Photo: Florida Office of the Attorney General
The debate continues over Friday’s big ruling in Massachusetts — that two foreclosures were illegal due to an improper paperwork chain — and what kind of impact it will have on the banking market.Some, like Chris Kotowski at Oppenheimer think it will be costly, but solvable, and that it will just be a matter of the foreclosing entities getting their ducks in a row.
John Carney disagrees, and notes the paper chain won’t be so simple to solve in large part because the foreclosing entities don’t have direct relationships with those who hold the necessary note. He notes for example the problem of any mortgage that went through Lehman.
This clever made-up dialogue shows the problem:
US Bank dude: “Hey, can I speak to whoever it is who is handling the Ibanez mortgage?”
Option One guy (after some delay): “No one handles that mortgage. We sold it five years ago to Lehman and closed the file.”
US Bank: “Right. OK. Well, I need you to find someone who will execute an assignment of the mortgage to me.”
Option One: “First of all, no one who handled that mortgage still works here. You might have heard about the mortgage meltdown, right? Second, we sold it to Lehman, according to the file.”
US Bank: “Right. But I bought it from Lehman.”
Option One: “So get the assignment from Lehman.”
US Bank: “They’re an empty company that is in bankruptcy.”
You can see the problem, right?
It’s still hard to fathom outright chaos where nobody can be foreclosed upon, and all that entails. But… if you’re looking for a cumbersome process that’s going to grind bank earnings lower, this is it.
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