The Subprime Debacle: Act 2

Discussion in 'Economics' started by ivanbaj, Oct 17, 2010.

  1. The yoghurt may hit the fan again.
    (you may want to watch this from the sidelines)

    However, legally...and this is the important part...MERS didn't hold any mortgage notes: the true owner of the mortgage notes should have been the REMICs.

    "But the REMICs didn't own the notes either, because of a fluke of the ratings agencies: the REMICs had to be "bankruptcy remote," in order to get the precious ratings needed to peddle mortgage-backed Securities to institutional investors.

    "So somewhere between the REMICs and MERS, the chain of title was broken.

    "Now, what does 'broken chain of title' mean? Simple: when a homebuyer signs a mortgage, the key document is the note. As I said before, it's the actual IOU. In order for the mortgage note to be sold or transferred to someone else (and therefore turned into a mortgage-backed security), this document has to be physically endorsed to the next person. All of these signatures on the note are called the 'chain of title.'

    "You can endorse the note as many times as you please...but you have to have a clear chain of title right on the actual note: I sold the note to Moe, who sold it to Larry, who sold it to Curly, and all our notarized signatures are actually, physically, on the note, one after the other.

    "If for whatever reason any of these signatures is skipped, then the chain of title is said to be broken. Therefore, legally, the mortgage note is no longer valid. That is, the person who took out the mortgage loan to pay for the house no longer owes the loan, because he no longer knows whom to pay.

    "To repeat: if the chain of title of the note is broken, then the borrower no longer owes any money on the loan.
  2. Like I posted in another thread;
    These are the reasons Federal and State Judges are demanding the original documents be produced before proceeding with a foreclosure.
    Getting those original documents is another matter.
  4. You should see the state in Europe. Both the US and EU are set to fall.
  5. "To repeat: if the chain of title of the note is broken, then the borrower no longer owes any money on the loan.


    Unjust enrichment is a legal term denoting a particular type of causative event in which one party is unjustly enriched at the expense of another.:cool:
  6. That screed is from Gonzalo Lira, a clown personified. There is definitely going to be a cost, perhaps a big one, to many of the banks that securititzed these loans. However, anybody who thinks they'll be getting a free house because the chain of title may have been broken is wrong. There are fairly simple remedies for this.

    Shame on John Maudlin for including this nonsense in his letter (actually, Maudlin is a name-dropping clown himself).

    Ok Gonzalo Lira is a loose canon. There are some good points made in te comments under the article

    A bankruptcy attorney wrote me the following:

    Love your blog and follow it regularly. I was unable to post a comment on your site, so I'm writing you directly. The point you made about a break in title is not entirely accurate. A break in title, generally, simply renders the title still properly in the name of the last proper transferee. The real issue with all of this is the use of MERS as a straw man beneficiary. MERS was created as the functional equivalent of a "John Doe" for purposes of registering the beneficial holder of notes with state property records. This would allow the banks, et al. to shift around the notes amongst the members of MERS without having to re-register the note everytime it was sliced, diced, transferred.

    As set forth in landmark cases like Landmark v. Kesler from the
    Supreme Court of Kansas (, it is the splitting or bifurcation of the promissory note or mortgage note and mortgage or deed of trust creates an immediate and fatal flaw in title. Thus, your point and prediction are well taken - the powder keg is the potential reclassification of secured (mortgage) debt on one's home to general unsecured debt, which can be wiped out through bankruptcy.

    Thus, a real risk is that if people can show their home loans are unsecured, you could see massive personal bankruptcy filings
    to wipe out that debt.

    If you're interested, you should check out the line of bankruptcy court cases that are adopting this reasoning.

    I'm a commercial bankruptcy attorney in NYC, so I follow this topic with great interest. I look forward to reading more of your thoughts on it in future posts.
  8. SteveD


    Chain of title refers to OWNERSHIP of real estate...not who has lien against the can have multiple liens: mortgage, real estate taxes, IRS etc etc....does not have any thing to do with chain of title.....

    Title companies trace ownership to be sure that each conveyance is legal properly signed and filed with county records.....

    Mortgages or liens are a totally different matter....there is an original document signed by borrower at the funding of the loan...that document will be produced at some point....valid lien holder can then proceed with foreclosure.....

    This ain't rocket science folks.........

  9. ammo


    its been 2 years since the mortgage packaged loans debacle,credit default swaps,more than enough time to search and discover the history on the debt,the only reason you wouldn't have already done this is because you had something you wanted to keep hidden,the actual sum of all these mortgages was never near the amount of the damage, i would suspect that many of these mortgage packages were sold multiple times, a simple tracking of just a few would validate this suspicion, if true, who was involvedi n the scheme, how powerful are they and how long will they be able to keep a lid on it,or find a patsy to take the blame,thier first patsy was all the $10 an hour morgage holders of the 47k homes,invalidating all the liens would be one expensive solution,taking down many banks and brokerage houses...they will continue to mill around, failing to look in the most obvious places, a law will soon be passed to exhonerate the banks and the house'es will be repo'd and resold
    #10     Oct 18, 2010