may be the most tenacious of the bunch, but he's hardly the only one who has been aware and vocal. As for this being a black swan, no, it's more like a flock or three of (desperate to messily shit anywhere and everywhere) black swans, and if I can get all feverish and (possibly) paranoid for a minute, what I'm most concerned with presently is the PTB concocting an "event", to employ a very mild euphemism for what I have in mind, for the purpose of distracting us away from this fast metastasizing epic scale disaster.

  29. A bankruptcy attorney wrote me the following:

    Love your blog and follow it regularly. I was unable to post a comment on your site, so I'm writing you directly. The point you made about a break in title is not entirely accurate. A break in title, generally, simply renders the title still properly in the name of the last proper transferee. The real issue with all of this is the use of MERS as a straw man beneficiary. MERS was created as the functional equivalent of a "John Doe" for purposes of registering the beneficial holder of notes with state property records. This would allow the banks, et al. to shift around the notes amongst the members of MERS without having to re-register the note everytime it was sliced, diced, transferred.

    As set forth in landmark cases like Landmark v. Kesler from the
    Supreme Court of Kansas (, it is the splitting or bifurcation of the promissory note or mortgage note and mortgage or deed of trust creates an immediate and fatal flaw in title. Thus, your point and prediction are well taken - the powder keg is the potential reclassification of secured (mortgage) debt on one's home to general unsecured debt, which can be wiped out through bankruptcy.

    Thus, a real risk is that if people can show their home loans are unsecured, you could see massive personal bankruptcy filings
    to wipe out that debt.

    If you're interested, you should check out the line of bankruptcy court cases that are adopting this reasoning.

    I'm a commercial bankruptcy attorney in NYC, so I follow this topic with great interest. I look forward to reading more of your thoughts on it in future posts.

  30. If a house is no longer considered collateral, then the loan becomes a signature loan. The court will still issue a judgment against the borrower for being in default on a non-collateralized loan.

    The judgment would probably allow seizure of bank accounts and garnishments. If bankruptcy followed then it is fairly likely that the house would be lost anyway.


    In fact, doing nothing right now is probably the best course of action (but keep making payments).

    I'm going to put on hold my plans to refinance my home loan.


  31. is there any way to refinace but have a lawyer put in strict language that the monies will not be released without proof of note ownership? Woudl that then put the old servicer in limbo and you can just put the money in your pocket if they dont claim it in 90 days? write me at cybercutealicious at yahoo dot com if you have any suggestions because I want to refinance but I am certain i am in mers and that my loan is most likely a mess

  32. So, if I understood the NYC bankruptcy attorney correctly, what is now expected, is a court ruling that reclassifies MERS home loans as "unsecured".

    Once that ruling is in, it will start a massive wave of personal bankruptcy filings from homeowners, wiping out a large part of the $8.9 trillion of previously MBS classified debt.

    Which will leave the homeowners on their homes, nullifying the value of a major part of existing MBS assets, probably bankrupting those parties that have major stakes in the market.

    However, those parties can probably sue the originators of the MBS loans for the value they paid for the assets, which means the major banks would fall like dominoes, again.

  33. Your logic is impeccable, Captain.
    We are in grave danger.


  34. Hi
    Great article. I just wonder if someboby could create a "dumbproof" Youtube or similar video explaining this situation in clear terms. As I said this and similar articles to this one are great, but sometimes people might get lost with the legal jargon and some of the acronyms.I think that a 5 mins. video could be really helpful.

  35. read this

    Cry Havoc!

  36. then this

    get (physical) Gold while you still can

  37. Great article. Couple of thoughts.
    Thinking about a refi myself, but maybe it's not the good idea that I thought it was at first glance.

    Also, how will al this effect the IRS and mortgage deductions if the deduction uses the mortage as the basis, but it turns into a signature loan (non-exempt)? Will the IRS allow a loss if the house is repo'ed due to error? If given free title, will this not be seen as a gain (short or long term)?

    What a mess.

  38. Not only was Denninger harping about this, but Jim Sinclair has been detailing these issues through Marie McConnell for years. This is nothing new, except the ins and outs of the problem, to his readers.

    Gonzalo, thanks for the detailed description of the mess, it confirms what I thought was happening but now I have a better understanding where the chain of title was broken, therefore nullifying the note itself. I absolutely howled at the opening line of this post; brilliant metaphor, sir. I wish I'd thought of it.


  39. How much are state govts hurt when the property taxes they demand are held up and uncertain becuse of the foreclosures mess?

  40. The potential legal actions from MBS holders like city governments and pension funds who got massively screwed even before this new -gate due to ratings agency malfeasance in rating garbage as AAA are going to be amazing to behold! The massive fraud during the housing bubble now comes to light at the tail of the snake rather than the head because it's only at the tail (foreclosure) where ANY of the mortgage paperwork MUST go through a COURT. Until now, the banks and the fedgov have successfully hid the true cause of the ongoing economic depression from the mostly ignorant sheep. Hopefully, that is about to end.

    As a supplement to this excellent article by GL, listen to this. It covers, among other things, MBS implications:

  41. Seems this is just paperwork delay. If the note was not properly assigned somewhere between A to E, money was exchanged for the assignment somewhere along the line. Whoever paid is the last beneficial owner of the note and can force the person he paid to give him his money back or execute the assignment of the note. If give the money back becomes the result, then that payor will chase the guy in front of him. I would join A to E in one lawsuit and fix it all at once.

  42. Disclosure: I work for a Real Estate, Foreclosure and Bankruptcy Law Firm.
    Point: Title Rights vary from State to State. We work in CT, which has much stricter requirements for Title. Of note, the vestment of Title resides with the homeowner, even if a mortgage or note exists. Most states reside Title with the bank until the note is paid, however. If a clear chain of Title cannot be proven in CT, the right of Title stays with the Homeowner. In the situation described in this article, that would mean that the banks could not foreclose or evict if they cannot prove they have the original "signed in ink" note. The debt would still legally exist, and could be enforced as an unsecured debt. Since the Homeowner could not make full payments on that debt, they could file bankruptcy to eliminate the debt (Chap 7) or file bankruptcy to renogotiate the principal and interest (Chap 13).
    Point: Pay the mortgage, if you can.
    I would advise everyone who can pay the mortgage to do so, but if you can't, you can't. We are seeing in our practice the reality for all of our clients that non-payment of mortgages is specifically related to loss of income from job(s) or from high medical debts. The medical debts are specifically people whose Health Insurance was lost from a job, or the insurer refused to cover large pre-existing conditions or they were dropped when they got ill (usually the first few days of being diagnosed with some condition). If you can't, try using the HAMP program (although most lenders seem to being playing silly games with this program).
    Point: Get a lawyer.
    It is becoming obvious that the Banks, MERS and unethical foreclosure law firms are conspiring to commit gross fraud. We are seeing multiple instances of document fraud in a single foreclosure. We also seeing that Banks are coming to the table to offer refinancing rather than fight a foreclosure if the Homeowner can make a reasonable portion of the original principal payments. Negotiating on your own has a very bad track record. Having a lawyer is changing the odds dramatically.
    Point: MERS has more problems than we know about.
    We are seeing an abnormal amount of Lost Note and Lost Mortgage Afffidavits in cases involving MERS transfer of Note to MBS securities. We can only surmise that the original notes and mortgages have been lost or purposefully destroyed. This raises a serious question for determining Title, based on whether MERS was operating under a legal belief they did not need to keep these documents secure. Our own belief is that MERS didn't want to bear the cost of archiving such documents and kept only copies electronically. This is a serious Title problem when trying to record these documents legally in County or Town Land records after the fact. Also, MERS seems to have deliberately avoided paying to record such documents at the time they were legally required to under law, which shorted the Counties and Towns many millions of dollars in fees. We also are quite sure that the "robo-signatures" of out of state notaries recorded in the land records are invalid. CT requires notaries and attorneys licensed in the State to legally validate such land records. Our best understanding is that AGs in various states will want these fees paid to rerecord these documents, in addition to penalties.
    In any case, this is a huge problem we have been expecting to come to a crisi point eventually. What we are surprised at is that all these issues seem to be converging at the same time. Good Luck to all!

  43. re: this just being a paper delay...

    yes, but didn't the banks already say that they shredded/got rid of the notes to "avoid confusion" ... I don't have the link off hand - probably at Denninger's site - which means that they don't have the physical "wet ink" note either... so nobody has it, right?

  44. What about a homeowner in good standing on his mortgage payments who wishes to sell and has a buyer? Would a broken title chain affect such a transaction?

  45. Not being a lawyer here - but I believe this affects all existing home sales... not new homes, but existing homes. They didn't just do this with homes in foreclosure. So when you go to sell, that buyer will need/want title insurance (even if they pay in cash). If no title company will insure a clear title, then there's no transaction.

    At the very least it will take a long time to figure out which homes are affected and which aren't (regardless of foreclosure status).

  46. so if your bank can provide the original note and show that it wasn't part of this mess, you should be able to get title insurance... if it was part of the MERS or they can't provide an original "wet ink" note (not a digitized version) then I would think you'd have to wait to see how this plays out (or maybe get a lawyer to force the issue).

    Even if you refinance into a new loan with proper documentation, where would the money go to pay off the current 'note' if nobody has a legal right to it?

  47. I am glad for your information in this posting. It helps to understand the parameters of the issue. I am still unclear about how the recent Notarization Act would impact all this. The state and federal courts already recognize notaries across state borders, so what is this about? I can't get a clear explanation anywhere, so my hope for one now rests with you. Also, one of the comments suggested a link with SEIU. Are you affiliated with this public-sector union? Good luck to you.

  48. Max Keiser was interviewed about the mortgage crisis. In the following clip after about 3 minutes Max says:

    1) He knows a group of Hedge Funds and big investors in Europe and the Mideast who hate Bernanke and Geithner and who want to take America offline.

    2( Their immediate goal is to attack the dollar and to rise the price of gold $1,400. Gold rose to $1,376. It is now $1,377 at Monex.

    I wrote an article about this here:

  49. Gonzalo,

    What you have described has been typical and standard procedure in America for four centuries. The Puritans began with the Algonquin natives. A depression in the early 1670's resolved into King Philip's War, the first concentration camp on Deer Island (for "praying"--Christianized Indians) and the annihilation of white settlements, The natives nearly won this one.

    Massachusetts then issued government paper money from 1690 for such adventures as warring with French Canada. The depreciation curve was similar to the one we have had since 1913. "Backing" the paper were...mortgages! Mortgages on scarce real estate in the Berkshires!

    The Puritan descendants, as if one could really descend from Puritanism, graduated from slave trading to drug running, and perpetrated real estate and bank fraud in the Midwest. That came to a head in 1837, and it was 40 years before that was all sorted out with the end of "Reconstruction" following the so-called "Civil War".

    These psychopaths spread across the continent and we get to 1929. Today America, tomorrow the world, and this cancer has metastasized . I always wondered who funded kooks like Hitler, Lenin, Stalin and Mao; it was...America. The Puritan empire figured that it could create conflict and profiteer from both sides, resolving the wars and fights for a fee with a goal of being the Eternal Number One.

    Now Americans have finally hit the limit. It is about time.

    I do not hold any celebrity responsible. I hold the nation responsible. It will have to stand to account for what they have inflicted on each other and others.

    If you think this is capitalism, you are wrong. One cannot have capitalism without capital, and the United States has destroyed its capital; it chose authoritarianism long ago. No nation, no society has ever come back after it destroyed its capital. The consequence for these psychopaths is the end of their nation.

    My solution would be forgiveness, a Jubilee. Now that does not mean giving anyone a free pass. I rarely forgive personally. However, a free and willing admission of wrongdoing and of taking responsibility and standing accountable will make this work.

    Loans are to be nullified. That means everyone owns his home, car, experiences, tools. People get to keep their capital.

    Since our currencies are debt instruments and they have been perverted, used by Americans to destroy everyone else--a successful person to an American is a threat to the American's standing in the Universe and with God and must be controlled or destroyed--we get to have no money. So if someone wants to deal with another, he has two alternatives: kill or trade. There will need to be a means of exchange and that means gold or silver, primarily. Otherwise, trade will cease.

    Restoration of trust will not follow. It will be useless to forgive and automatically trust as a result. That opens one up to continuous abuse.

    We must instead commit to civilization and reject psychopathy as acceptable behavior. The only economic question has to be "Is it voluntary?" We may never profit from the destruction or diminishing of anyone else and repudiate the belief that one can live only at others expense, the systems supporting that belief and the territories where those belief systems operate. This means rejecting religion and becoming adult.

    This is not an economic but an existential crisis. Make that commitment or die.

  50. If I understood the process correctly, the Fed rescued the TBTF banks by buying up their smelly MBS's, and they are still in possession of $100B's of those toxic assets. If this is true, what does that say about the shape of the Fed's own books if millions of homeowners are resolved of debt via bankruptcy? Who will bail out the Fed? Do I even want to know the answer?

  51. Very good article. But don't worry about it,
    because Geigner and Bernanke will "paper it

    Or.... maybe this is too big to paper over???

  52. Actually, this could improve the banks position significantly. In many states there are anti deficiency laws that prevent the banks from going after a borrowers personal assets. After, they foreclose the house, they are prohibited from pursuing a judgment for the difference between the amount collected at auction and the amount owed on the mortgage. They can't go after your stock portfolio, they can't get to your cars or jewelry or anything else. By converting the mortgage to unsecured debt the bank is now able to take everything that they can lay their hands on, including the devalued house. Beware the elephant in the room that no one is talking about.

    Corey Schwartz

  53. Excellent Blog Post Mate! Not just he info but the way you put it...

  54. this is nothing new, one of the major network I believe NBC show case in 2006 before the "mess" of one owner that stop paying mortgage on his 1+ mil Florida home after 9-11 when his company folded & he could not afford to make payments, he found real estate attorney that prevented foreclosure demanding in court the "NOTE", they interview attorney & he had 500+ clients & that time just remind You it was well before real estate bubble top

  55. Mr. Lira,

    Great post, as usual. As a California attorney and real estate broker (who made little money during the boom, because telling clients not to buy is not a good formula for high commission income), I hopefully bring some knowledge and experience to this issue.

    The legal problems of these mortgages and the associated MBS (or, as I have taken to calling it, mega bullshit) should be fatal. I say should, because one cannot rule out the legal system retroactively declaring that all is hunky dory. But if it does not so declare, then many if not most mortgages and notes are foreclosure proof. Given the loss of income and the ability of securities holders to put back (fraudulent) mortgages at par to the banks that generated them, the banks are all insolvent.

    The silver bullet, then, is two-fold:

    1) FDIC closure of all banks and payoff of all depositors, with possible leniency toward large corporate transaction accounts (for instance, payroll accounts could be divvied up between employees, applying against each of their $250K limits, instead of wiping out $9,75M of a $10M payroll account that serves 5000 workers).

    2) For all people whose mortgage is foreclosure proof, immediately so declare, and have the IRS assess the discharge of indebtedness income. The IRS can do this because they don't give a hoot about title issues; for them, the issue is, was money borrowed that did not have to be repaid. They can call people in to testify and ask them point blank, did you borrow money, and they would have to tell the truth about it. Effectively, people with foreclosure proof mortgages would owe 40% or so to the federal and state governments where the property is located. Then, designate the stream of income taxes from that (either full payouts by people who sell, or the monthly income from people who make a 15 to 20 year payment plan with the IRS, at 10 year UST plus 350bp for 15 years, 450bp for 20 years) to pay off the federal debt incurred by the FDIC bailout.

    Of course, to make this work, other spending will have to be cut (corporate welfare, etc.), and entitlements cashed out (for example, scrap SS, Medicare, old-age medicaid, and just give every citizen over 65 $2K per month cash to spend as they see fit, with some appropriate payout for those who die early, before a decent portion of their FICA taxes have been paid back).

  56. Re: Already shredded.

    The photostatic copy the homeowner has of his own note is deemed to be an original. If the homeowner lost the note, then the court will let the terms of the note be proved by other evidence such as the fact that the homeowner is make monthly payments.

    This will all take time but will be worked out because it is the government and the banks. Don't get clever and destroy your copy of the note. The law may be an ass but it will definitely kick yours.

  57. Nothing I have read refers to the enormous amounts MERS owes to the various counties (every single one, I imagine) for recording fees it has stiffed them. There are enterprising people filing lawsuits in behalf of large counties for the gain of a fraction of what is owed the county. This will play into the legal brouhaha, no?

  58. ACRONYMs, not ACRONYM's.

  59. As an Australian, just thought I'd add that funnily enough, the native Koala's have a chlamydia epidemic.

    We also have a housing bubble that will eventually burst next year. Though thankfully I think our paperwork trail is in better shape than yours.

  60. Koalas have chlamydia? That is fucking funny.

    Thanks for the laugh, my brother.


  61. Gonzalo,

    I want to thank you for this post, and tell a short story. I bought a new house in 2007 (I know, I know, the incentives were ridiculous and I needed more room). I took the builder financing (more incentives) and refinanced for a lower rate as soon as my old house sold. The cost was something like $3000, to save $50K over the life of the loan. The paperwork was all done correctly, in a traditional closing. When rates went down again in 2008, I got itchy to refinance, figuring to save another $50K or so. I made the error of refinancing with Ameriquest - $10K in fees and buydown, the application paperwork was utterly incorrect, I corrected all the figures on the road and sent it back to them, they completely ignored it- THREE TIMES - the loan officer Mark Cerra was a COMPLETE asshole, by the end I rejected the paperwork again, but did the deal so as not to lose my fees, and, to top it off, there was a class-action settlement over their bad practices WHICH THEY FAILED TO GIVE ME NOTICE OF. If this is typical of what was occurring by the end, the industry is completely fucked.

  62. Dear Banker,

    This is a qualified written request under Section 6 of the Real Estate Settlement Procedures Act (RESPA). I own the property at the address listed below, and your bank services my mortgage.

    [My Address]

    Please send me the name address and phone number of the individual or institution that owns my mortgage, so I can compare that with the institution listed as having title to the property. I also request a copy of the valid signed and properly executed chain of title.

    Why do I want these things? It is simple.

    A. If, in the process of securitizing and reselling my mortgage, the chain of title was broken, then your debt is not legally valid. That’s right, I own the property free and clear.

    B. If the institution listed as the owner of the title and the holder of the mortgage are not the same, then guess what:

    a. The owner of title is owed nothing. They are satisfied and the title reverts back to me.

    b. The owner of the mortgage is an unsecured creditor. Get in line, beware a bankruptcy though.

    Am I gaming the system to try to rip you off? Yes. Let me explain. I have the highest level account with your bank and yet you STILL have a history of hiding behind the law and various technical excuses in order to rip me and my family off. Let me give you some examples:

    1. Twice, my credit card payments were a day or two late on total balances of less than $100, and you charged me a $35 late fee each time, because legally you could.

    2. My daughter opened a debit account. When she went over you did the following:

    a. Staged the charges so that the largest charge of the day went first, causing a larger number of overdraft instances, even when it was the last charge of the day.

    b. You charged $25 per overdraft

    c. You charged $10 to move the money from her savings account into the checking account to cover the overdraft

    d. I asked you to deny charges that went over the amount in the account, you claimed your systems couldn’t do that…when in reality you just wanted the extra fees.

    These are just a couple of the many examples in which banks like yours have hidden behind the law and claimed “system limitations” to rip me off. Was that right, moral or just? No. Now, I’m just returning the favor.

    Besides, when you and your banking buddies ran into problems in 2008, the government bailed you out. When I say the government, I mean me, the taxpayer. Instead of being thankful and contrite, you took the money and paid huge bonuses with it. Then you continued to do the very same thing that got you into trouble in the first place.

    The government (again read me, the taxpayer) made free money available to you via the discount window. This was meant to stimulate the economy through lending. But instead, you turned around and invested that in treasuries, making a fortune on the spread. In other words, you took advantage of the system, the system we the taxpayer pay for.

    So, you have a history of screwing me personally and screwing the American people in general by gaming the system and hiding behind the law. Given that history, I am quite confident that you will be proud of me for doing the same.

    I ask that I receive my response to the aforementioned request in writing. I understand that under Section 6 of RESPA you are legally required to acknowledge my request within twenty business days and must try to resolve the issue within sixty days. It has been a pleasure doing business with you.

    Mike Hogan
    Your Loyal Customer

  63. What is more likely to happen is that the courts will take each case individually and determine if the previous owner defaulted or not. If they in fact did, than the forclosure will stand in spite of the fact there was a faulty process. Some speaches will made about the mess, Congress will hold worthless hearings and a few people will go to jail. To do anything else would be impossible and, as the author points out, completely catastrophic.

    It will be fast-tracked to the Supreme Court and yes the will uphold the decision. They will have no choice. They will rule on it as they did with the "W" Bush decision and Florida. They overruled the Florida Supreme Court (for good cause), but then overstepped their role by certifing the election. If they had not, the country would have been without a President, Executive Leader, and Commander in Chief while the opposition used every dirty trick to try to reverse the election. My point of the last portion was that the Supreme Court overstepped their constitutional role for the sake of the country. They will do so again.

  64. This is the kind of information you cannot find anywhere. Thanks for the explanation in layman's terms. Glad he didn't sign interstate notary bill but didn't quite see why he couldn't have signed it and just said whoops. Nobody seemed to touch on whether people could reoccupy a foreclosed house that they've been gone from for several months. Looking forward to your silver bullet post.

  65. This sounds like roughly what happened to Iceland. Except they had industries to fall back on: fishing and geothermal power (aluminium refining). Hell, they can just eat the fish, like they have for a thousand years.

    What will America do for a living when it goes Iceland?

  66. Nice article . . . .

    The situation we have is that the MBS now are seen to have no definable value. This makes a deadly joke of the FASB capitulation of letting the banks holding all this junk "mark to model" the value of the instruments they are stuck with. This means the banks don't carry the "assets" on their books at actual true (marketable) value (as there is no value for this junk in the marketplace), but instead invent a value for them.

    This is what is behind the apparent "profits" of the major banks. But in reality your Bank of Americas, Morgan Chases, Cit and the rest of the big boys are insolvent.

    They are also facing colossal retribution from folks they committed fraud on with the misrepresentation of these instruments.

    What I want to see is that the various attorneys general "investigating" this fiasco bring criminal charges against the individual executives who executed these frauds.

    The companies involved were merely the vehicle used by live individuals . . . enough of this suing the "company" and exhorting settlements out of the shareholders pockets . . . hit the bastards who dreamed up and executed this monster fraud.

    Roger E. Boswarva

  67. A broken chain of title doesn't, of itself, cancel the debt. If Larry, the holder of the homeowner's note, transfers the note to Moe and Moe then transfers the note to Curley but Moe doesn't properly endorse the transfer, the chain of title is broken at that point. Curley is not a "holder in due course" of the note (Uniform Commercial Code, Article III). Moe is. The maker of the note (the homeowner) is still in debt to Moe, the holder in due course of the note. If the homeowner pays Larry, Larry is obligated to pay Moe.If the homeowner pays Moe, no problem. If the homeowner pays Curley, Moe can bring an action against Curley to recover the payment and Curley can defend against it. The broken chain of title doesn't cancel the debt.

    And if the MERS turns out to be an immense series of fraudulent forgeries, so what? The law can fix or disregard it. If the big banks have suspended foreclosures, it has to do with sorting out which banks are going to take which hits as between themselves. Homeowners (the mortgagors) aren't suddenly going to be let off the hook as though their notes have been canceled and happily find that their homes are now theirs debt free.

  68. Even before I read this, I was wondering...if no one knows who holds the note, who deposits the mortgage payment check the homeowners send every month? What is the relationship between the note holder and the receiver of the payment?

  69. You said

    "To repeat: If the chain of title of the note is broken, then the borrower no longer owes any money on the loan. "

    That is wrong. The borrower still owes the money and there is zero chance he will get to keep the house w/o paying. The problem at this point is determining who can foreclose.

  70. How will this crisis effect GNMA funds?

  71. MY God glad i live in Aus.

    Why don't you guys just move over here.

    On our wonderful Island .

    No stress free public healthcare etc. etc.

    Unemployment at around 5%.

    The beer is cold and the people friendly.


  72. If title is discovered (at any time) to be impaired, is it not the responsibility of the title company to pay whatever costs attend curing the defect or, in the alternative, making the owner whole in the full amount of the property transaction?

    In other words, is it not true that title is insured against defect, regardless of whether there has been any subsequent attempt to transfer it for any reason?

  73. "Judgment will begin in the House of the Lord"

  74. Great research and article, GL. Thank you.

    But the law is not that perverse that an undischarged debtor ends up having legal procession on a real estate he/she did not pay for! Remember you cannot profit from an illegal act.

    This mess will be sorted out by the courts and in the meantime it will be a bonanza for Lawyers.

    Hey, Al, if 25 million Americans migrate to Oz won't that be more than Australia's population?

    Does that not bother you and your mates?

  75. As an inhabitant of Koala Country, we look in and conclude that the populace has been inhaling banker sponsored chemtrails, eating toxic food too long etc to allow and put up with these shenanigans for eons. Surely just about everyone by now knows the banking scam has tentacles in every aspect of American life. Has done since 1913 or earlier. And that the debt based money system is a geometric progression that compounds over time (eg NOW) to where it cannot be repaid. And the bankers need to colonize Mars to keep the racket expanding...and sucking all the blood, and nourishment, and values and morality out of all human endeavours. Twisting and contorting all enterprises as a mirror to the revolting black money system, in its final death throes. The galactic sized scam headed by galactic sized pychopaths has been exported to the 4 corners of the Earth, thank you very much.Yes, thoroughly infected koala country too.
    The "land of the brave" has to be the land of the brave.Switch off American Idol and Bold and the Beautiful. Your great country and centuries of effort and enterprise are witnessing galactic sized parasitism, sucking the life out of all that is good and viable.
    What is happening with the mortgage executions is symptomatic of the multi generational money fraud. It has been enacted behind the scenes with ruthless cunning craft. Its outcomes were always known, from day 1 of the Fed.Its a geometric ponzi scheme, where it keeps on compounding until there is not enough money to cover the the pyramid collapses, and all the myriad cut corners occur, just to survive. And those systemic errors/frauds/acts of desperation compound geometrically.
    Re the fraud paperwork executions? I would start with 100 actual executions a day as soon as possible (wishfully at 7am tomorrow) of all the galactic sized crooks. Hey...a fatal cancer needs immediate excising. The Black Magicians knew and know what they are doing , and they are killing America stone dead.INTENTIONALLY.
    *** This FATAL DAMAGE is no accident...the current MERS debacle is yet another escapade visited ultimately..on the WORLD.

  76. Too early yet to predict the demise of America, this can drag on for years in a slow death spiral.
    Bernanke just announced a new round of quantitative easing. Ask yourself where it's going, to the public, or the banks? If the banks, then you know they know about the illegality of the whole situation, and don't give a shit.
    If the banks get bailed out again, it would be wise to get some of you wealth out of the U.S.. Canada, Lichtenstein, Panama, gold, whatever your choice. Stewart Thomson of Graceland Updates has a great investment plan.
    The redistribution of wealth that occurs may make American cities a very undesirable place to live. Consider a country place with some elements of self-sustainability. You don't necessarily need a mutant-proof bomb shelter, but if anyone has plans for one, email me.

    I'm a firm believer that no one rebuilds better than the U.S. after a crisis, but its going to take awhile, and you need to preserve whatever wealth you can in the meantime. Buy some gold, get out of the city, start a garden, get as many skills as you can, but don't buy into all the end of the world bullshit out there.

  77. If you can not foreclose nor sell the property, then what are the banks doing valuing these MBS high enough to pay themselves bonuses and report profits? These were all sold to pensions worldwide as securities with a AAA rating on them. Don't tell me the banks are going to get away with this one. There going down this time or say hello to REVOLUTION.


    I really liked your article. You seem to have a far superior handle on the ways of the banks and political America.


    needs a lot of work. For someone as articulate as yourself, you detract from your own credibilty with the crude language that you use in your essay. Your sprinkling of the word << fuck >> throughout does nothing to prove your case. It only displays your limited vocabulary, and an inability to express yourself on an emotional level without scrapping your knees on the street.

    Want to be a credible journalist? Show your mastery of the English language

    Mike P.

  79. The author seems to imply that there is no chain of title because there is no “single” owner of the loan. That's bull. Take a bank, it is an “entity” because it is a corporation, but it is owned a stock-holders. Does that mean the loans it holds on it's balance sheet are unenforceable? If they are enforceable, that means an “entity” can own the loans, which is the case. The loans are owned by at TRUST, not by bondholders. The bondholders own a piece of the trust related to the priority of cash-flows of the loans. And the trust is directed by a trustee. Unless we are saying a trust is not a valid entity, the author is COMPLETELY WRONG!

    If courts say MERs is unenforceable, then good, we should have the chain of title recorded, and known as a matter of public record. However, as the for the rest, you are wrong.

    This author only thinks he knows what he's talking about. Have you ever read an actual note or mortgage. Read a prospectus on a private label deal, or allregs for Fannie or Freddie. All these private label bonds had filed a prospectus and often a prospectus supplement (free form FWP or 424b5) with the SEC which can be easily found on for free.

    I doubt you really understand servicers, master servicers, trustees, special purpose vehicles, sponsor, or MERS - like how much money per loan MERS costs, or how much efficiency it can add and how ("improved efficiencies" is probably enough in-depth reporting to understand the whole truth, right?). Many loans sold and securitized that didn't go through MERs. MERs help in securitization is reduced cost - preparing and recording assignments is expensive and can get repetitive if the loans is sold 4-5 times in the first year (which can happen, and they could be recorded out of order if the seller/servicer isn't careful). But you don't need to put the loan in MERs for it to be securitized.

    As for your chain of title, I think you are mixing up notes and mortgages (or deed of trust in some states). A note must be endorsed (and that's not considered a chain of title), while a mortgage must be assigned (that gets recorded at the county recorders, and linked together with the mortgage and related assignments is called the chain of title). The note says you owe money, the mortgage allows the bank to enforce the lien via foreclosure on the property (and since it involves your property, that is why it is the only thing that gets recorded).

  80. Excellent piece Gonzalo, super explanation.


  81. This is just one more nail in a corrupt and greedy economic system, not only here, but worldwide, which will cause a complete total implosion of society as we know it very soon.

    Nobody looks at the broad picture, but just the one snapshot. If you look at what is happenning to the dollar, and what is happening to the physical gold and silver and commodity prices, then you have to conclude that there is a complete loss of faith in the dollar as the world reserve currency.

    The fraud in the mortgage industry will only bring about a quicker end to this gangster economic run economy! If you look at the tsunami of loans coming due just on the commercial end (around $1.7 trillion), and the loans on the residential end resetting, and combine that with the foreclosure debacle, and plummetting home and commercial values, and then add in this debacle, one can only conclude the demise of all mortgage lending institutions, and most of your major banks.

    This will in turn topple the derivative market, since this paper is worthless($600 trillion) and can easily implode the world economic system overnight. This domino effect will happen very quickly, as the loss of faith in the dollar will create a liquidation of the bond market, equity markets, and as the gold and silver market decouples from the paper market, gold and silver will rise to meteroric levels not even fathomed!

    There is no way out for Bernanke, as the printing presses go on overdrive to keep the banks, insurance giants,entitlement programs, pensions, and the state budgets afloat. These are all bankrupted entities which cannot be salvaged by a currency that is worhtless! A fiat monetary system has only one way to end, and that is where this runaway locomotuive is heading, over a cliff, and when it hits bottom, there will be nothing left to salvage.

    If you add in the likelihood of a war somewhere in the world to take the sheeples minds off their economic woes, the powers tht be really will have their end game at hand. Believe it! This is reality! We are being controlled and manipulated by the phycopaths who control the Fed, our politicians, and the world. Time to wake up Amerca! Your world as you know it is about to come tumbling down.

    If you don't act now,and I mean now, it will be too late. Enjoy the ride, its going to get wild from here end out!

  82. Just another way to pump trillions into the system. Halt the forclousure process and all the money you would normally pay towards rent can now be spent at your favorite mall.

  83. My question is,(and I will need a answer to this). On my mortgage, when I pay it off will I get a free and cleared title or will I never own the home to sale or use as collateral? I hate to see after paying so much for the home and find out it's not mine.

  84. I feel no sympathy to all those skanks who bought 5000 sqft houses with no money down that they couldn't afford and never paid any principal towards with their interest only loans. Why should they own a house free and clear? If you put nothing down and pay only interest, you're just a renter anyway.

  85. Don't have time to see if anyone raised it yet.

    So in fact, it wasn’t that the riskier loans were in junior tranches and the safer mortgage loans were in the senior tranches: Rather, all the loans were in all the tranches, and if and when a mortgage in a given bundle of mortgages defaulted, the junior tranche holders would take the losses first, and the senior tranche holder take the loss last.

    But who was the owner of the junior tranche bond and the senior tranche bond? Two different people. Therefore, the mortgage note was not actually signed over to the bond holder.

    I don't get this. You are suggesting that senior tranches were bundled less risky loans while junior tranches had riskier loans. From this video that I saw a few months ago, all of the tranches are related to the same mortgages. If lots of mortgages get foreclosed, senior tranches get the proceeds. If LOTS AND LOTS AND LOTS foreclose, there's not enough money to satisfy the senior tranches in whole... And that's about as complicated as it gets. So I'm not sure what you're fussing about.

  86. The long version of your post just made it to John Mauldin weekly newsletter (Thoughts from the Frontline Weekly Newsletter) via David Kotok:

    "OK, in a serendipitous moment, Maine fishing buddy David Kotok sent me this email on the mortgage foreclosure crisis just as I was getting ready to write much the same thing. It is about the best thing I have read on the topic. Saves me some time and you get a better explanation. From Kotok:

    "Dear Readers, this text came to me in an email from sources that are in the financial services business and with whom I have a personal relationship. The original text was laced with expletives and I would not use it in the form I received it. Therefore the text below has had some substantial editing in order to remove that language. The intentions of the writer are undisturbed. The writer shall remain anonymous. This text echoes some of the news items we have seen and heard today; however, it can serve as a plain language description of the present foreclosure-suspension mess. There is a lot here. It takes about ten minutes to read it. - David Kotok ("

    Congrats! Mauldin has north of 1.5 million readers

  87. I see a lot of you guys talking about the chain of title on the actual promissory note, bigger issue im seeing is if they need the physical promissory note to actually foreclose, it wont matter who was last or first on the list seeing how most of the physical notes were all digitized lost or destroyed with the enormous fallout of mortgage lenders. I watched first hand as lenders such as country wide (who was absorbed by the crooks bank of america along with all their issues) shredded everything they had including notes before investigators could catch up.

    Having worked in that industry on the front lines of sales, to back ends of the lenders I can tell you this, you haven't even scratched the surface of how evil these people are and what they really did to cause this whole problem, and honestly everything Ive seen or read on the subject has been extremely watered down or misinformed.

    Im not knocking this article but you should talk to some of the Loam Officers, Title reps, underwriters and especially the account executives. Every Lender used to teach Account Executives how to defraud they're own system so they could teach us how to give you shitty loans you wanted at the highest commission available which ultimately left borrowers with extreme pre payment penalties and fucked loan rate margins/indexes.

    but thank you for this article it's good see someone getting closer to showing the truth.

    Let me know if you'd like to shoot the shit about this I still have a lot of the lenders documents they'll make you laugh or maybe not.

  88. A few quick comments:

    If this situation exists, which I think it does, what will happen is that the property will become unsercured. However, you will still owe the money.

    However, you might be able to discharge that in bankruptcy, also if you are in a homestead state they won't be able to take your home.

    Also, as soon as the note becomes unsecured it will drop in half in value, and whoever the banks sell it to will be willing to let you get out of it for much less than face value.

  89. so lets connect some dots. B/4 MBS, there is ABS, These started in late 1970's. US debt for public has mushroomed since then. How many multiple credit cards did people have, I had six or so and when my FICO was above 700 credit availble of 100k or so. Car loans, CC cards - all in pools of ABS's. The CC company is just another servicer like Mortgage Servicers now. You deflaut on your car loan, it gets repo'd. Who actually holds that note? You deflaut on credit card, who actually holds that in the ABS? After 180 days of non-payment on credit card, CC servicer writes-off debt, collects the insurance and pools all CC defaults and sells to highest bidder of Collection Company (which many are public companies and owed by Wall Street, banks). So collection company buys written off debt for pennies on the dollar, something they bought, so now they contacted the defaulted people and try to get them to pay for something they bought. HAHAHAHAHA, gotta laugh when you think about it. Our debt based economy. Money = debt. Government & Feds what us to take out more loans, new Small business bill passed by Obama. feds increase or decrease interest rates.....all actions based on loans - debt - to increase the money supply. Where has all the other money gone? Why are the America people always in debt?

  90. From Paul Warburg:

    "The world lives in a fool's paradise based upon fictitious wealth, rash promises, and mad illusions."
    "We must beware of booms based upon false prosperity which has its roots in inflated credits and prices." Chernow pg.223

    That was 1922!!!!

  91. You are WRONG and have no idea what you are talking about.

    If the transfer through MERS is invalid, then the original lender still holds your note. You owe the originating bank. The bank that bought your note can't foreclose, but the originating bank can. Not only can they foreclose on someone not making payments, but they could foreclose on someone who is making every payment on time (but to the wrong bank) or even someone who has paid off his mortgage (but to the wrong bank). Don't forget that the original note is still recorded at your local recorders office. It won't do you any good to have a notice from a second or third bank that you have paid off your mortgage; since they don't legally hold your mortgage, they can't declare it paid off.

    Do you really think banks are going to let you not pay your debt?

  92. Dear Mr. Lira:

    Permit me to add something to your excellent article. The reason the mortgage documents are the way they are is not because the banks were "crazed" and "frenzied." It is because one cannot make a profit lending at 5.0%, less salaries, less costs of foreclosures. The banks make their profit by collecting on each foreclosed mortgage twice: once when they sold the note to teams of investors and a second time if they evict the owner and sell the home. This is illegal and requires forged documents to deceive the courts. At least 80 percent of mortgages in the U.S. are actually unsecured debt. (The homeowners must pay their debt, but they cannot be foreclosed out of their homes.) I have filed a R.I.C.O. class action about this scheme in the N.D. Illinois, Stone v. Washington Mutual, 10 C 6410. If you or any of your readers wish more information, you may write to me at

    Robert L. Stone

  93. When all is said and done, where the money for the loan came from? Out of nothing. Thin air. Now can anybody tell me why we have to pay back money that did not exist? And to add insult to injury at sometimes usury interest rates.

    Can anybody explain me why a select group of people has the right to print as much money as it pleases and then lend it at interest? If they have the right to do that why not me?

    We are supposed to live in democracy isn't?

  94. Don't count on the courts to protect your rights . Judges are political animals, and cannot be counted on to follow the law. They are simply the vassals and servants of the big banks and corporations. Citizens of the US haven't got a clue as what the corporations, banksters and politicians have been doing to them for the past 40 years. They are too busy sitting in front of the TV guzzling beer and watching athletics. If they had any sense they would have had all their assets in gold and silver. The US is-- and has been-- the most corrupt nation in the history of the world.

    Keep up the good work. Maybe a few citizens will wake up and take measures to save themselves.

  95. Methinks I hear the faint sound of the wingbeats of an approaching ginormous Black Swan, the volume of which will soon surpass that of Mr. Bernanke's helicopter.

  96. Bankers shilling on this site need to read more real estate law.

  97. First, this is the BEST read of the mortgage crisis, I have seen so far. Thank you for explaining it in "easy-to-read-and-understand" details.

    I am so worried about thousands of unemployed and underemployed people that have got kicked out of their homes because they were unlucky to be laid off. Or better yet, have a ARM that went up, while their hours at work, went down.

    My continue following your blog. Thank you for your analysis and insight.

  98. The fact that many(possibly all?) of these securitized pools of mortgages were insured also adds another element of confusion to the mix.

    If insurance payed off the supposed holders, what standing do they have to come in and try and "double dip" on these homeowners? I haven't seen anyone talk about that aspect of this situation. Of course the insurers may have a case against the banks too, don't know, haven't thought about that.....

    I have personally witnessed the games these guys are playing as a family member is currently fighting foreclosure. Chase, the loan servicer, still refuses to produce the chain of custody after being court ordered to do so. Upon request of discovery and receipt of loan docs, some were missing, some had obviously been implanted, and some were forged. How was this found out? The idiots at the foreclosure mills were playing with copy machines to forge these docs and didn't scale them right to the other docs so that the copied signature looked off.

    By the way FDIC is totally in on this scam. They know exactly what's going on. They are NOT here to help homeowners, but the banks.

    Another game these guys have been playing in our particular case I'm referring to is to try and trick the homeowner into suing the wrong entity. For instance Washington Mutual FA is not the same as washington mutual FSB or washington mutual INC. So they play these games in court by not providing discovery, yet implying they do or don't own the note, and then try and get you to sue the wrong entity. So be careful about that. These guys are professional assholes.

    Nobody helped us uncover this mess. We had to do it ourselves.

    It's fraud, plain and simple.

  99. Hi GL,
    That bankruptcy attorney that contacted you said "As set forth in landmark cases like Landmark v. Kesler from the
    Supreme Court of Kansas (, it is the splitting or bifurcation of the promissory note or mortgage note and mortgage or deed of trust creates an immediate and fatal flaw in title. Thus, your point and prediction are well taken - the powder keg is the potential reclassification of secured (mortgage) debt on one's home to general unsecured debt, which can be wiped out through bankruptcy.

    Thus, a real risk is that if people can show their home loans are unsecured, you could see massive personal bankruptcy filings
    to wipe out that debt."

    So let's think about it. Unsecured debt, hm. That's the same thing as credit card debt. Since I did some research into stopping payment on credit card debt, I found out that each state has its own statue of limitations on unsecured debt. Check out the statue of limitations for each state. Some, like Arizona and Louisiana have a mere 3 year statute of limitations, meaning that after three years of no payment, the debt is discharged. What will become interesting is if the MERS are determined to be unsecured from their inseption, meaning when the action was incured. Many people will find that they've been sitting on unsecured debt for years. Moreover, it is not illegal to stop payment on unsecured debt. If it were, CC companies would not be selling that stuff; they'd be having people arrested for not paying CC debt.

    Just a thought.

  100. Good article but if you had skipped the "F" word it would have been a couple of pages shorter. Maybe others aren't offended by its frequency but others probably are.

    Also, if you use it, don't include it with "God Almighty." He might be tempted to read the article if he is included/

  101. Relative to the "Plagiarism" evident in "Before It's News", I have been posting on this topic for nine days, predating this essay and certainly BIN.

    I do not read other's work. It is inconvenient, but I have a superb memory, and can't afford the time it takes to vett what I consider my original work. Plagiarism is worse than theft, it is similar to stealing awards, and wearing them. That being said, the key to this kerfuffel is the note, as has been noted by others. Title Insurance will indemnify an owner against attack deriving from "Of Record" documents. Any sale down the road is not covered unless it is recorded in the jurisdiction transacted, and NOTARIZED. Notification of debtor is required, but not ironclad. The remaining Wealth of the USA not squandered on thieving "Cosmopolitan" reptiles, is our Land. Theoretically, the FED can Eminent Domain just about anything it wants, but that requires Due Process. Failing this, Martial Law, and Executive Order can easily trump the Constitution (just not legally). Let's be careful, and stay in touch.


  102. Your personal attack on Kotok is wrong to the extent that he did not claim authorship. He did clearly state that it was from another source. He was very wrong in plagiarizing the entire piece without permission as was Mauldin in publishing Kotok's letter.

  103. "I normally do not purge an individual comment, unless it is blatantly obscene"

    Perhaps you should purge yourself. I quote:

    "the fucking Mortgage Backed Securities"

    " same fucking thing as the last time—the fucking Mortgage Backed Securities!"

    "The reason the banks are fucked again is,"

  104. A letter I am about to send to my Senator regarding this issue, feel free to copy/paste and send to your own:

    Senator Sherrod Brown:

    I am writing to you today about FraudclosureGate, and specifically, your participation in regards to the unanimous voice approval of the Interstate Recognition of Notarizations Act of 2010: HR 3808.

    Senator: who the FUCK do you think you are to attempt to legalize banking FRAUD at the expense of the American people!?!

    Senator Brown, you have voted for the Banks- AGAINST the American people, Time and again! This vote is more dastardly than TARP- incomprehensible!

    Even Obama knew enough that approving this bill would be political suicide, but you tried to quickly sneak it through the Senate with a voice vote- so your name would not be recorded. You Banker SCUM!

    The people of Ohio DEMAND that you stand up to this massive FRAUD- and yet you side with the Bankers! Ohio's Attorney General Richard Cordray has launched an investigation into this fraudulent activity, and you try to make the fraud legal by attempting to pass HR 3808!!


    Senator Brown, participating in the passing of HR 3808 in the Senate proves you are a SPINELESS COWARD, and a BANKERS BITCH!


    - An extremely enraged citizen of the State of Ohio

  105. Re the Bankruptcy attorney who wrote you about break in title...

    If the the last proper transferee is the owner of the mortgage, what will a court say about the fact that this entity has already been paid in full? IOW, it may well have a letter-of-the-law claim, but no claim in Equity.


  106. What do you make of Bof A's return to foreclosures in the judicial states?

  107. wow! finally the American people are or might be waking up to the massive fraud committed by banks, politicians,presidents and VPs! what took you all so long!?
    I have been following thus mess for over 5+ years. how blind are some even in the real estate industry? I thought about buying property in 04 and 05. I went to a very respected broker/financier and asked him about the real state industry. was it on shaky ground? was a correction due soon? and many more questions. he answered favorably to all of my questions. he didn't see a problem anywhere! and he was not involved in any way with any mortgage that I would take out. result? I knew he didn't understand the derivatives side of the equation. he pretended to. but from his answers jones that he didn't. so, I didn't buy a house.
    consider the following:

  108. 1. several years ago the banks pushed into law a bill making it more difficult to declare bankruptcy. can't remember all the details. but ask yourself why do that during the height of the USA housing boom? what did they know then? I have not seen one article anywhere online or in papers or on the news referring to thus?so, who benefitted from that law? follow the money and you get you answer.
    2. the supreme court ruled that cities/ counties etc could impose eminent domain in the forced acquisition of a persons land etc. can't remember all the details. maybe someone here could update us? who benefitted? where did the money go?
    3. why does the USA military have new settlement camps popping up around the country? no media reporting on this anywhere! who benefits? why are they being set up and for whom? immigrants? not a chance! think about it!
    4. why is bernanke called 'helicopter ben'? who benefits from his unending printing press of dollars?not the Chinese-the single largest holder of USA debt.
    banks maybe? or should I say bankers!?
    5. who runs the USA fed? who controls it? who has benefitted the most from it? remember thus- the largest banks and brokerage firms tried to start a revolution and overthrow FDR. but they learned a valuable lesson from that failed plot- control the fed and everything else falls into place and behind it. they found it was easier to control the supply of money and get politicians in their pockets than to topple a president. think about that!
    6. how much has your purchasing power increased since the creation if the fed? none! it has actually lost more than 98%! who benefits from that?
    7. why is Greenspan now advising large brokerages etc to buy precious metals? and he's getting paid millions to advise this!? what does he know about the USA economy? the housing mess?who made he most money while he was in charge of the fed?
    8. why does the USA gov't continue to bailout TBTFs?who was geitners previous boss? who benefits from these bailouts-CEOs, etc. who foots the bill- the taxpayer.
    9. why did Obama pocket veto that bill? who benefits? who makes money?
    10. when did most of his crap happen? under GWB. who benefitted the most? can anyone remember enron? all bush flunkies who made billions.
    11. why did Nixon take the USA off the gold standard? who benefits the most? bankers of course!
    12. have you ever talked to someone who lived through the last depression? what so all of them say first-never trust the banks! why? think about it! the USA is going into a depression. it's unavoidable. what will YOU be saying when it is all over!? never trust bankers! yup the same thing your grandparents said too!
    13. if the USA did what china us now doing(executions of those caught upping off the people and or gov't) then this mess would never happen. I know there are more problems with china but thus is the single most effective method of deterring criminal behavior!
    14. the end is nigh for the USA. blame it on a variety of criminal psychopathic individuals if you want. but the only way out of all this banker-induced garbage is via revolution. that is the only answer. the fiat system has failed miserably.
    take this whatever way you want.
    but I saw this mess over 5 years ago. derivatives are the work of criminal bankers. cut off the had(bankers) and the beast dies. not one gov't official has addressed the cause of this problem-derivatives! wh not? who benefits from them turning a blind eye to this criminal behaviour?politicians and bankers.
    FYI- I am a canadian living in Canada. we will be affected by what happe s in thus mortgage fiasco-over 90% of our trade is with the USA!
    depressions cleanse the world system. what remains will be interesting to see!
    good luck!

  109. In response to your suggestion about plagiarism, I posted the following on Rick Humphrey's blog:
    I notice that you have ripped off and plagiarized the original article by Gonzalo Lira. I find that quite disgustingly dishonest. Do you look at the article on your website and fondly imagine that you really are a clever and perceptive man to do a thing like this? You probably see nothing wrong in shoplifting either, or perhaps some software piracy, or any petty larceny. Theft is theft, my friend. You are a small-minded petty thief. Sorry, but that’s the way it is.

  110. Greetings from Victoria, BC!

    I actually read all the comments to the date of my writing this, and found a lot of intelligent responses to your article. Clearly, North America is in a very bad, self-created state, one which will soon implode.

    The USSA [not a typo], to the best of my knowledge, the only nation in the English-speaking world to use a bizarre "escrow" system to register property sales. The rest of the English-speaking world uses the "Warren system" of registration.

    Here in Canada [we are far from perfect], if one wishes to sell a property, s/he needs only write a simple bill of sale to another, get it notarised, take that to a Government Agent, who reads it, then records it into a folio-sized Registry of title transfers. With the notary fees, this will come to less than C$ 100.00, and takes about an hour.

    Without a doubt, the USSA is world leader in making simple matters so complex that only a lawyer or other costly creature can make some sense of it. OK, maybe Israel's bureaucracies are one better at making matters worse. I do mean to give credit where due.

    But this whole sorry incestuous criminality was bound to be under the dictates of what the USSA believes is 'free market capitalism', where genial old Father Free Market somehow manages to settle all social, economic, and even political issues in a fair and balanced manner. Too bad it ain't so, suckers.

    According to one Tom Jefferson, the nation's 200 years overdue for a revolution. Meanwhile, vampire banksters have long since taken control of all that really matters, and the weary sheeple will pay and pay and pay....

    All best,
    Joseph E Fasciani
    Victoria, BC [ex-pat circa 1969]

  111. agnes.laura@yahoo.caOctober 19, 2010 at 2:09 PM

    i have to agree with the ex pat living in the capital of BC!
    the US is in deep deep trouble. we are only now beginning to see how bad it really is.
    the bankers have screwed the american sheeple over in what has been called the greatest transfer of wealth in recorded history!
    and what does obama do?he follows the lead of the single worst national leader in the history of mankind(GWBush)! your leaders have handed over your country to the elite of the elites!
    this will not end nicely for you yanks.
    i also agree with the other canadian-this will affect canada as you yanks are our greatest trading partner.
    we will be affected by the us sheeple bending over and taking it gladly by the banksters-mafia!i thought the russian mafia was the worst...not anymore.american banksters are the worst!bar none!

  112. Consider. I reference again the Industry's fiat creation of money (Wealth). The mortgages were not purchased, neither was the Land that floored the notes. Instead, a "bundle" was created, in a common denomination, 100M USD. Not even the Bundle was "sold". How yesterday that would be. "Investors" (the money managers who paid your dough to the "Handle") bought "tickets" (CDS's) as in a casino, when one covers the 'don't side' on a fresh roll. The "Pool" was the at risk money that was "matrixed" by the market, as in an alley game of crap.

    Anybody know what a "Spider" is? Owning a share of a Spider does not entitle one to possession of the issues traded. Neither does investing in a Default Option entitle an investor to the Notes, it isn't the note that floors the Handle.
    At the end of the game, it was the underwriters of the action (~AIG)who provided the earned payoff for the tail end charlies who invested too late. Which is to say the cash came from Asia, but the cash is owed by the taxpayer.

    Does anybody else feel "Used" by the alley catted mongrels who bet with your money on a game that couldn't succeed?


  113. Sir my hat is off to you. You are truly the genius of this mortgage disaster. Please go to see Arianna Huffington and Michael Lewis (author of The Big Short)Get ready for a book deal and a movie! What is that old James Bond song: "Nobody does it better!"

  114. In order to save their homes, Americans have to kill off their country.

    LOL, what a hoot!

  115. I have been a small-time real estate investor (just a few units at a time at most) since 1980. I have watched the ups and downs of the RE market for that entire time with interest because it is almost a family hobby.

    But this time, I sense, is different somehow...can't say exactly but it feels weird.

    I am looking to buy another investment property big deal, a few units and I'm shopping Phoenix and southern AZ.

    But what I am seeing out there in the field are properties that have gone to ruin and are taking the entire neighborhoods down with them. I have never seen this level of abandoned structures before and banks letting them go to waste.

    Many of these places cannot be repaired as it does not make economic sense to do so; they will need to be scraped of the expensive proposition and the cost negates much if not all of the value of the lot the structure is built on.

    In other words, a considerable amount of these places are worth zero or less!

    I have the feeling, based on how these sort of issues have worked out in the past, that the banks will win in the courts but that it will take a while to all sort out.

    In the meantime, more properties will be left to rot while the banks get their act together and more neighborhood values will decline. There will be few happy endings as this plays itself out...sad, really.

  116. Dear Gonzalo,

    Man, you are ALL OVER THIS! Kotok IS a liar and a thief! And then his "follow-up" I just read is the weakest piece of garbage to attempt a cover of his tracks. He toots his own horn that so many people responded to "his" article without actually claiming it's his anymore.

    << Wow, there were many, many emails in response to the recent piece entitled “Foreclosure Mess.” Here are some of those observations. >>


    << Some folks missed the opening disclaimer and attributed the piece to me; that was their error. >>

    LIAR! Is lying a job requirement for Cumberland financial advisors? He's not very good at it here.

    Then he blathers on a bunch of RED HERRING distractions, so-called "experts" to interpret "his" analysis. These experts seem a bit confused over the MERS situation, as well.

    << Lastly, Elliot S. wrote and linked websites... "Therefore, they created MERS, which is a registration of the mortgage but not to a bank, but to MERS. MERS is the mortgage holder and the loans are assigned via registration number... The foreclosure is actually performed in the name of MERS..." >>

    Umm... Elliot, honey? Do your homework, dear. MERS has already declared in court documents THEY OWN NOTHING. This includes MORTGAGES, right? This is the problem, Elliot. MERS cannot assign what it does not own. The chain connecting the "promissory note" to the "title" has been irretrievably broken... by MERS. When banks admit in court documents they have "intentionally destroyed" original mortgage records "to not confuse" the situation, they effectively nullified mortage contracts by willful destruction. Make sense, Elliot S? Elliot may have another day job.

    And finally, Mr. Kotok has the self-righteous audacity to attempt the moral high-ground!

    << Had he written without rudeness and expletives the outcome might have been different. It is too bad he had to resort to abusive language. >>

    I know this was your battle, Gonzalo... but may I point out one last thing to Mr. Kotok?

    Hey, David! What do you mean, "Had HE written??" You initially tried to STEAL someone else's writing and pass it off as your own. That's called PLAGIARIZING, big shot! YOU GOT CAUGHT! You don't even have the balls to admit you're a thief and, say... APOLOGIZE, at the least! Typical banker mentality with you guys, eh? Oh! And if you don't like the true author's "rudeness and "expletives, " here's an idea... do your own homework and WRITE YOUR OWN FUCKING ANALYSIS, BUDDY!

    As Charlie Munger advised recently: "Suck it up, buddy! Suck it up and cope!"

    David Kotox = FRAUD

    Gonzalo, you are doing a tremendous service to many people feeling the pain from the DESIGNED DESTRUCTION of this country and the impoverishment of its inhabitants instigated by BANKSTERS! Period! Banker thieves like Cumberland Dave, criminals all! Have you considered any legal recourse against this clown?

    His follow-up also tries to "clarify" the issue with tried-and-true "expert opinion" strawman arguments, which NEVER address primary assertions. They only confuse and cloud the thought process of most folks making the topic opaque and incoherent.

    This guy is just another fraud-meister that got caught. F'n loser!

    Peace to you, Gonzalo!


  117. Dear Gonzalo,

    Man, you are ALL OVER THIS! Kotok IS a liar and a thief! And then his "follow-up" I just read is the weakest piece of garbage to attempt a cover of his tracks. He toots his own horn that so many people responded to "his" article without actually claiming it's his anymore.

    << Wow, there were many, many emails in response to the recent piece entitled “Foreclosure Mess.” Here are some of those observations. >>


    << Some folks missed the opening disclaimer and attributed the piece to me; that was their error. >>

    LIAR! Is lying a job requirement for Cumberland financial advisors? He's not very good at it here.

    Then he blathers on a bunch of RED HERRING distractions, so-called "experts" to interpret "his" analysis. These experts seem a bit confused over the MERS situation, as well.

    << Lastly, Elliot S. wrote and linked websites... "Therefore, they created MERS, which is a registration of the mortgage but not to a bank, but to MERS. MERS is the mortgage holder and the loans are assigned via registration number... The foreclosure is actually performed in the name of MERS..." >>

    Umm... Elliot, honey? Do your homework, dear. MERS has already declared in court documents THEY OWN NOTHING. This includes MORTGAGES, right? This is the problem, Elliot. MERS cannot assign what it does not own. The chain connecting the "promissory note" to the "title" has been irretrievably broken... by MERS. When banks admit in court documents they have "intentionally destroyed" original mortgage records "to not confuse" the situation, they effectively nullified mortage contracts by willful destruction. Make sense, Elliot S? Elliot may have another day job...

  118. And finally, Mr. Kotok has the self-righteous audacity to attempt the moral high-ground!

    << Had he written without rudeness and expletives the outcome might have been different. It is too bad he had to resort to abusive language. >>

    I know this was your battle, Gonzalo... but may I point out one last thing to Mr. Kotok?

    Hey, David! What do you mean, "Had HE written??" You initially tried to STEAL someone else's writing and pass it off as your own. That's called PLAGIARIZING, big shot! YOU GOT CAUGHT! You don't even have the balls to admit you're a thief and, say... APOLOGIZE, at the least! Typical banker mentality with you guys, eh? Oh! And if you don't like the true author's "rudeness and "expletives, " here's an idea... do your own homework and WRITE YOUR OWN FUCKING ANALYSIS, BUDDY!

    As Charlie Munger advised recently: "Suck it in, buddy! Suck it in and cope!"

    David Kotox = FRAUD

    Gonzalo, you are doing a tremendous service to many people feeling the pain from the DESIGNED DESTRUCTION of this country and the impoverishment of its inhabitants instigated by BANKSTERS! Period! Banker thieves like Cumberland Dave, criminals all! Have you considered any legal recourse against this clown?

    His follow-up also tries to "clarify" the issue with tried-and-true "expert opinion" strawman arguments, which NEVER address primary assertions. They only confuse and cloud the thought process of most folks making the topic opaque and incoherent.

    This guy is just another fraud-meister that got caught. F'n loser!

    Peace to you, Gonzalo!


  119. Agree or disagree, someone holds the note. When my note was sold, the bank selling the note notified me of who the new note holder was and where to send my payments.

    It all boils down to; Can you make your monthly payment that you obligated yourself to make or not? If you can not make the payment it really does not matter who holds the note. You still owe someone. Eventually they will find out who it is and you are still on the hook for making the payment.

    They didn't shred your file and burn it.

    Ok, the actual note holder did not file your foreclosure notice but someone filed it for a reason and that reason is YOU WERE NOT PAYING YOUR MORTGAGE PAYMENT. If you want to play the game of finding out who actually holds your note and if it is all legal and such, than stop paying your mortgage payment and you can find out.

    Trust me, in the end no one is going to get out of their foreclosure with the defense of "Is the person foreclosing on me the person that has the legal right to do so?".

    They'll just find the right person or sign the necessary documents and continue on with the foreclosure. It may buy you some more time to live rent free but it will also cost you more by all the legal fees the real note holder will add on to the arearage.

    Remember, those being foreclosed on may not be held liable for the difference of what the bank lent and what they get back after they foreclose and resell the property. But, they can and will come after you for the court costs, legal fees, and missed monthly payments that you did not pay while living in the house. They have seven years to hound you for that money.





  121. If we ask to see our mortgage note from the lender, how do we know if the note has in fact already been forged?

  122. as an outsider I can be more objective than Americans.
    this all happened on GWBs watch. a republican with the iq of a squashed bug.
    you are getting what you deserve for electing that moron to president. he couldn't even run a baseball team- it went bankrup for gods sake!
    the USA empires almost over. in a few years it will be a third rate banana republic.
    ben, scotland

  123. another copy cat...

    by Mark B. Rasmussen ...???
    PLAGERIZING whats going on here

  124. Gonzalo Lira,

    Look your intelligent and a creative writter but lighten up on the dooms day senarios. The banks have a huge mess on their hands and it will cost them and couple grand per house in administrative fees but ultimately, they can cure the title.

    All mortgage notes were recorded. It is the assigments and releases that were not.

    If the recorded Note for the house is to Bank of America, how the hell can MERS foreclose? That is the issue. MERS is a database that holds electronically the assignments for the MBS beast you mentioned. Which is ok as a database but not legally binding for real estate. They need to cure title by recording the assignments and release for every single house at every single court house based off of this MERS database.

    That would be my guess if I were to recomend a solution.

    End of the world no but creative writting definetly.

    I look forward to you next post as you definetly have great insight into many financial issues.


  125. This is interesting, but this has been going on for years. I was told my an attorney that I could get out of paying my mortgage about 8 years ago. He said that it transfers hands so much that the current owner probably doesn’t have the note. I didn’t try to get my house for “free” as he put it. Hopefully most people will ignore this, and know that they should lose their house for not paying. The media not making it a big deal is good. Who wants to spread the word that people could get free homes, knowing that it could collapse the economy. There will be some people take advantage of this. Unfortunately judges don’t judge anymore. They can’t look at the person and ask if they were making payments and if they stopped. How long have you been living in the house? Easy questions to show the person owes the debt. Judges should be allowed to use common sense, and forgo the legal crap. Then we can make a law and regulate going forward.


  126. There are specialty lawyers in this area of practice that claim the only thing needed is to show a transfer of the flow of notes, not actual bygone old days ink signatures.

    This puts to rest the legitimacy issue of the note holder.

    Sorry, but there are no free lunches Gonzola.

  127. 2010 was kinda a bizarre year for the mortgage market. In the first half of the year, you had a decent number of home sales keeping mortgages for purchases stable, thanks to the home buyer credit. In the second half of the year, that changed as demand crumbled when the credit was withdrawn. At the same time, you had very low mortgage interest rates throughout much of the year cause a mini-refinancing boom. 2011 will look very different, as the housing demand continues to struggle and mortgage interest rates have begun rising.

  128. I've just read through all of this, and am impressed by the author's work as well as a great many of the comment's. Keeping in mind that the "system" has been rigged for some time; it is realistic that regardless of how it is resolved, homeowner will remain liable. Thinking otherwise is just wishful.
    Even the Constitution is not a barrier with DC.
    What is not mentioned is the possibility that DC sees an opportunity to grab, and is in the process of evaluating how to "own" more of these mortgages themselves. They need the cash flow and the banks still get paid with more paper up front and this might well boost DC's stability in the currency markets. The more likely reason this is dragging out is the money flow to lawyers, the avoidance of exposing the losses, the continuation of "hope" for main street folks, etc. Just musing here, because in the big picture this is a just one of many side shows destined to be resolved not in favor of main street, but effective at diverting our collective attention from those unseen and unheard who are truly "in control" of the circus were watching. Since this was published we have entered a third conflict, this time without Congress even being asked, yet they don't force the issue. Keep your eye on the big picture and get prepared.
    GL, don't take it seriously, your not living under this regime.

  129. The new mortgage reforms will definitely have a significant impact on the housing market because many prospective homeowners will not be able to meet the stringent income to mortgage payment ratio of 28% and heftier down payments. As a result we will see more renters.

  130. Well, I believe you just made an excellent point. You certainly fully understand what you are speaking about, and I can truly get behind that. Thanks for staying so upfront and so sincere.

  131. One other addition to the mortgage situation is the new mortgage reforms. Less people will qualify for a home and we'll probably see more renters.

  132. Excellent point, the mortgage lenders definitely have a significant impact on the housing market...

  133. Wow! Very interesting news on the foreclosure crisis. I can't believe that banks are suspending foreclosures. I read that there will be a new wave of foreclosures in 2012, lasting around six years. I feel that some mortgage companies like american home mortgage servicing inc out business would be able to help the people who are facing foreclosure. What other reforms will we see in development for 2012?

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