Sunday, February 12, 2012


Mr. Henry Potter (Lionel Barrymore), the richest man in Bedford Falls and owner of half of it, sporting his omnipresent scowl. Fictional as it seems in the Capra film . Reflects the Banks of today.

The recent Massachusetts Supreme Court ruling against Wells Fargo and U.S. Bancorp is likely to bring foreclosures to a crawl, resulting in a further destabilizing of housing markets.  The Court ruling is a major win for debtors and a severe blow for creditors trying to clear a backlog of millions of defaulted mortgages. California, New York, Nevada, Florida and Massachusetts are among the states that haven’t signed off on a settlement with banks over foreclosure abuses, according to state officials and two people familiar with the talks.The holdouts include some with the highest rates of foreclosures. More than 6 percent of Nevada housing units had at least one foreclosure filing in 2011, the nation’s highest rate, according to RealtyTrac. California was third-highest with more than 3 percent, said the firm, which tracks foreclosures.California Attorney General Kamala Harris and New York Attorney General Eric Schneiderman, who have been among the most outspoken in pushing for changes to the accord, were among those who hadn’t joined as of a Feb. 6 deadline. More than 40 states signed on, said Iowa Attorney General Tom Miller, who is helping to lead talks with the banksThe Massachusetts Court set aside two foreclosure sales, citing failure by the banks involved to prove that they actually owned the mortgages at the time of foreclosure.  The Court’s ruling stated that “We agree with the judge that the plaintiffs, who were not the original mortgagees, failed to make the required showing that they were the holders of the mortgages at the time of foreclosure. As a result, they did not demonstrate that the foreclosure sales were valid to convey title to the subject properties, and their requests for a declaration of clear title were properly denied.”The court ruling centers on paperwork errors made when mortgages were purchased from lenders and combined into pools that were assigned to a trustee to be converted into mortgage backed securities (MBS) which were then sold to investors.  During this securitization process, mortgages were commonly assigned multiple times before winding up in a trust.  Often times, the assignment did not follow proper procedures or was not done at all, calling into question the legal right of the trustee to take title in foreclosure.Due to the vast numbers of mortgages that were securitized during the mortgage mania, the foreclosure mess could become catastrophic for the banks, housing market and financial system.  According to Wikipedia, “There is about $14.2 trillion in total U.S. mortgage debt outstanding.  There are about $8.9 trillion in total U.S. mortgage-related securities.  The volume of pooled mortgages stands at about $7.5 trillion.  About $5 trillion of that is securitized by government sponsored enterprises or government agencies, the remaining $2.5 trillion pooled by private mortgage conduits”.
“Adding more numbers probably improves the political dimension of the settlement from the standpoint of the attorneys general,” said Ken Scott, a Stanford University law professor. “If you can say there were only a handful of diehards that didn’t sign on, that gives you some political protection.”
All 50 states announced almost 16 months ago they were investigating bank foreclosure practices following disclosures that faulty documents were being used to seize homes. Officials from states and federal agencies, including the Justice Department, have since negotiated terms of a proposed settlement with five banks that is said to be worth as much as $25 billion.

Another point is that banks don't want any one to own their homes , the fixed rates in mortgagees 30 years for example is too high for any one to pay off and own . The BANKS PROFIT FROM HIGH FIXED MORTGAGEES .
Very good point – many view the banks as the tip of the spear in the real estate/mortgage fiasco.
It becomes harder to point the finger, however, when viewed in the larger context. The banks were front and center in the mortgage boom and real estate crash but they couldn’t have done it without a large supporting cast including underwriters, mortgage originators, real estate agents, appraisers, credit agencies, Wall Street, Fannie, Freddie, federal regulators, the Federal Reserve, home buyers – the list goes on. As the mortgage lending and real estate bubble expanded, the prospect of easy wealth via real estate appreciation captured the entire nation.
The problem now is how to repair the damage that was done without creating another financial crisis.
Meanwhile, under the theory that all the bad news is already discounted, financial stocks continue to rally. Go figure.

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