Where's da mortgage...

Discussion in 'Economics' started by daveb351, Dec 4, 2007.

    by Bill Bonner

    Mr. C.A. Boyko recently fired a shot that was heard ’round the world. At
    least ’round the world of structured finance. Or, at least, ’round the
    world of Deutsche Bank, who got a bullet in the head.

    Poor Deutsche Bank is the victim of its own avarice...its own
    stupidity...and the cycles of nature. Nothing to be ashamed of. In war,
    even the best soldiers get their brains blown out. In finance, they blow
    them out themselves.

    Before pulling the trigger, the judge was curious...a curiosity shared by
    millions, no doubt. He wanted to crack open a sophisticated derivative
    product – a mortgage backed security – and find out what was in it. In the
    event, he discovered that something was missing; structured finance was
    not structured quite as well as it pretended to be.

    Here unfolding is the story of a credit contraction. Its protagonist is
    neither a financier nor an economist. He is a U.S. federal judge. And at
    issue in his courtroom was whether Deutsche Bank National Trust Company
    could repossess 14 houses in the Cleveland area.

    The first part of courtroom proceedings always begins with a ‘whereas’:
    Whereas the homeowners were living in houses with mortgages, said the
    lawyers. And whereas said homeowners hadn’t made their payments. And
    whereas Deutsche Bank was the de facto mortgage holder, the pleadings went
    on...said bank wished to foreclose on the 14 properties.

    Here, we add some whereases of our own. Whereas there is about $6.5
    trillion worth of securitized mortgage debt in the United States alone.
    And whereas the value of the collateral – the houses themselves – is going
    down. And whereas the hotshots who securitized this debt operated so fast
    and loose they might have been undertakers in a plague year. And whereas
    standards of creditworthiness...and details of the mortgages
    themselves...were permitted to slip. And whereas the whole idea was to
    earn high fees for loading people down with debt, while pushing the risk
    of loss onto the naïve, the slow-witted and the unborn. And whereas the
    losses are now expected to tote to somewhere between $150 billion and $400
    billion...and as much as $2 trillion, according to Goldman Sachs, in lost
    credit... And whereas every half-wit knew there would be hell to pay when
    the credit cycle turned down...

    ...this case might be a bigger deal than people realized.

    For his part, Judge Boyko showed little interest in the macro-economic
    whereases. What he wanted to know was: Where are the mortgage documents?
    It may be true that these people owe you money, he suggested, but we don’t
    take a man’s house away from him without a valid mortgage contract. Not in
    the sovereign state of Ohio anyway.

    Deutsche Bank’s legal team looked at each other. Then, they looked in
    their briefcases. The lawyers had plenty of documents, including some
    clearly showing an “intent to convey the rights in the mortgages.” But as
    for the mortgages themselves, they had none. Again, Deutsche Bank is
    hardly exceptional.

    ***When a law professor studied foreclosure proceedings
    recently, she found that in 40% of cases, the creditors either did not or
    could not produce the vital documents, giving them the right to retake the houses.***

    Apparently, the financial intermediaries who had bundled these 14
    mortgages together with thousands of others to create the Structured
    Investment Vehicle (SIV) bought by Deutsche Bank had neglected to bundle
    in the actual mortgage documents. Searching high and searching low, they
    could not be located.:)
  2. RhinoGG

    RhinoGG Guest

    Doh!.... fucking DOH!

  3. The mortgage would also have been recorded in the county recorder's office to make it a valid lien against the property. The mortgagees can therefore simply request a copy of this lien document from the county records.

    If they cannot find it this way then there is no lien and the issue is moot since they have nothing to foreclose against.