Great piece up by D-Day about a Mass. Supreme Court ruling stating that banks must be able to prove they own a house before closing it. You’d think that, in and of itself, would be an open and shut case. But what is so strange about it is that D-Day feels the need to say the following:
The banks are screwed if this precedent holds.
It’s a sign of what a screwed up country we are that someone would even speculate that this ruling might not hold (and mind you, I think D-Day is right- the banksters might weasel out of this somehow). The law is pretty clear. You have to have the proof. Christ, I have to prove I own my car every time I want to have it inspected. It would never occur to me to show up without that proof, because the law is pretty clear. What kind of arrogance, hubris, and mismanagement would lead banks to think that they can go to court and take someone’s property without even proving that they are the rightful owner?
It’s insane.
NobodySpecial
For all intents and purposes, they think they run the place. Why wouldn’t they act like that?
The Republic of Stupidity
Welcome to the United States of Goldman Sachs…
We are now officially a banana republic…
j low
@John- The same could be said about a majority of the folks at Guantanamo. “We know you are innocent, but we have to keep you in prison for life because we unjustly imprisoned and tortured you so now you hate us.”
Linnaeus
Careful there, John. That’s socialist talk. And we can’t have that in America.
Seriously, though, if you look at this in a certain way, it’s not that remarkable. When you have the resources, i.e., capital, you can use those resources to 1) overpower people with less than you and 2) manipulate legal and political institutions to work to your advantage.
Crazy Marxism, I know…
Villago Delenda Est
As I noted a couple of threads down, it’s obvious to anyone with the sense of Sarah Palin that the Massachusetts Supreme Court is a nest of communists (can’t use the “S” word because of a bad string in the middle of it) and Islamists.
Omnes Omnibus
@The Republic of Stupidity: You say this in the context of a post about a court decision that requires banks to submit to the rule of law. The idea that they will weasel out is speculative; the court decision is not.
Comrade Javamanphil
They thought they had everyone they needed bought and paid for. Oooops.
Alternate thread title in keeping with today’s theme: “The dreams in which I’m dying are the best I’ve ever had”
Jay C
This is America.
Money talks.
Banks have Money.
SATSQ.
The Raven
The same ones the White House Chief of Staff worked for.
Croak!
BGinCHI
“The tide comes in and the tide goes out.
You can’t explain that.”
Anyone who saw O’Reilly say this in order to try to explain why God exists will probably not be surprised if people in this country just assume that banks can do whatever they want.
Now, if a black guy starts getting uppity, well….
burnspbesq
@Omnes Omnibus:
You’re letting the facts get in the way of a comforting narrative. In some circles, that’s considered bad form.
shoestring potato
Free house for everyone!
dr. bloor
@NobodySpecial:
Fix’t.
burnspbesq
@The Raven:
It’s only Friday morning, but I think it’s safe to award you the prize for non-sequitur of the week.
liberal
I think a useful place to read up on this, at least to start, might be nakedcapitalism.com, where there’s some indication that this might have limited applicability to other states.
Villago Delenda Est
@The Republic of Stupidity:
When I was on TDY to Panama in the mid 80’s, I spent some time with staff officers from SOUTHCOM stationed there, and they described some of the outrageous nonsense that took place on “the Economy” outside the gates of the bases. In particular, how some retiree had built up a business, made it successful, and the locals discovered this, swept down on it, seized it with the full authority of local “law”, and proceeded to milk it dry and then discard the husk. Not a darn thing the US authorities could do…after all, Panama is a sovereign state.
This is what the short term mentality (the hallmark of the Ivy League MBA) does to an economy. Loot the company your’re working at, then leave. That’s how these guys operate. Pirate captains were at least answerable to their crews, as Captain Jack Sparrow found out.
Ross Hershberger
Banks are hosed either way. They may get to confiscate a lot of devalued housing stock but personal experience is that pretty much everyone is pissed at and suspicious of all banks over the mortgage mess, TARP, rising fees, etc. Their reputation has cratered, and reputation is a huge intangible asset for a financial institution.
The Republic of Stupidity
@Omnes Omnibus:
I never said the court decision was speculative…
Dungheap
I think the most amazing thing about this case is that the trial court judge ruled that the banks did not have the authority to foreclose, notwithstanding that the homeowners did not appear in court to contest the cases. Kudos to that guy.
The Republic of Stupidity
@Villago Delenda Est:
I saw this done to a company that was one the verge of being spectacularly successful… the flame out was equally impressive…
This was an ‘up-close and personal’ moment, I might add…
I worked in accounting there at the time and saw EXACTLY how they did it…
Citizen_X
@Omnes Omnibus:
I wish I had your confidence.
lacp
Sounds almost the opposite of the way these hearings are working in Florida.
Crashman
Happened in the People’s Republic of Taxachusetts. Doesn’t count for the rest of Real ‘Merica ™.
dday
@liberal: This is correct, it’s not so much if the ruling holds, but if the precedent holds. The applicability to other states is the question. Because endorsement-in-blank, which is what this ruling turns on, is essentially the industry standard. But it’s very good news if you live in Massachusetts.
TomG
Maybe I have to turn in my libertarian card, because I never have understood how loans can be sold just as if they were real property – at least not without notifying the person who took out the loan.
I also don’t like hostile takeovers of businesses that aren’t already losing money.
I guess that’s the left-libertarian, anarchist side of me showing through?
Omnes Omnibus
@The Republic of Stupidity: No, you said we are now officially a banana republic. You said this in the context of a court decision that upholds the rule of law and some speculation that the decision will be overturned or sidestepped. To me, it seemed you were putting more faith in the speculation than the concrete fact of the court decision.
Kirk Spencer
@lacp: Part of that is the fact we’re dealing with state law here. It’s something the enthusiasts forget as well.
MA has certain requirements that are waived in some other states. The filers are using a process that takes advantage of those waivers and applying them nationwide.
I think it’s likely the whole issue will end up in front of Robert’s court as there are conflicting decisions which are impacting a federal authority (bankruptcy), and while states can differ federal authority can not. Don’t know how long it’ll take, and unlike some I’m not as certain of the outcome (either way), but I do think it’s going to get there.
burnspbesq
@Citizen_X:
“I wish I had your confidence.”
It’s not about confidence. It’s about understanding how things work.
On matters of Massachusetts law, the Massachusetts Supreme Court has the final word. Financial institution essentially have three options: (1) comply; (2) continue to not comply and face increasingly stiff sanctions when they get busted over and over again for the same bad conduct; or (3) go to the Legislature.
Didn’t they teach civics at your high school?
Bob Loblaw
@burnspbesq:
So what’s the proper narrative, o ayatollah?
That “a few bad apples” working in “an integral and honorable profession” temporarily “went too far” before “the wise and beneficent hand of the United States justice system” gently corrected them for the good of us all?
Something like that? Or do I need some more codewords to cover up the fact that a lowly state supreme court had to tell the banking sector that no, they weren’t able to just steal random homes anymore because they’re too lazy and overworked to give a shit about outdated frivolities like property rights?
Sasha
@Dungheap:
Wow. That judge should win Mensch of the Year.
Villago Delenda Est
@Omnes Omnibus:
No, he was saying that the Mass Supremes are actually upholding the rule of law in the face of banksters flouting it, quite openly, and the Mass Supremes WILL be attacked as “Marxists”, mark my words, for daring to insist on due process of law.
The standard, now, is banana republic mentality, and the Mass Supremes are defying that standard.
maya
The 5 SCROTUS’ already ruled that money is free speech in CitiZens United. Banks are obviously equipped with the biggest boom boxes, sub-woofers, and ghetto blasters in town, so when they speechify in court that they own your house you had better start dialing Mayflower. It’s a Constitutional thang.
The Republic of Stupidity
@Omnes Omnibus:
I apologize…
Clearly, my use of the word ‘official’ has provoked this exchange…
I promise… I’ll be more… EXACT… in my verbiage in the future…
On the other hand, if follow what’s been happening in other states around this morass, like Florida, you’d see that sort of behavior has been officially sanctioned…
So perhaps it’d be more accurate to say that FLORIDA is now officially a banana republic…
But I promise, I’ll try harder… for your sake…
Jager
When mortgages were written by small local banks, the banks had an investment in the community, if the community thrived, so did the bank. The local bankers were slow, methodical, fair and above all the bankers lived where they wrote mortgages. Before the Reagan Revolution changed the rules, you got your mortgage from a bank just down the street and from a guy who lived where you lived.
Ahhh, the good old days!
Mowgli
@Jay C: The REALLy funny part is that I sell software to banks. Last year I spoke with the VP of very large regional bank. When I mentioned our software was several thousand dollars, her response was, and I quote, “We’re a bank. We don’t have MONEY.”
She said this without the tiniest hint of irony.
rickstersherpa
When taking my bar review course many years ago, the instructor on commercial law that applies to bank (Articles 3-5 of the UCC), told us that if we got stuck on a question, always remember that the answer is “Bank Wins” and work back from that for justification.
As I have posted on previous threads, I am not particularly upset about the President’s selection of William Daley. Gene Sperling’s selection also does not surprise, but does leave me somewhat sadden. I will post below the best statement to date that I have found, the Economist Tim Duy’s from Fed Watch.
And for those who think, gee, who wants to read these boring economists, the gross ignorance that so many of us have cultivated the last 30 years, and awarded our media for providing such pap as worrying about Presidential blow jobs is one of the reasons we have Democratic President doing the bankers’ bidding and one of our political parties completely wing-nut. Note that you will not hear on MSM news outlet any concern about the “dollar” being overvalued and the destruction this has done to the economy that lies west of New York City-DC line and east of Beverly Hills.
http://economistsview.typepad.com/timduy/2011/01/what-is-rubins-legacy.html
What Is Rubin’s Legacy?
As the candidates for the next NEC chair narrow, a debate has erupted regarding the suitability of candidates either too directly related to former US Treasury Secretary Robert Rubin or Wall Street. Mark Thoma came out first:
“I still think a break from the Wall Street connected side of the Clinton administration would have political value.”
Brad DeLong subsequently declared his support for Gene Sperling. Next up was Felix Salmon, who, like Thoma, notes that the three leading candidates, Gene Sperling, Roger Altman, and Richard Levin, are all “multi-millionaires with close ties to Wall Street.” He singles out Sperling for a particularly harsh criticism, first questioning the nature of Sperling’s ties to Wall Street:
…there’s Sperling, who in some ways is the worst of the three when it comes to grubbing money from Wall Street.
Salmon relies on Ezra Klein to paint a picture of Sperling as a low-class influence peddler, and then extends his attack to Sperling’s competence:
Noam Scheiber does his best to defend Sperling, but is far from persuasive—the general picture he paints is of a man whose heart might be in the right place but who never seems to get anything done. The last time he was at the NEC he sat quietly by while Treasury pushed through various deregulatory measures; within the Obama administration his main claim to fame seems to be the bank tax, which never actually got enacted.
Finally, he echo’s Thoma’s concerns:
More generally, Sperling has done nothing to counter the general impression that he’s one of many Rubinites in the administration, in the context of a political atmosphere where one of the few points of agreement between the right and left is that the departure of Summers can and should be taken as an opportunity to finally put as much distance between Obama and Rubin as possible.
This elicits a response from DeLong, who defines himself as a long-time Rubinite and launches into a spirited defense of Rubin:
Robert Rubin went to work for the Clinton Administration in 1993 with four goals: (1) to make the decision-making process work smoothly; (2) to match the tax revenues of the federal government to its spending commitments; (3) to make the tax and transfer system more progressive so that people like him paid more and America’s working class paid less; and (4) to make the financial system work more smoothly and transparently and so diminish the rents earned because of market position and institutional connections by people like him.
(1), (2), and (3) were big successes. (4) was a failure–the belief that financial deregulation would diminish Wall Street payouts because organizations like Goldman Sachs would face new competition from deep-pocket commercial banks–turned out to be wrong. Why it was wrong I do not understand. But it was a failure. However, it was not a catastrophic failure–it was not the repeal of Glass-Steagall that caused our current downturn, but rather other and different regulatory failures long after Rubin had left office…
DeLong does acknowledge that Citigroup shareholders have a legitimate gripe, and so do the American people:
I think that if you are an American or a citizen of the world you have a beef with Rubin for believing–as I did–in the “Greenspanist” doctrine that the Federal Reserve had the tools to put a firewall between finance and employment and should thus regard bubbles principally with benign neglect.
What I find curious is that DeLong neglects to mention what I believe was a central element of the Rubin agenda, and an element that was in fact the most disastrous in the long run – the strong Dollar policy.
The strong Dollar policy takes shape in 1995. At that point, Rubin made it clear that the rest of the world was free to manipulate the value of the US Dollar to pursue their own mercantilist interests. This should have been more obvious at the time given that China was last named a currency manipulator in 1994, but the immensity of that decision was lost as the tech boom engulfed America.
Moreover, Rubin adds insult to injury in the Asian Financial Crisis, by using the IMF as a club to enact far reaching reforms on nations seeking aid. The lesson learned – never, ever run a current account deficit. Accumulating massive reserves is the absolute only way to guarantee you can always tell the nice men from the IMF and the US Treasury to get off your front porch.
In effect, Rubin encourages the US to unilaterally enact a new Plaza Accord on itself. Michael Pettis reminds us of what the Plaza Accord meant for Japan:
Not only did Tokyo wait way too long to begin the rebalancing process, but when the rest of the world (i.e. the US) refused to absorb its huge and expanding trade surplus and forced up the value of the yen, Tokyo made things worse – it counteracted the impact of the rising yen by expanding investment, expanding credit, and lowering interest rates. This accelerated Japan’s structural imbalances, set off a further frenzied rise in asset prices and capacity, and worsened the eventual adjustment. This also seems to have happened after China began revaluing the RMB after July 2005.
This sounds like an eerily similar story. To counteract the impact of the rising trade deficit, US policymakers increasingly relied on asset bubbles to support domestic demand. It goes beyond benign neglect, which assumes you know acknowledge you have a bubble. US policymakers didn’t even see the train wreck ahead. They simply enjoyed the fruits of the bubble thinking it reflected sound economic policy. Back to 2005:
Ben S. Bernanke does not think the national housing boom is a bubble that is about to burst, he indicated to Congress last week, just a few days before President Bush nominated him to become the next chairman of the Federal Reserve.
U.S. house prices have risen by nearly 25 percent over the past two years, noted Bernanke, currently chairman of the president’s Council of Economic Advisers, in testimony to Congress’s Joint Economic Committee. But these increases, he said, “largely reflect strong economic fundamentals,” such as strong growth in jobs, incomes and the number of new households.
At least Japan had the excuse that they were forced into the Plaza Accord, perhaps justifiably given their expanding current account surplus of the time. Rubin has no such excuse – the strong dollar policy was entirely a self inflicted wound that goes far beyond simple “benign neglect” of bubbles. To be sure, Yves Smith argues in Econned that Asian central banks were threatening to sell Dollar assets, but adds that the main motivation was supporting Japan. Most importantly, Rubin entirely missed how Chinese policymakers would take advantage of America’s newfound love for an artificially strong currency.
But did he really miss it? Wall Street was making money hand over foot intermediating the current account deficit, which raises the question that many of us still have: Was Rubin working for the American people or Wall Street? As far as I can tell, the greatest coup of the last two decades was how easily Wall Street managed to secure the support of Democrats, knowing of course they always had the support of Republicans.
And what has been the ultimate achievement then of the Rubin era? A lost decade for jobs and industrial production and a massively unbalanced global economy. The promised compensating job surge in other sectors has so far been absent. Ultimately, didn’t Rubin simply lay the foundation for today’s economy that is decried by DeLong?:
From here it does look like a two-tier, profit-driven recovery–no parking places within a quarter mile of Tiffanys and long lines at Williams and Sonoma and Sur la Table, with people buying $12 cans of almond paste, while some of my daughter’s high school classmates are now being told they cannot afford to go to college next year.
And by the way, it is not clear that we did China any favors either by the strong Dollar policy, as they are now faced with a massive internal rebalancing act – there is no guarantee anymore that China is the future, nor that China will escape the fate of Japan.
I agree with DeLong that being associated with the Wall Street, the Clinton Administration in general and Rubin in particular should not alone disqualify one from serving in the Obama Administration. But we shouldn’t give Rubin a free pass either. The strong dollar policy reinforced and entrenched massive and disruptive distortions to patterns of global consumption and production. Unwinding those disruptions is proving to be very costly. The long-term impact of the strong Dollar policy needs to be counted among Rubin’s legacies.
superking
First, I think we need to accept that DDay is a moron who has a very limited grasp on his subject. He likes to whine about how bad it personally hurts him when things like this happen, but he really doesn’t know how foreclosure works.
With that in mind, this case isn’t as powerful as he makes it out to be. First, it’s a Mass. state court, and has limited persuasive authority outside of Massachusetts. Second, from the excerpts, it appears that the mortgage was improperly assigned. What that likely means is that the document that transferred limited title to the bank in order to secure the mortgage note was not transferred properly. This does not appear to be a case where the banks were not complying properly with the UCC. (If it were a UCC case, it could have more influence.) Instead, it’s a highly fact-specific case where the banks did one or two things wrong and then decided to fight about it. THERE IS NOTHING HERE TO SUGGEST THAT THIS WAS A COMMON PRACTICE OR THAT OTHER PEOPLE HAVE THE SAME FACT PATTERN AS THE IBANEZ FAMILY.
I see little reason to think that this will have a large effect on other foreclosures throughout the country.
For the record, I am an attorney and I work at a non-profit where I provide legal services to low-income families in foreclosure.
burnspbesq
@Bob Loblaw:
Any narrative that is not completely untethered from reality will be fine.
Cris
The kind that results from owning everything, for a long time.
The Raven
Can’t imagine. Why, the banks only control most Federal banking law–have since Bush I at least and arguably since Reagan. No reason to believe the law is working for them, no-sirree.
Oh, BTW, Dayen is an expert on this subject.
Croak!
Paris
Which why the precedent will NOT hold.
Omnes Omnibus
@The Republic of Stupidity: @Villago Delenda Est:
I will ignore the snark and go to what I think is the larger point. Perhaps we have a glass half full/glass half empty dichotomy in our viewpoints. I see a court taking the proper action in a case; this is something I expect. While it is only one state and others do not handle the situation as well, I tend to think that good decisions serve as an example and lead to other good decisions. You appear to see it as an aberration; a good one, but an aberration nonetheless.
Villago Delenda Est
@superking:
It really is amazing that all across the country horror stories like those of the Ibanez family keep cropping up. People in Florida, for example, who held clear title to their homes finding asshole contractors from some bank changing the locks on their doors in anticipation of a foreclosure action.
It’s a common practice nowadays. The banksters are totally out of control.
Turbulence
@Jager: When mortgages were written by small local banks, the banks had an investment in the community, if the community thrived, so did the bank. The local bankers were slow, methodical, fair and above all the bankers lived where they wrote mortgages. Before the Reagan Revolution changed the rules, you got your mortgage from a bank just down the street and from a guy who lived where you lived.
Yeah, it was great as long as you ignored all the redlining.
The Republic of Stupidity
@Villago Delenda Est:
Thank you…
That is EXACTLY what I was trying to get at…
And again… I suppose the inadvertent use of the word ‘officially’ was the the problem there, warn’t it?
Having apologized twice for such an horrific gaffe…
Villago Delenda Est
@Omnes Omnibus:
I see it as the courts finally coming to their senses (not that they ever lost them in Mass, mind you, but still) and reading the black letter of the law that even people who are not professional law talkers can figure out, with no Latin involved.
Down in Florida, as Republic of Stupidity suggests, the “rocket docket” mentality rules, and the judges in charge wink wink nudge nudge the quaint requirements to actually have a chain of custody on the note.
The result is that people who THOUGHT they held clear title to their land with no encumbrances at all find thugs from banks changing the locks on their doors.
j low
@superking:
Where exactly? I wouldn’t want to accidently refer someone to your non-profit.
The Republic of Stupidity
@Omnes Omnibus:
I am actually delighted to see the Mass Supreme court step up and smack the banks upside their heads…
I suppose ‘half full/half empty’ is a reasonable way to put it…
I really don’t have much faith in this society these days… wish I did and deep in my heart of hearts I refuse to surrender completely, but… I just keep seeing the bad guys get away w/ too much truly outrageous behavior…
Dungheap
@superking: Well, these were two cases involving the same fact pattern concerning two different homeowners and two different banks so it may not be as limited as you suggest. Moreover, one of the issues appears to be that the trust instruments through which the banks claimed a right to foreclose did not show any actual assignments of the mortgages to the trusts in both cases. If the assignments of the mortgages to the trusts were not properly documented, that’s a big big problem.
Omnes Omnibus
@Villago Delenda Est: The fact that courts are, as you say, coming to their senses on this is something I see as a sign that we are not a banana republic. Florida is, of course, a major exception.
superking
@Villago Delenda Est:
I agree that they’re out of control. All I’m saying is that this case doesn’t appear to do what DDay thinks it does. It is heavily dependent on the facts relating to the securitization of these loans and the Massachusetts foreclosure process. I am reading the case now, and I can already tell it has close to zero application in my state.
The Republic of Stupidity
@Villago Delenda Est:
Again, thank you…
You’ve found a narrative that is not completely untethered from reality…
superking
@j low:
You know people think lawyers are all liars and crooks, but we have a responsibility to be honest with our clients, opposing counsel, and the courts. A lot of my job is telling people that they don’t have good defenses. The people who do, I will do anything I can for them. So, insult all you want, but I am not going to give people false hope or go screaming into court to try to gin up a case that isn’t there.
Villago Delenda Est
@Turbulence:
A problem, to be sure, but one that can be addressed by proper (horrors!) regulation.
As an aside, one of the bromides about “liberals” and “conservatives” is that “liberals” believe (quite foolishly) in the perfectibility of man, while “conservatives” (quite wisely) believe that man must be watched because man will do evil.
Of course, this doesn’t apply in the economic sphere at all, where the invisible hand of myth (not Adam Smith’s…read the entire fucking book, dumbshits…) will magically solve all problems and no supervision is required.
The Republic of Stupidity
@superking:
I’m not a lawyer but I’ve been your side of that sort of exchange more than once the last few years and know what you mean… I’m the head bookkeeper for two different non-profits that deal w/ housing, so I’m pretty familiar w/ the kinds of problems people can create for themselves in this arena…
comrade scott's agenda of rage
Nobody sums up banks better than the immortal Mojo Nixon:
http://www.youtube.com/watch?v=BTFASpNOpHw
I Hate Banks
So many money quotes:
“Wall Street can eat my meat”
“Republicans one and all, have tallywackers mighty small”
Villago Delenda Est
@superking:
Ah, but what DDay is pointing out, quite correctly, is that some vile Marxist attorneys are defying the will of Galtian bankster supermen who should be able to merely assert their rights to some peasant’s property and have their word alone taken as law.
THAT is the terrible precedent that we’re seeing put into action here, and as these cases come to adjudication more and more often, we’ll see more and more that the banksters decided, unilaterally, to ignore their legal, moral, and fiducial responsibilities in the pursuit of the fast fee, and the opportunity to sell a new financial “product” to people with too much money on their hands that needed to be transfered to the banksters own pockets.
Chuck
@comrade scott’s agenda of rage:
I’m working from (distant) memory here, but my fave line is “Dow Jones can suck my bone…”
rikyrah
it’s so wrong that could even be questioned.
jpe
@ Tom G: loans are personal property, and can be sold like any other personal property.
Xenos
@superking:
It is bad enough that journalists can not be bothered to talk to an expert before publishing tripe, but D-Day, claiming to be offering a better sort of journalism, could have spent five minutes talking to Massachusetts property lawyer to figure out how this works.
Notice is not a side issue – it is everything in this case. The statute allows non-judicial foreclosure but it only works if the notice is perfect. Screw something up, then you update your file and do it again. In this case, there is not even a process to withdraw the foreclosure, just update your file, make sure your assignments are correct, get your text right, send out the certified letters, and publish that sucker.
Here, if you can’t foreclose on a securitized mortgage that was not securitized correctly, then push it back on the originator and let them foreclose on it. Sure, you get a nice lawsuit between the dealer and the security holders, but the foreclosure will still, eventually, happen. As it probably should.
superking
@Villago Delenda Est:
I didn’t see that in DDay’s post. What I saw was him claiming that this was huge and that bank stockets were plummeting because of it.
I get the general complaint about the banks. I’m there with you. Hell, I’m probably beyond you in this regard. But this case isn’t huge. It’s important in that it will give attorneys in Massachusetts more tools to work with, but it’s not national in scope.
Dork
That part is certain — ruled in favor of banks. Write that down.
Xenos
@Paris:
And who, exactly, is going to overturn the MA SJC on a matter of pure state law?
Villago Delenda Est
@Xenos:
Again, you’re ignoring that the entire concept of “securitizing it correctly” was dismissed as “unprofitable” by the banksters. They COULD do it the legal, proper way, but that would take too much time, and too much money, and would inevitably reveal that the entire “product” was essentially a scam…a game of three card monte.
The entire purpose of the chain of custody and the proper way to securitize a bunch of mortgages works against the fast buck mentality of the modern bankster.
Which is why they invented the computerized system to move this stuff around faster than a three card monte dealer.
Because the money was in the fees, and the entire “I’ll be gone, you’ll be gone” mentality of these people is pervasive. The ultimate in moral hazard, of privatizing the profit while socializing the risk.
sal
Got a brain fart today, John? IOKIYAR at all times.
Xenos
@Villago Delenda Est: This is all well and good, but the applicability of this case is pretty limited. The exact nature of MA property law makes these loans unsecured by the people who hold them, but that is not not say that the people who hold the loans and the people who sold them the loans do not have detailed contracts explaining how they sort this out.
If they don’t, then the note holders are bigger suckers than the borrowers.
Cris
Pottersville!
tkogrumpy
If you are a member of the royal court in America, you can usually avoid going to court,which allows you to escape responsibility for your crimes Once you are forced into court it becomes more difficult to maintain the fiction that we are a nation of laws, while finding a way to exonerate the courtiers.
Villago Delenda Est
@Xenos:
Eventually, the investors are going to come to the banksters, and demand their money back.
That may take a while, though…it’s far easier to blame the “deadbeats” who are not making their monthly mortgage payments to the right “noteholder”…there are plenty of cases out there where people who thought they were current on their mortgage found out they were sending checks to the wrong outfit (no one ever bothered to tell them…and the wrong outfit, which sold the note, kept cashing the mortgage payment checks, and not passing that along to the new “noteholder”….).
After all, the serfs are all immoral because they don’t have piles of money, you see.
That’s the great thing about this scam. It’s complex and it will take a long time to sort out. In the meantime, the perpetrators are on the beach in Aruba, trying to decide between the lobster claw and the cracked crab for lunch.
Maude
@Villago Delenda Est:
While cheating their investors as well.
Suffern ACE
@Villago Delenda Est:
Nah, they will be attacked as Marxists for attempting to maintain the real property system.
Villago Delenda Est
@Xenos:
The applicability of the case is NOT THE ISSUE.
The fact that banksters are being held to the actual black letter of the law is the problem for them. It shouldn’t be a precedent, it should be the way things are always done. But the reality is, it’s a damning precedent. Holding their feet to the fire of actually having to produce a note with a chain of custody on it is devastating. If other courts start actually holding them to the law (as they are in Ohio and New York, for example), then the entire scam is in danger, and the banksters will be getting it from both sides…the homeowners and their investors, both who have been cheated by the banksters.
The entire scam that is MERS is in danger, because in its creation centuries of black letter law were ignored because they got in the way of profit. Of churning “securities” rapidly for the fees and walking away from the real world consequences of doing so.
Rick Taylor
@superking:
Who do you recommend those of us who are not especially economically literate read to make sense of the current crises?
JD Rhoades
Wait, you can’t transfer title to real property unless you can prove you own it? Shocking! How will business function under draconian rules like that!?
Triassic Sands
The banks are screwed?
Somehow I think they’ll find a way to get by. When Congress acts to protect consumers, the banks simply create new fees to get back any lost revenue. When it comes to screwing the public, the banks are very, very creative.
Catsy
@The Republic of Stupidity:
Never has a pseudonym been so fitting.
I love it when people who make factually incorrect statements and get busted for it get all whiny and passive-aggressively butthurt about being corrected on questions of fact which are not a matter of opinion or interpretation.
Words mean things. How about you try harder for your sake, sparky.
Villago Delenda Est
@Catsy:
Someone has a defective snark detector. I understood EXACTLY what RoS was getting at.
Catsy
@Villago Delenda Est: My snark detector works just fine, thanks. You might want to recalibrate yours to more effectively identify the line between snark and outright misuse of terminology.
Jrod the Cookie Thief
@Catsy: Yeah! How dare that ruffian declare the US an “official” banana republic when the US clearly doesn’t fit the criteria laid out in the United Nations’ Treaty Regarding Banana Republichood. Clearly, the US fails to meet the definitions laid out in all 27 clauses, therefore to use the word “official” in regards to the USA’s banana republicality is a gross lie!
Thank you for having the courage to stand up and say so! The world needs more humorless pedants like yourself.
Catsy
@Jrod the Cookie Thief: Thank you for stepping up to provide a shining example of exactly the kind of sarcastic, anti-intellectual, whiny butthurt that stupid people defensively throw out when they get corrected on an irrefutable point of fact or usage.
Shalimar
@superking:
Yeah. You lost me with the first sentence. DDay might be wrong, and he might not fully understand the subject, but years of reading his writing make it very clear he is about as far from a moron as you can get. So, telling me I should accept something as true before you even try to prove it is effing dumb.
mclaren
Proof is meaningless and irrelevant in today’s America. Reality is unimportant.
The last time I went down to get my drivers license renewed, the DMV wouldn’t do it. Why? Because I didn’t have a copy of my birth certificate. “But you can look right on the computer,” I told the DMV. “You can see the picture of me. That’s me. I can’t be anybody else.”
“Doesn’t matter,” the DMV said. “Without a birth certificate, you don’t exist.”
So I sent away to the state where I was born to get a copy of my birth certificate.
Guess what?
They wanted a copy of my drivers license to give me a copy of my birth certificate. But to get a copy of my birth certificate, I need a drivers license.
Reality means nothing. Proof is unimportant. The world is insane.
Sad But True
Ultimately, I expect the only person who ends up being punished for this (besides us taxpayers) is that rascally mortgage lender VP, Linda Green. The AGs better go after her quick, though, before she goes into hiding.
If you don’t know who I’m talking about, just check out the excellent Fla. AG presentation linked below:
Jamie
Sometimes you have to remind yourself that these are the same people who reelected Dubya.
agrippa
As a layman, that looks like a good decision.
I think that a creditor needs to prove that the note is valid; and the creditor has the right to foreclose.
superking
@Rick Taylor:
Calculated Risk is usually very good. There’s a link here from Balloon Juice. I read Atrios sometimes, but he’s a little too vitriolic for my tastes. If you’re in for big reports on housing and foreclosures, the Congressional Oversight Panel for TARP has been putting out regular reports that I find readable. I would also highly recommend the National Consumer Law Center for their reports on mortgage servicers’ incentives and other related issues. I also just have a google news thread dedicated to foreclosure and housing issues so that I can catch news when it happens.
mclaren
@Villago Delenda Est:
This is exactly right.
If you look at the amount of profits banks were making, the points from the homeowner for the bank originating the loan + the 2.5% to 4% profit on selling the repackaged the loan was bigger than the amount of profit from providing the mortgage to the homeowner. So the banks had zero incentive to give a damn about anything but turnover. Issue a mortgage, repackage it, securitize it, re-sell it, move on. It’s exactly the same as realtors: no realtor has any incentive to make sure that a seller gets anything like a fair price for his house. The realtor’s only incentive is to sell, sell, sell, as fast as possible, turnover is the key. The faster the banks could dump mortgages on buyers as a securitized instruments, the more money the banks made.
And this is also why the disappearance of this whole mortgage Ponzi scheme has hurt banks’ bottom lines so horribly. Banks were making 6% from the mortgage but also a percent or 1.5% in points from the homeowner but also 2.5% to 4% in profits by repackaging and re-selling the morgage as a securitized instruments. That really adds up.
That kind of scheme turns a regular 6% boring conservative morgage into a 10% to 12% return. And it’s a fast return. Once the bank re-sells the mortgage as a securitized instruments, it doesn’t care anymore. No more paperwork, no worries about the homeowner defaulting, just walk away with the cash. But that 12% return has now gone away, which leaves a giant gaping hole in the banks’ balance sheets. That gigantic Niagara Falls torrent of cash has dried up, and this is the basic reason why banks are going broke right and left. So far 9 trillion dollars worth of value has evaporated in the subprime housing market, but there’s probably at least another 25% to 50% for housing prices to fall in the high-end markets like Los Angeles and New York. In those markets we still aren’t anywhere near historical norms for home prices. So figure 12 trillion of value goes up in smoke all told for homes, and then the commercial real estate market is around twice that, so 36 trillion dollars of value will have disappeared by the time this is all over. 12% of 36 trillion is around 4 trillion dollars a year in revenue that the banks are no longer getting, or will no longer be getting once the commercial real estate market shakes out and the housing market finishes crashing.
A missing revenue stream of 4 trillion dollars a year hurts. Granted, the financial sector only amounts to 30% of the U.S. GDP, so divide that 4 trillion dollars by 3 — still, that impacts U.S. GDP to the tune of subtracting 1.3 trillion dollars. That’s meaningful.
Bottom line? There was a lot of funny money coming from scams like this, bubble money, propping up the U.S. economy in the 2000s after the dot-com bubble blew up. Now that bubble money has disappeared. That’s blown a huge whole in the U.S. economy.
And the bad news is that there’s even more bubble money propping up the U.S. economy right now. The DHS and TSA are useless worthless pork barrels whose only real purpose is to pump cash into the economy on worthless wastes like those TSA air-puff “bomb detector” machines that turned out not to work and now sit unused in warehouses along the Potomac. The 1.35 trillion dollars in military expenditures is essentially white collar welfare. At some point that’s going to go away, because we can’t afford it. Most medical expenses in America are white collar welfare, wasted on worthless junk like spinal fusion operations that have been proven not to reduce back pain, or arthroscopic knee surgery that have been shown by studies to be worthless. At some point the gigantic river of gold coming into the U.S. medical-industrial complex will dry up because we can’t afford that either. And the colossal gushers of cash coming into colleges is starting to dry up too, because people can’t afford a quarter of a million dollars for a 4-year college degree nowadays when the result is that you wind up working part-time as a barista in Starbucks.
All these rivers of bubble money are in the process of drying up. And when that finally happens, boy, is the U.S. economy going to crash.
Because what does America make anymore? You buy a cellphone or a computer or a TV or a Blu-Ray player or an mp3 player or a car or a piece of clothing or shoes or lawn furniture or power tools, and it’s all made in Singapore, PRODUCT OF MALAYSIA, made in Taiwan, MADE IN CHINA. None of it’s made in America anymore.
When all that bubble money from the Pentagon and the U.S. medical-industrial complex and our college system finally goes away, you’ll see an economic collapse that will make your hair stand on end.
tamied
@mclaren: Is it time for drinking now?
Jrod the Cookie Thief
@Catsy: My pleasure.
I hope someday I’ll have the intellectual chops to use the term “butthurt” in regards to someone who is making fun of me.
I also hope to someday be intellectual enough to pretend that “banana republic” is a term of art that can have an “official” definition, rather than a loosely defined slang term. Then I’ll be super duper intellectual, yesserrie.
MTiffany
The kind that also leads to repeated global financial crises?
Francis
IAAL (not licensed to practice law in MA) and this is something I know a fair bit about.
In virtually every state, there are two ways to sell a note&mortgage: (a) individually by endorsement on the physical note and mortgage; and (b) in a big batch, by using a generic Sale Agreement, with a schedule of the sold mortgages attached. In the batch approach, notes and mortgages are endorsed in blank: ie, the mortgage is stamped “ASSIGNED TO: [BLANK]”.
The first way is much more time consuming and expensive. But the problem with the second route is that there is extra work to do when it comes time to foreclose, in order to document the chain of transfer. You have to be able to find the Sale Agreement.
In this case, the MA Sup. Ct. did NOT NOT NOT invalidate the batch approach. It did say that the approach was disfavored due to the problems associated with proving up the chain of transfers.
What did happen is that no one could find any of the Sale Agreements by which the notes and mortgages got transferred. The bank essentially came in and said that it owned the mortgage because it said so, because the note and mortgage were in their computer system. This kind of third-tier evidence was unacceptable to the court.
The bank had ample opportunity to prove up the chain of transfer. The fact that it couldn’t find the underlying documents is really shocking. (I mean, REALLY SHOCKING.) This is the most basic kind of document control that’s hammered into every young lawyer and, I would have thought, every young banker. So, this case has the potential to be huge because if banks can’t show chains of title, they may be unable to foreclose.
(Please keep paying your mortgage, though.)
And yes, the case will stand. There are no federal issues to take to the US Sup. Ct. It’s up to the Mass legislature to change the law as to allow banks to foreclose with such weak evidence as the banks had in this case.
Judas Escargot
@mclaren:
They wanted a copy of my drivers license to give me a copy of my birth certificate. But to get a copy of my birth certificate, I need a drivers license.
I was born in AZ (literally only lived there two weeks, just where my father happened to be stationed at the time).
During the whole SB1070 business, I figured it’d be a fine time to get my long-form birth certificate from there. They needed a photocopy of my MA driver’s license. But, of course, it’s ILLEGAL to photocopy your MA driver’s license here in MA.
Luckily, neighbor-of-father-in-law has a color photocopier… in NH. Problem solved.
Still, ridiculous.
Just Some Fuckhead
@mclaren:
Similar experience. My DL expired, went to DMV to renew it, wouldn’t take my birth card due to new Patriot Law requirements. Needed the birth certificate. The vault copy. Drove to the State Capitol, filled out the paperwork, stood in line. Presented expired DL as proof of identity to get birth certificate to take to DMV as proof of identity to get renewed driver’s license.
General Stuck
DMVs across the globe have, and will always remain a ride with the devil.
liberal
@Rick Taylor:
Just adding my two cents unsolicited, of course, I’d read nakedcapitalism.com.
NonyNony
@superking:
The mind boggles at the idea that Duncan Black can be described with the word “vitriolic”.
I don’t think Duncan writes enough in a single post to rise to the level of “vitriol”. How much vitriol can you really stuff into 3 or 4 sentences?
ETA – Thinking about it further, I can’t even imagine the adjective you might use to describe Matt Taibbi, if Duncan gets a “vitriolic”.
RareSanity
@Villago Delenda Est:
After reading some of the updates, I think what @superking is trying to say is that this ruling has no bearing in many other states. Because MA has a requirement on the transfer of the lien attached to a promissory note, that frankly, the majority of other states do not. If MA, was like the majority of states, this case doesn’t even make it to court. The foreclosure notice gets corrected, reposted in the newspaper, and the foreclosure continues. The only reason this went to the Supreme Court, was the land court judge’s observation of the “endorsement-in-blank”, which is not illegal in most states.
Unfortunately the MERS system, in most states, is perfectly legal. Is it a big “GFY!” to the little guy, yes. However, no one can be arrested for being a greedy, selfish, assholes.
Chief
All well and good in the Bay State. But how many people, hanging on by their fingernails to their shredded dignity, will be able to successfully fight the bank? It takes money to hire a lawyer (and find the right one) to prepare to take on the bank. I mean there is no contingency in this case.
Tonal Crow
@maya: On Citizens United, whatever happened to “reasonable time, place and manner” restrictions that provide ample alternative forums? Or does that apply only to the little people who hold signs up in front of banks?
(P.S. This argument might work to narrow Citizens United in a subsequent case, depending upon how corrupt the Supreme Court is.)
GeneJockey
@Xenos:
Well, duh. These are the folks who bought piles of shit tied up with pretty bows and labeled ‘AAA Rated!’, after all.
Tonal Crow
@Francis:
True, at present. But such a statute, if passed, might constitute a 5th Amendment taking and/or due process violation, since the foreclosing parties cannot prove that they have a right to the property. And moreso if the statute is retroactive.
Francis
@Tonal Crow: Oh yeah. There’s no way for the Mass legislature to fix this case retroactively.
No, the fix I’m talking about would be to specifically allow banks to prevail in Land Court only with secondary evidence of their ownership of the mortgage because the primary evidence — the Sale Agreements with the schedule of mortgages attached — has been lost. Something like that might work.
But the major implication of this case remains the fact that the banks could not prove that they ever bought the loans. The whole “Show Me the Note / Mortgage” movement just got a huge boost. (I remain astonished that major financial institutions got so arrogant and sloppy. They can’t keep track of how the documents by which they bought and sold billions in loans? Really? Does anyone out there work for a big bank who might explain how such basic record-keeping wasn’t done?)
Tonal Crow
@Francis: Yeah. The record-keeping mess is just jaw-dropping. But record-keeping is expensive, and the bosses were doubtlessly repeating “Cut costs! Do more with less! Outsource, outsource, and outsource again! And don’t make mistakes!” Well, you can get rock-bottom costs, or careful work, but getting both simultaneously is, at best, a transient phenomenon.
I expect that very many of the original records were either dumped (unsorted) in crates and shipped to now-unknown, unguarded, un-environmentally-controlled warehouses, or were simply shredded or thrown out whole.
It brings this to mind.
I think “fixing” the rules of evidence to permit banks to prove ownership with substandard records is going to be a due process problem, and perhaps even more so if the “fix” is retroactive to existing loans.
kc
The court didn’t rule that the banks had to prove they owned the houses before foreclosing. If they owned the houses, they wouldn’t have to foreclose.
It ruled that they had to prove they owned the assignments of the mortgage.
http://www.calculatedriskblog.com/2011/01/massachusetts-court-voids-foreclosures.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+CalculatedRisk+%28Calculated+Risk%29
kc
@Xenos:
I don’t think DDay’s a moron by any means, and I’m disgusted by what the banks have done to screw things up so royally, but there has been a dismaying amount of factually incorrect information disseminated by some liberal bloggers about foreclosure issues.
kc
The last paragraph of the concurring opinion in the case:
What is more complicated, and not addressed in this opinion, because the issue was not before us, is the effect of the conduct of banks such as the plaintiffs here, on a bona fide third-party purchaser who may have relied on the foreclosure title of the bank and the confirmative assignment and affidavit of foreclosure recorded by the bank subsequent to that foreclosure but prior to the purchase by the third party, especially where the party whose property was foreclosed was in fact in violation of the mortgage covenants, had notice of the foreclosure, and took no action to contest it.
Hint, hint.
Dungheap
@RareSanity: I don’t know that what you are saying is necessarily true. The fundamental problem in both cases (the Ibanez case and another similar case were consolidated on appeal) was that the foreclosing entities did not have written evidence of instruments assigning the mortgages to them. I don’t know that evidencing your legal interest in a mortgage before being able to foreclosure on it is something that is all that unique to Massachusetts law but then again I ain’t no expert.
polyorchnid octopunch
@mclaren: This is the elephant in the room. Wealth comes from making things; all the rest is mere bookkeeping. That’s not to say that bookkeeping isn’t important, but without the things being made it’s just shuffling paper… and the US is a nation of bookkeepers now.
La Caterina
@superking: That’s funny. I am also a foreclosure defense attorney at a non-profit (in NYC) and I run across fact patterns nearly identical to that of the Ibanez family every day. The decision, of course, is not binding in my state, yet it will be useful as another chink in the TBTF banks’ armor.
As for Massachusetts, I suspect there are thousands of wrongly foreclosed upon homeowners to whom this precedent applies. I spoke on a panel in November at Harvard Law School along with local legal aid attorneys and the clinical professor who runs Project No One Leaves. They partner with a community development funding entity to help foreclosed upon owners buy their houses back at a reasonable, market based price. Sounds like that whole venture just became a lot more viable.
Glen Tomkins
Where you been the last 30 years?
“What kind of arrogance, hubris, and mismanagement would lead banks to think that they can go to court and take someone’s property without even proving that they are the rightful owner?”
Exactly the kind of arrogance and hubris the banksters have gotten away with for a generation. Why would they imagine their streak is over now?
megamahan
So let me get this straight:
Mortgage-backed securities precipitated the housing bubble which precipitated the economic crisis. Taxpayers who bailed out banks in the wake of said crisis are now unable to make mortgage payments due to said crisis and are being foreclosed upon by said banks which lack the proper documentation to prove that they own the mortgages which are wrapped up in mortgage-backed securities.
♫ It’s the circle of life! ♫
Tonal Crow
@kc: Yep. Oh, the trouble this bullshit is going to cause to our ability to determine whether we’ve got good title. And the lawsuits between banks and title insurers are going to keep lawyers fully employed for a decade.