Given everything we know about sloppy underwriting standards at the mortgage mills from the middle of this decade, it wouldn’t surprise us at all to learn that a lot of crucial mortgage paperwork is just flat out missing.
This issue has been bubbling under the surface for a while, as some homeowner advocates fight foreclosures on the grounds that the actual paperwork can’t be produced.
How big is the problem? Bankruptcy lawyer R. Glen Ayers recently gave a speech saying 1/3rd of all mortgage backed securities may not be connected to a physical mortgage. Sure, they’re producing cash flow now. They’re connected to a household. But if there were ever need for a foreclosure, it could be much harder than current holders assume. Talk about toxic assets. (via New Geography)