Inquiring minds are looking into the Foreclosure Crisis and seeing the issue reaching critical mass after simmering for the last 3 years. The primary problem is:
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.
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.
Why is this important. The answer is twofold:
1) To be enforcable real estate contract it must be written and recorded in the county of the real estate.
2) The foreclosing party must show both ownership and injury to have standing in a court of law.
That is a big problem since Wall Street’s Genius’ decided to colaterize home loans:
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.
All this with foreclosures rising and forming the second ‘hump of the camel’.
Can anyone hear Governor Schwarzenegger say, “This is getting better by the moment.”
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