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Discussion Starter #1 (Edited)
It is unbelievable.

I would imagine that everyone is informed of the problems in the US regarding the issuance of mortgage foreclosures. Of course, any reasonable person would expect that someone who fails to live up to the terms of their mortgage should not be allowed to stay in the property. That is not only reasonable, but necessary to protect contract law. If it were not so, nobody would be able to get a mortgage as all lending would soon dry up.

But.......and it is a big enough "but" that it could bring down the whole US financial system.........the big banks have agreed to a moratorium on foreclosures for a reason.

In the US, there is a company that performs the registration process for the mortgage lenders. The company is known as Mercorp and is supposed to validate ownership of the property. It is becoming apparent that for years they farmed the work out to a subsidiary company called MERS (Mortgage Electonic Registration Systems).

Fine so far, but here it gets crazy.

According to court testimony, MERS has no employees. They farm the work out further to debt collection agencies, mortgage brokers, and any other assorted groups of people who have the ability to sign their names on documents. In order to make it "official" looking, these people could sign up online and receive a title as an Officer of a law firm that represented MERS. This procedure made it look as though the people worked for the law firm, when they did not.

The problem is that each of these robo-signers were signing thousands of documents a day, had no access to resources to check properties or land titles and virtually did nothing more than simply sign the paperwork.

Now, everything is cratering. People who paid cash for their homes are being given eviction notices. People can't find out who owns their mortage and can't make the payments. People who buy homes are subject to eviction, if it turns out later that the paperwork is wrong. They could be paying someone who doesn't actually hold legal title to the home.

Many questions and investigations have been raised and started.

A major concern is that Fannie and Freddie (the US equivalent of our CMHC government mortgage guarantor) was sold Billions of these mortgages under false statements. They were sold mortgages that didn't fit within their rules.

By law, Freddie and Fannie could send these mortgages back to the banks, but herein lies the problem.

To do so, would bankrupt the banks.

The housing industry, especially the financial side of it, depends on consumer perception. No one is going to buy a foreclosed home if they are not sure they will own it. Housing sales are dropping like a rock.

As the US Government discusses another round of quantitive easing, it is possible that the banks will require this money to stay afloat, but the American people will not likely accept any part of it.

We now know why the banks were slow to foreclose for so long. They didn't want anyone digging around and finding all this out.

These new events have the capacity to bring the financial system to it's knees and stock market investors need to be very wary these days.

Even in Canada, we could wake up and find a total flight to safety in gold or some other commodity. People may just take all their money out of investments and keep it under the mattress.

It is hard to believe that these banks and other financial insiders could have so callously disregarded the law for the sole purpose of pumping up their revenues, so they could collect bigger bonuses. It was all about greed, and the belief they would somehow get away with it.

Trust is a major ingredient for the financial system to work, and these people have set about to totally destroy any trust people would have in any system.

Obama and the Government is now faced with a hard choice. Do they ensure that contract law is followed and insist the documentation is in place to foreclose on a property. Or, do they recognize that the big banks could be decimated by forcing them to accept the mortgages back. Or lastly, does he dare tell the US population that they government is going to bail out the banks once again for scandulous and illegal behaviour?

Gosh, he must be having trouble sleeping these nights.

Tread carefully with your investments, and watch the news.........it is going to heat up from here.
 

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I'd say if the government is going to be guaranteeing mortgages, they have a duty of care to ensure that the loans and contracts they are guaranteeing are in good order. At least a random audit of every thousandth mortgage... They are as much a party to the agreement as the bank or the borrower.
 

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The Alt-A and ARM reset mortgages renewals peak in 2011. This bubble will make the sub-prime crisis look like child's play. Buyer beware!
 

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I first heard of these problems with mortgages a few years back.

See even according to contract law... the person who owns the mortgage must be the one who enforces it.

So a few lawyers who were helping the people in foreclosure required the mortgage owner to show up to enforce rather than accept a "proxy" The problem is that the mortgages were securitized (split up into multiple pieces) and sold to investors. The owner of the mortgage might be 10 or even 100 people. So unless these investors all showed up the foreclosure was not possible. The company who was in charge of splitting these mortgages is not the owner.

For the same reason it is impossible for these people to rework their loans. They may have 10 different owners for the mortgage all of whom have to be contacted to agree to the terms.

It's a horrible mess. The only solution I foresaw a while back was for the government to step in and legislate a different solution. Even the investors would be much better off keeping people in their homes, reducing the interest rates and at least getting their capital investment back even if there was no ROI. With a foreclosure the investors are not getting their money back.
 

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Considering how they issued the debt in the first place, another RE screw up is not entirely surprising. I can understand how they would like to push the foreclosures through, otherwise the RE market will take forever to recover. This is only going to delay the process.
 
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