by Asher B. Edelman
It is clear that the banks would not have suspended all residential foreclosures for humanitarian reasons. The banks were achieving their objective, a very high percentage of successful foreclosures. Why, then, did foreclosures suddenly become forbidden?
The banking community was caught, caught illegally foreclosing and declaring that all was legal. They understood the possible magnitude of their liability. Here is an outline of the details:
When foreclosures and evictions take place it is required, in most States, that the foreclosing institution actually have physical possession of a signed note providing for payment of the mortgage loan. In the case of “bundled” loans (packaged mortgage loans) these documents are often not available to the foreclosing institution, partly because in the securitization process the note changed owners frequently – often not well documented. Frequently these signed documents did not follow the ownership. Sometimes the transfers themselves were not documented properly, thereby breaking the chain of title. If the change of title had been left improperly documented or the signed note was not able to be produced, foreclosure is not possible under most State laws. In fact, the borrower technically no longer owes the debt!
The institutions hired lawyers (foreclosure mills) to attest to and, in some cases, create documents in lieu of the proper ones. They were caught. That is why a moratorium on foreclosures has been declared.
The liability of these institutions to shareholders, bondholders, holders of the bundled mortgages, new homeowners, title companies, foreclosed homeowners, etc. is huge. In addition the mortgage packages owned by the institutions require substantial write-downs.
To save the banks from this new spate of mismanagement and bad behavior will require more tax payer money than in previous years. Let’s hope this time government will look at solutions healthier for the nation than those instituted previously.