Friday, October 8, 2010

You maniacs! Damn you... all to hell!

On Tuesday I made the first post about what is becoming to be known as the US Foreclosure Fraud Crisis.

It is a major, evolving and significant story on a scale that is simply profound.

In a nutshell “it appears that on a widespread and probably pervasive basis (the banks) did not take the steps necessary to own the note... which means that in 45 out of the 50 states they lack the legal right to foreclose... So they have simply created a system where servicers hire foreclosure mill law firms whose business is to forge documents showing or purporting to show they have a legal right to foreclose."

The import of this cannot be understated. There are trillions of dollars in mortgages bundled into mortgage backed securities. And as this document fraud is exposed it is entirely possible that these trillions of dollars in mortgage backed securities could have NO backing whatsoever!

That means they are worthless!

As the Washington Post newspaper notes, this chaos in the mortgage industry could prose a much wider peril.

  • Millions of U.S. mortgages have been shuttled around the global financial system - sold and resold by firms - without the documents that traditionally prove who legally owns the loans.

    Now, as many of these loans have fallen into default and banks have sought to seize homes, judges around the country have increasingly ruled that lenders had no right to foreclose, because they lacked clear title.

    These fundamental concerns over ownership extend beyond those that surfaced over the past two weeks amid reports of fraudulent loan documents and corporate "robo-signers."

    The court decisions, should they continue to spread, could call into doubt the ownership of mortgages throughout the country, raising urgent challenges for both the real estate market and the wider financial system...

    For big banks, "there's a possible nightmare scenario here that no foreclosure is valid," said Nancy Bush, a banking analyst from NAB Research. If millions of foreclosures past and present were invalidated because of the way the hurried securitization process muddied the chain of ownership, banks could face lawsuits from homeowners and from investors who bought stakes in the mortgage securities - an expensive and potentially crippling proposition.

    For the fragile housing market, already clogged with foreclosure cases, it could mean gridlock and confusion for years. And there is concern in Washington that if the real estate market and financial institutions suffer harm, it could force the government to step in again.

Do not underestimate the impact of these developments.

How long before all foreclosures executed within the past 2-3 years have to be retried? How many millions of existing home sales will be put in jeopardy, those homes which were foreclosed upon and then resold?

All of the big banks have legacy assets which are currently marked up in value to cost and above. Because of the mark-to-market nonsense, this now represents a large amount of capital for the Western world’s financial entities.

And a number of Canada's big five banks also have large exposure to US mortgages.

As I have said, this issue has the potential to be far more explosive and crucial than the collapse of Bear Sterns and Lehman Brothers in 2008.

Gather everything together that is going on.

An economy in tatters. A looming crisis in individual US state funding. Massive looming obligations in pensions, social security and healthcare.

And now this.

It isn't a question of whether or not there will be QE2. It's a question of when will QE3, 4, and 5 come.

The United States is going to have to print money to infinity.

Do you see any other way out?

If not, you have the foundation of a genuine currency crisis.

Mortgage backed securities, over the counter (OTC) derivatives, all have been confusing financial products that critics have called time bombs that will blow up the Western economy.

I'm starting to understand what they mean by that.



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  1. Great stuff, Whisperer! Keep it up!

  2. The scenario described in this article adds fuel to the hyperinflation argument put forward by Jim Sinclair and Gonzalo Lira.

  3. CNBC: Bank of America halts foreclosure proceedings in all 50 states:

    How long until the US housing market goes no-bid? I certainly wouldn't be willing to buy a house-- any house, even one without a mortgage, given the current uncertainties surrounding titles. Heck, I wouldn't even trust title insurance to cover me, given that some title insurers may go under with the volume of claims they're sure to see following these revelations...

  4. Thanks m for the link to the video M...

    What a web we weave when first we practice to deceive.

    Someone is going to have to press the reset button as this is going to freeze the resale market down south.

    Remember that we are an island and nothing touches our economy, prices always go up...!

  5. what happens when copper goes up in value? lol

  6. I first watched this video about 18 months ago when Iceland was melting down, with all the slicing and dicing going on, it was obvious to me that it would all end very badly.
    Its 90 minutes long and worth watching.

  7. Thanks to all for the comments and links.

  8. A very interesting post and if true is a huge bomb that if known to the general public would probably be end game.

    Quoted from Calculated risk blog:

    "You misperceive my argument. I am saying that in most instances the plaintiff probably DOES own the mortgage and probably DOES have a right to the foreclosure, with reference to extant documents which have never been lost or misplaced. But instead of going and getting that evidence, they are engaged in wholesale evidence fabrication.
    Lets take an analogy. SMITH commits a murder. There exists physical evidence that SMITH committed the murder. There are eyewitnesses. All the detectives have to do is go out and interview witnesses, secure the video of the crime, obtain ballistic evidence, and various kinds of forensic evidence. They have the makings of a terrific case.
    But that would require a lot of effort and require that these detectives leave their favorite donut shop. So the detectives simply arrange for their forensics specialists to CREATE the necessary evidence to obtain a conviction. SMITH is guilty anyway, so what is the difference?
    I am telling you that the entire industry have been FABRICATING ESSENTiALLY ALL OF THE EVIDENCE for years. Plain and simple.
    Many in the industry will tell you that this is OK, because the borrower owes the money and they are entitled to it! Rules of evidence be damned! Judges be damned."

    So if true they have the paperwork but forge doc's to cut corners and this has happened for years. WTF!

  9. Does this happen in Canada and if so I am going to get a house tommorow and then default and show that evidence of the foreclosure has been fabricated to the court. This will stop the foreclosure due to fraud.

    Man if this is true this is insane.....