Welcome to the new version of European Tribune. It's just a new layout, so everything should work as before - please report bugs here.
Display:
Is there anyone around who can explain in 3 sentences without too many economical terms what the foreclosure fraud MEANS?
by Nomad on Wed Oct 13th, 2010 at 03:23:13 PM EST
Ownership of land and property is based on title - documents (e.g. deeds) that are bearable = who holds the documents also 'owns' the property, even if temporarily, until a debt (i.e. a mortgage) is paid in full.

If the debt part of the title has been 'extracted' and resold to multiple investors, and further bets on that debt have been resold, it then becomes impossible to decide who owns that title.

If the land or property market is expanding, and the mortgage debtor continues to pay the agreed amortization (paying off the loan they took to eventually buy the property outright), then these 'lay-offs' (a bookmakers' term for reducing their exposure to potential large pay-offs) remain hidden i.e. they depend on a rising market to conceal 'match-fixing'.

And of course this is all built on the illusion of a perpetually rising market. When - who could have predicted - the market falls, and simultaneously mortgage debtors can no longer keep up the agreed amortization payments, a process called foreclosure is instituted whereby the physical asset (land or property) is reclaimed by the current owner of title. This is done in order to sell off the asset to recover as much of the debt as possible. So far so good.

But in order to foreclose, ownership of title must be legally established. If the mortgage debt has been subdivided and that bets on that debt have been resold  - it becomes very difficult to establish who actually has title.

The fraud emerges in companies trying bypass title. The law is relatively simple = who has the bearer deeds has the title, and thus owns the debt. The scramble now is to establish title - by other means.

You can't be me, I'm taken

by Sven Triloqvist on Wed Oct 13th, 2010 at 03:58:39 PM EST
[ Parent ]
add skin of 2 newts (huge public trust in the safety of their title deeds to their properties, and/or the faith that their mortgage payments were faithfully and accurately recorded), add 3 pickled snake cadavers (fake, untrained workers pretending to be efficient processors and adjudicants regarding the paperwork), 6 whipped dragon eggwhites ( the creaking sound as one of the main pillars of capitalism's freaking reason for being starts splitting and yawing).

it's uri geller time!

stir vigorously with a spoon of 'finally' (who could have predicted?), season with several sprinkles of epic comeuppance, NOT (record bonuses and profits for chief ripoff agents), and stand back and watch a new universe emerge out of the big bang of ensuing chaos, as millions of americans wake to the sound of the bank repossessing the house grandpa bought lock stock and barrel years ago. having little better to do, they will probably decide to mosey on down to their local banks and town meetings to gently remonstrate with local officials and bank managers.

lawyers will line up like taxi drivers at the airport.

a big cleanup crew is anticipated, parental guidance is recommended, some of the scenes may contain graphic material.

"We can all be prosperous but we can't all be rich." Ian Welsh

by melo (melometa4(at)gmail.com) on Wed Oct 13th, 2010 at 04:04:57 PM EST
[ Parent ]
Well, ARG has a better handle on this than I do. But my take is generally as follows.

In creating mortgage backed securities, the geniuses of the financial world didn't bother with pesky formalities like proper transfer of the note (the debt document). That wasn't a problem as long as people were paying their loans, but in the course of foreclosure proceedings it has become increasingly apparent that many of the foreclosing companies do not actually hold the note, and thus cannot foreclose - indeed, in many cases it seems to be impossible to legally establish who owns it; the fraud comes in because these companies started inventing paper to cover up the fact.

Now if the MBSs don't actually, legally hold the notes on which they are based, they are worth, in the worst case, about the price of a pair of stinky socks. (3 sentences!)

To my mind, the fraud business could well be simply the water-running-out phase of the tsunami cycle.

The fact is that what we're experiencing right now is a top-down disaster. -Paul Krugman

by dvx (dvx.clt ät gmail dotcom) on Wed Oct 13th, 2010 at 04:16:50 PM EST
[ Parent ]
Glad to see that my presence was not required! This could as dramatic as watching a nuclear explosion at 100 pico seconds per second, except that we have a much less clearer understanding of what to expect.

As the Dutch said while fighting the Spanish: "It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Wed Oct 13th, 2010 at 05:38:17 PM EST
[ Parent ]
My internet connection was out from 8 AM until about noon today. Most annoying. A five minute interruption is not so bad, but, in this case, it seems to have been an eight hour interruption. I complained about the lack of redundancy in their feed and noted that anytime a drunk hit a phone pole between here and Harrison AR, ~100km, we lose internet for a day. They said a fiber optic repeater had failed. I asked, if that was the case, was not the fiber into and out of the repeater connecterized and why couldn't they just change out the repeater? I got no good answer. I think the cable reliability is more like three nines than five nines.

As the Dutch said while fighting the Spanish: "It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Wed Oct 13th, 2010 at 05:48:19 PM EST
[ Parent ]
its that Just in time supply system,  they've got someone from 'Buisness' who reckons they can run things cheaper by keeping no stock of spares, because you cant go anywhere else for supply, so when something goes wrong they have to ring their suppliers, who have a similar idiot in charge who also has no stock of spares, but it's all cheap.

Any idiot can face a crisis - it's day to day living that wears you out.
by ceebs (ceebs (at) eurotrib (dot) com) on Wed Oct 13th, 2010 at 07:25:11 PM EST
[ Parent ]
Yeah, but I used to include clauses in the contracts for telephone and data system, etc. that the contractor had to have a supply of spares in stock for all items that could cause a single point of failure. But that is so 20th century and I know not who would enforce such a claim on cable companies. But with only one high speed path into Mtn. Home, a fiber cable along the highway from Harrison, a drunk in a truck can easily cause a 12 hr. outage. Either reason should be unacceptable. Should be.

As the Dutch said while fighting the Spanish: "It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Wed Oct 13th, 2010 at 11:34:28 PM EST
[ Parent ]
I hate to be seen as the defender of the insane, especially as I am at the end of several segments branched off from oblivion and get outages often. Three 9s you say...yeah; the 9th, the 19th and the 29th...

On the other hand, there are so many potential points of failure to cover, many of which have significantly high MTBF that it is a tough proposition to cover everything adequately across the many spokes in the wheel.

Plus, if I was mister clever guy balancing the stores, I would know that there is also a high percentage of my replacement stock that is out of date a few minutes after unpacking it, undoubtedly the software/firmware and often the hardware itself.

I was just reading about some of the cool optical things coming out of Cisco for example, doubling the amount of data that can be delivered by polarizing (spinning) some streams of the photons, which can be kept separate of the original stream. That technology will only continue in the same way that the change in the way they built the magnetic bits of the hard disk has given us terabyte drives recently. Point is, I'm not going to over stock my back ups if I can get new cooler more efficient possibly cheaper stuff that swaps in just as well.

Anyway, just following a thought. I also have a 3G USB stick that gets me out of jams when they have an outage. I pay for a couple hours per month, and it goes months without use. One month they cut us off for nearly a week and I left the GSM on much of those days. They charged me up the wazoo, and we protested that they weren't delivering promised service and amazingly they gave us a credit. Score one for France Telecom.

Never underestimate their intelligence, always underestimate their knowledge.

Frank Delaney ~ Ireland

by siegestate (siegestate or beyondwarispeace.com) on Thu Oct 14th, 2010 at 06:36:47 AM EST
[ Parent ]
Yeah, but a fiber-optic repeater is a commodity, even if newer ones are somewhat better they are backwards compatible. And there will be hundreds installed even in Mountain Home, pop. ~15,000. There are some (relatively minor) costs you have to pay for greater reliability. Cable companies don't have to pay it.

As the Dutch said while fighting the Spanish: "It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Thu Oct 14th, 2010 at 10:00:20 AM EST
[ Parent ]
What you say is not untrue. Worst part for me is that my neighbor, with phone lines which parallel mine all the way to the box, ends up with 12 Mb of internet speed, while I end up with 2. If I suddenly get 12, summer 2010 must be coming, because that is when it was promised to me too.

Never underestimate their intelligence, always underestimate their knowledge.

Frank Delaney ~ Ireland

by siegestate (siegestate or beyondwarispeace.com) on Thu Oct 14th, 2010 at 12:43:05 PM EST
[ Parent ]
Foreclosure for dummies (in 5 easy parts)

This is way, waaaay, bigger than most people realize. This is going to blow up in an absolutely flabbergasting way.

Wind power

by Jerome a Paris (etg@eurotrib.com) on Wed Oct 13th, 2010 at 04:51:58 PM EST
[ Parent ]
I'm reading it as the critical test of the US as a viable political entity.

If there's a successful effort to write some new rules that favour Wall St and its mess at the expense of home owners, we can stop pretending that the US is anything other bandit country.

Ironically, a huge gladiatorial contest with thousands of hungry lawyers is the best possible outcome, because it's the only thing that could be mistaken for something that looks like accountability.

But I think I'm going to have to bet on the former. Law and order, justice and due process may well be dead concepts in US politics, and once Wall St realises this, things are going to get really ugly.

by ThatBritGuy (thatbritguy (at) googlemail.com) on Wed Oct 13th, 2010 at 05:39:55 PM EST
[ Parent ]
I'm reading it as the critical test of the US as a viable political entity.
I am seeing friends of friends on Facebook claiming that it has been shown convincingly that the crisis is all the fault of the government for forcing banks to give mortgages to minorities.

I'm assuming the number of people who believe this stuff is of the order of those who believe Obama is a Nigerian-born Socialist bent on installing death panels. Which is about 30% of the voting public by some accounts.

Boy, are they fucked as a viable political entity.

By laying out pros and cons we risk inducing people to join the debate, and losing control of a process that only we fully understand. - Alan Greenspan

by Migeru (migeru at eurotrib dot com) on Wed Oct 13th, 2010 at 07:23:08 PM EST
[ Parent ]
Comment on dKos:

Vote Democrat this November - because you can only destroy one crony-capitalist party at a time.
by ThatBritGuy (thatbritguy (at) googlemail.com) on Wed Oct 13th, 2010 at 08:59:51 PM EST
[ Parent ]
Boy, are they fucked as a viable political entity.

Fortunately the asdf and ATinNM families have already made reservations in Finland.  As soon as Sven (the lazy bugger) gets those goddamn shelves up four people, five cats, a dog, and 20,000 books will be arriving -- COD -- on his doorstep.

Skepticism is the first step on the road to truth. -- Denis Diderot

by ATinNM on Wed Oct 13th, 2010 at 09:13:00 PM EST
[ Parent ]
My sister today accused me of stealing some of her books--25 years ago. I told her that she could have a few dozen boxes of mine if she wanted--thus reducing Sven's COD bill...
by asdf on Thu Oct 14th, 2010 at 01:17:23 AM EST
[ Parent ]
Oh what a relief!

BTW Have your books delivered directly to the Stora Enso pulp and paper mill in Oulu.

You can't be me, I'm taken

by Sven Triloqvist on Thu Oct 14th, 2010 at 02:54:04 AM EST
[ Parent ]
Let's not get all foamy at the mouth until they're shooting brown people instead of the foreclosure thugs stealing their houses.

you are the media you consume.

by MillMan (millguy at gmail) on Wed Oct 13th, 2010 at 09:56:37 PM EST
[ Parent ]
I'm not sure I understand who you imply is stealing whose house.

By laying out pros and cons we risk inducing people to join the debate, and losing control of a process that only we fully understand. - Alan Greenspan
by Migeru (migeru at eurotrib dot com) on Thu Oct 14th, 2010 at 04:45:14 AM EST
[ Parent ]
And when it does, it's going to make the last three years look like a walk in the park.

If you thought a month-long market seizure, the failure of Northern Rock, Bear Stearns, Lehman Brothers, and Iceland was bad, the next round is going to be worse.

This is what happens when governments spend three years trying to restore an unsustainable (and fraudulent) status quo rather than reform the system.

By laying out pros and cons we risk inducing people to join the debate, and losing control of a process that only we fully understand. - Alan Greenspan

by Migeru (migeru at eurotrib dot com) on Wed Oct 13th, 2010 at 07:16:47 PM EST
[ Parent ]
by Melanchthon on Wed Oct 13th, 2010 at 05:24:09 PM EST
[ Parent ]
Not in three sentences, but there are some nice quotes from other sources such as Naked Capitalism in this thread.

By laying out pros and cons we risk inducing people to join the debate, and losing control of a process that only we fully understand. - Alan Greenspan
by Migeru (migeru at eurotrib dot com) on Wed Oct 13th, 2010 at 05:44:42 PM EST
[ Parent ]
Reading that thread was the reason why I posed the question today... I could sense it was Big - except that I didn't grasp the mechanism behind it.

And somewhere, I now wish I hadn't asked. I'm tired to death of interesting times.

by Nomad on Wed Oct 13th, 2010 at 06:54:09 PM EST
[ Parent ]
The financial sector fraudulently originated mortgages, fraudulently securitised (created bond out of) them, and when people stopped paying is fraudulently going about taking away the mortgaged properties (which is a necessity since the loans were fraudulently originated).

We're potentially looking at insolvency for the major US financial institutions, huge class-action suits by both bond investors and wrongly foreclosed mortgagees, and the end of the rule of law and/or legal security around property records in the US.

If you take the view that the rule of law and a functioning property register are some of the key institutional factors explaining the success of capitalism in the last couple hundred years, you're potentially looking at the end of capitalism as we know it in the US.

By laying out pros and cons we risk inducing people to join the debate, and losing control of a process that only we fully understand. - Alan Greenspan

by Migeru (migeru at eurotrib dot com) on Wed Oct 13th, 2010 at 05:49:54 PM EST
[ Parent ]
"the end of the rule of law and/or legal security around property records in the US?"

All well and good for a rational person trained in physics and math to think that, but there's a better than even chance you're underestimating the prejudices and corruption inherent in the US "justice system."

Property rights may be more "sacred' in the US than anywhere else (pointing to exactly what's wrong with the civilization as a while), but me bets they're more sacred for financial engineers who own the government than for pigmented people who were sold a bill of goods.

Though it will be interesting to see how Geithner deals with the next Dust Bowl.

"Life shrinks or expands in proportion to one's courage." - Anaďs Nin

by Crazy Horse on Thu Oct 14th, 2010 at 03:32:12 AM EST
[ Parent ]
Grumble.

By laying out pros and cons we risk inducing people to join the debate, and losing control of a process that only we fully understand. - Alan Greenspan
by Migeru (migeru at eurotrib dot com) on Thu Oct 14th, 2010 at 04:46:40 AM EST
[ Parent ]
Is there anyone around who can explain in 3 sentences without too many economical terms what the foreclosure fraud MEANS?

It means either the entire global economy has gone bye-bye or governments are going to have to toss out current banking laws and regulations and start over because $14 trillion dollars of Collateralized Mortgage Obligations (CMO) just went south and who knows how much in derivatives based directly or indirectly on CMOs that are now in legal limbo land.

Skepticism is the first step on the road to truth. -- Denis Diderot

by ATinNM on Wed Oct 13th, 2010 at 08:55:52 PM EST
[ Parent ]
who knows how much in derivatives based directly or indirectly on CMOs that are now in legal limbo land

To give an idea of the range of what has been thrown into question:

The ISDA reported in April 2007 that total notional amount on outstanding credit derivatives was $35.1 trillion with a gross market value of $948 billion (ISDA's Website). As reported in The Times on September 15, 2008, the "Worldwide credit derivatives market is valued at $62 trillion".

Putting that in perspective, the total global yearly GNP is estimated to be $67 trillion.  

Skepticism is the first step on the road to truth. -- Denis Diderot

by ATinNM on Wed Oct 13th, 2010 at 09:03:06 PM EST
[ Parent ]
And that's the good news.

As I've said before - what are the odds that at least some other consumer and 'professional' financial obligations aren't in a similar state?

by ThatBritGuy (thatbritguy (at) googlemail.com) on Wed Oct 13th, 2010 at 09:09:12 PM EST
[ Parent ]
Spreading joy where 'ere I go.  Little Mr. Ray of Sunshine, I is.

Skepticism is the first step on the road to truth. -- Denis Diderot
by ATinNM on Wed Oct 13th, 2010 at 09:15:11 PM EST
[ Parent ]
It will be all be over by Christmas.

For non-trivial values of 'it.'

by ThatBritGuy (thatbritguy (at) googlemail.com) on Wed Oct 13th, 2010 at 10:01:23 PM EST
[ Parent ]
ATinNM:
governments are going to have to toss out current banking laws and regulations and start over
You mean "Basel III" didn't just save the day a couple of weeks ago?

By laying out pros and cons we risk inducing people to join the debate, and losing control of a process that only we fully understand. - Alan Greenspan
by Migeru (migeru at eurotrib dot com) on Thu Oct 14th, 2010 at 04:46:14 AM EST
[ Parent ]
I'm waiting for Basil I.  If nothing else we can use it to make pesto.

Skepticism is the first step on the road to truth. -- Denis Diderot
by ATinNM on Thu Oct 14th, 2010 at 10:52:36 AM EST
[ Parent ]

Display:

Occasional Series