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Securitization Crisis

The subject of securitized loans has been slowly but surely surfacing as time has passed.  At first, the area seemed very complex and often confusing – even to the trustees conducting foreclosures or the judges who were ruling on them. Nobody was completely certain of what the full implications or impact would be on the American homeowner, and many thought that it was just a “ploy by homeowners” to get out of making mortgage payments.

However, as time has passed and experts have researched the area as well as tried and won cases in court, the full impact is beginning to be realized.  It sums up as this:  Millions upon millions of homeowners could be illegally foreclosed upon, thousands upon thousands already have been.

In essence, since the real estate bubble burst, and lenders have been dealing with the fallout they created by issuing predatory loans, they have been guilty of foreclosure fraud. They’ve been presenting themselves as the rightful owners of the loans they are foreclosing on (often through their self-created agent, MERS). They are not.

The lenders created mortgage backed securities (MBS) by a complex process of turning mortgage loans into stocks that could be traded on the stock market. However, they didn’t do it right.  They lost the actual ownership rights to the note, they let the deed get separated from the note, and very often they set up the trusts that would hold these mortgages for maximum IRS tax benefit, which caused the trust to literally have no owners of the notes they contained. They created MERS (Mortgage Electronic Registration System) to operate as a “fast and efficient” registry and agent and thereby avoid the cost and time to properly record these legally required documents at the county.

Foreign and domestic investors (banks, large companies, hedge funds, etc.) all bought into these “Mortgage backed Securities.”  And they bought heavily, including the US Government.
Today, most homeowners’ notes are not owned by the investor who claims to own it.  The servicer who operates to collect your payment and/or foreclose on you has no right to do so, and MERS is getting more and more supreme courts ruling against their self-imposed right to operate as an agent.

And of course the state governments, congress and even the Securities and Exchange Commission are all busy investigating and demanding answers from the banks. Class action lawsuits abound, and homeowners everywhere are still displaced through wrongful foreclosure – despite all the bank’s illegalities.

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