Foreclosure Fraud: 6 Things You Need To Know About The Crisis That Could Potentially Rip The U.S. Economy To Shreds

[Sandra]

Foreclosure Fraud: 6 Things You Need To Know About The
Crisis That Could Potentially Rip The U.S. Economy To Shreds





The foreclosure fraud crisis seems to escalate with
each passing now. It is being reported that all 50 U.S. states

have launched a joint investigation into alleged fraud in the
mortgage industry. This is a huge story that is not going to
go away any time soon. The truth is that it would be hard to
understate the amount of fraud that has gone on in the U.S. mortgage
industry, and we are watching events unfold that could potentially rip
the U.S. economy to shreds. Many are now referring to this crisis
as
"
Foreclosure-Gate", and already it is shaping up to be the worst
thing that has ever happened to the U.S. mortgage industry. At this
point, it seems inevitable that some financial institutions will go under
as a result of this mess. In fact, by the end of this thing we
might see a whole bunch of lending institutions crash and burn.
This crisis is very hard to describe because it is just so darn
complicated, but it is worth it to try to dig into this thing and
understand what is going on because it has the potential to absolutely
decimate the entire U.S. mortgage industry.

The truth is that there was fraud going on in every segment of the
mortgage industry over the past decade. Predatory lending
institutions were aggressively signing consumers up for mortgages that
they knew they could never repay. Many consumers were also
committing fraud because a lot of them also knew that they could never
possibly repay the mortgages. These bad mortgages were fraudulently
bundled up and securitized, and these securitized financial instruments
were fraudulently marketed as solid investments. Those who
certified that these junk securities were "AAA rated" also
committed fraud. Then these securities were traded at lightning
speed all over the globe and a ton of mortgage paperwork became
"lost" or "missing".

Then, when it came time to foreclose on these bad mortgages, a whole
bunch more fraud started being committed. The reality is that the
"robo-signing" scandal is just the time of the iceberg.
The following are six things that you should know about how deep this
foreclosure fraud crisis really goes....

#1 According to the Associated Press, financial institutions were
hiring just about whoever they could find, including hair stylists and
Wal-Mart employees, as "foreclosure experts" to help them rush
through the massive backlog of foreclosures that were rapidly piling
up.

Apparently many of these "foreclosure experts"

barely even knew what a "mortgage" was according to the
AP....

In depositions released Tuesday, many of those workers testified that
they barely knew what a mortgage was. Some couldn't define the word
"affidavit." Others didn't know what a complaint was, or even
what was meant by personal property. Most troubling, several said they
knew they were lying when they signed the foreclosure affidavits and that
they agreed with the defense lawyers' accusations about document
fraud.

#2 There is soon going to be a colossal legal scramble to figure
out who actually owns millions of U.S. mortgages.

In his recent article entitled
"
Invasion Of The Robot Home Snatchers", Robert Scheer described
the complete and total mess that the U.S. mortgage industry has
created....

How do you foreclose on a home when you can't figure out who owns it
because the original mortgage is part of a derivatives package that has
been sliced and diced so many ways that its legal ownership is often
unrecognizable? You cannot get much help from those who signed off on the
process because they turn out to be robot signers acting on automatic
pilot. Fully 65 million homes in question are tied to a computerized
program, the national Mortgage Electronic Registration Systems (MERS),
that is often identified in foreclosure proceedings as the owner of
record.

Meanwhile, more organizations are stepping forward to help homeowners
fight foreclosures. National People's Action, PICO National
Network, Industrial Areas Foundation, Alliance of Californians for
Community Empowerment and the Northwest Federation of Community
Organizations have all partnered with the SEIU to launch the

";Where's The Note" campaign which is going to encourage
homeowners to demand to see the note before submitting to a
foreclosure. Campaigns such as this are going to make foreclosures
much more costly for banks.

#3 Legal battles over foreclosure documents could soon spawn thousands
upon thousands of lawsuits across the United States.

Adam Levitin, a Georgetown University Law professor who specializes
in mortgage finance and financial regulatory issues was recently quoted
in an article on CNBC as
saying the following about the situation we are currently in....

The mortgage is still owed, but there's going to be a problem figuring
out who actually holds the mortgage, and they would be the ones bringing
the foreclosure. You have a trust that has been getting payments from
borrowers for years that it has no right to receive. So you might see
borrowers suing the trusts saying give me my money back, you're stealing
my money. You're going to then have trusts that don't have any assets
that have been issuing securities that say they're backed by a whole
bunch of assets, and you're going to have investors suing the trustees
for failing to inspect the collateral files, which the trustees say
they're going to do, and you're going to have trustees suing the
securitization sponsors for violating their representations and
warrantees about what they were transferring.

#4 The problems with foreclosure paperwork may be more widespread
than anyone would have dared to imagine.

Attorney Richard Kessler recently conducted a study in which he found
"serious errors" in approximately 75 percent of the court
filings related to home repossessions that he examined. Now he says
that the foreclosure crisis could haunt the U.S. mortgage industry

for the next ten years....

"Defective documentation has created millions of blighted titles
that will plague the nation for the next decade."

#5 If some banks discover that they are missing the paperwork for
large numbers of mortgages (as is currently being alleged), those banks
could be forced to significantly revalue those assets (as in "close
to zero") on their balance sheets.

John Carney of CNBC recently
described it this way....

The most damaging thing that could happen to banks would be the
discovery that they simply cannot prove they hold a mortgage on a house.
In that case, the loan would probably have to be written down to near
zero. Even for current loans, the regulatory reserve requirements would
double as the loan would no longer be a functional mortgage but an
ordinary consumer loan. Depending on the size of the “no docs” portion of
the loan portfolio, this might be a minor blip or require a bank to raise
new capital to fill the hole in the balance sheet.

#6 Renowned investor Jim Sinclair is actually warning that the
collapse of securitized mortgage debt could be the "final shot"
that will wipe out many financial institutions across the United
States.


The recent warning that Sinclair posted on his blog is more than a
little sobering....

I am asking for your attention again because of the depth of the fraud
and now the size of the securitized mortgage debt OTC derivative pile of
garbage that is in the trillions. This entire mountain of weapons of mass
financial and social destruction is now in question. I have been telling
you this for more than 2 years since the manufacturers and distributors
of this crap were called by the NY Fed due to the loss of control over
the paperwork.

I had dinner with my former partner, then lead director of and CEO of
Bear Stearns. I could not contain myself so I asked him why he did so
much business in OTC derivatives which were certain to bankrupt them. The
answer I got was it was more than 50% of their profit. The right answer
should have been it was more than 80% of their earnings.

Securitized mortgage debt is going to be the final shot that kills all
kinds of financial entities in the Western world. The biggest holder of
this putrid junk is pension funds.

Meanwhile, the stock market continues to go up, up, up as if
everything is right in the world and as if a juicy new bull market is now
upon us.

Well, let's all join hands and sing happy songs around the
campfire.

Perhaps if we all close our eyes and wish real hard all of this
foreclosure fraud will just go away.

Then again, maybe not.



http://beforeitsnews.com/story/214/946/Foreclosure_Fraud:_6_Things_...

[Sandra]

Good ole Freddie and Fannie are still washing money to don't forget. No oversight we all know that, they do as they please and have for a very long time.

[Sandra]

(From a real-estate friend of mine) Not sure what it all means for future but for sure, not good. Note that pensions will be gutted because they funded these junk packages.

It might be wise to take as much from pensions now and reinvest elsewhere as possible.

For sure this could well be the death knell. Forewarned is forearmed. My friend is not a financial expert but even the least knowledgeable of the workings can see this will be an unmitigated disaster.