The Emperor Has No Clothes - And Neither Do Banks - Kiss Your Mortgage Payments Goodbye!

some asshole who thinks he can spam his way into people's minds.

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"Money" has no value - people do.

for removing those images,who was that anyway's?

Author F. William Engdahl says says the Deutsche Bank debacle shows that we are headed for global disaster…
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Deutsche Bank lives in the exotic new world of "global securitization", where banks like buy tens of thousands of mortgages from small local lending banks, and then "bundle" them into Jumbo new securities. The securities are rated by or Fitch, Moody's, or Standard & Poors, and sold as bonds to pension funds or other banks, or to private investors who naively believe they are buying bonds rated AAA, the highest, and never realized that their "bundle" of say 1,000 different home mortgages contained maybe 20% or 200 mortgages rated "sub-prime," i.e. of dubious credit quality.

The profits being earned in the past seven years by the world's largest financial players -- from Goldman Sachs to Morgan Stanley to HSBC, Chase, and Deutsche Bank -- were so staggering that few bothered to open the risk models used by the professionals who bundled the mortgages. Certainly not the Big Three rating companies who had a criminal conflict of interest in giving top debt ratings. That changed abruptly in August 2006. Since then, major banks have issued continual report of disastrous "sub-prime" losses.

The Ohio ruling is an earth-shaking precedent for all banks holding what they had thought were collateral in form of real estate property.

Because of the complex structure of asset-backed securities, and the widely dispersed ownership of mortgage securities (not actual mortgages but the securities based on same) no one can identify who precisely holds the physical mortgage document. This was a tiny legal detail our Wall Street derivatives experts ignored when they were bundling and issuing hundreds of billions of dollars worth of CMO's in the past six or seven years. As of January 2007 some $6.5 trillion of securitized mortgage debt was outstanding in the United States.

In the Ohio case, Deutsche Bank (DB) was acting as "Trustee" for "securitization pools” – that is, groups of disparate investors who may reside anywhere. The Trustee never got the legal document known as the mortgage note. DB could only argue that the banks had foreclosed on such cases for years without challenge.

Hundreds of thousands of struggling homeowners took the bait in times of historically low interest rates to buy a home with little or no money paid down. Many of these mortgages had low rates in the first two years. They were called "interest only" Adjustable Rate Mortgages (ARMs). Now those borrowers face exploding mortgage monthly payments at just the point the US economy is sinking into severe recession.

The US real estate bubble began in 2002 when Alan Greenspan began the most aggressive series of rate cuts in Federal Reserve history. The bubble peaked in 2005-2006. Greenspan sought to replace the Dot.com Internet stock bubble with a real estate home investment and lending bubble. He said this was the only way to keep the US economy from deep recession. Of course, a recession in 2002 would have been far milder and less damaging than what we now face.

Greenspan has since safely retired, written his memoirs, and handed the control (and blame) over to a young ex-Princeton professor, Ben Bernanke. As a Princeton graduate myself, I would never trust monetary policy for the world's most powerful central bank in the hands of a Princeton economics professor. Keep them in their ivy-covered towers.

In the last two years of the boom in selling real estate loans, banks thought they could resell the mortgage loans to a Wall Street financial house that would bundle it with thousands of better quality mortgage loans, and resell them as Collateralized Mortgage Obligation bonds. In the flush of greed, banks became increasingly reckless. In many cases banks did not even bother to check if the person was employed. Who cares? It will be resold and securitized, and the risk of mortgage default was historically low.

That was in 2005. Most Sub-prime mortgages written with Adjustable Rate Mortgage contracts were written between 2005-2006, the last and most furious phase of the US bubble.

Now a whole new wave of mortgage defaults is about to explode onto the scene beginning January 2008. Between December 2007 and July 1, 2008 more than $690 Billion in mortgages will face an interest rate jump, according to the contract terms of the ARMs written two years before. That means market interest rates for those mortgages will explode monthly payments just as recession drives incomes down. Hundreds of thousands of homeowners will be forced to stop monthly mortgage payments.

Millions of homes will be in default, but because of the Deutsche Bank debacle, the banks won’t be able to seize them as collateral assets to resell. Robert Shiller of Yale, the controversial and often correct author of the book, Irrational Exuberance (which predicted the 2001-2 Dot.com stock crash) estimates that US housing prices could fall as much as 50% in some areas, given how home prices have diverged relative to rents.

No one will be able to refinance, or to sell his home. Couple that with falling wages and rising unemployment, and we’re in for a rough time indeed.

Overall there are a total of $1.4 trillion in "interest only" ARMs, according to the US research firm First American Loan Performance. These ARMs face staggering higher interest costs in the next 9 months. More than $325 billion of the loans will default, which translates into about 1 million property owners. If banks can’t reclaim the homes as assets to offset the non-performing mortgages, the US banking system and a chunk of the global banking system faces financial gridlock.

The number of new mortgages approved by UK lenders in September 2007 was the smallest monthly amount since July 2005, according to Bank of England figures.

The downturn started in the summer of 2006, when the Bank of England imposed the first of five increases in interest rates.

Meanwhile home prices and borrowing costs have risen briskly.

The Council of Mortgage Lenders (CML) says the slowdown will become glaring in 2008.

Lenders are now setting increasingly strict criteria for borrowers. This will make refinancing a lot harder. As there are even more ARMs in England than the USA, British homeowners will be smashed. The CML predicts a 50% rise in the number of foreclosures in 2008.

Adam Sampson, head of housing charity Shelter, said: "These figures will set alarm bells ringing for hundreds of thousands of homeowners across the country.”

BBC News

Solution: nuke Iran and declare martial law.

Bob and Ricky Husick have been trying to sell their home, located 37 km from Pittsburgh, for almost a year, but they still haven't found a buyer for their property, which has four bedrooms and three bathrooms. The asking price is $399,900.

They are offering anyone who buys their home to refund its cost after their death, and even their full inheritance, currently worth at least $500,000.

The desperate couple is ready to offer a full cash-back upon their death.

In case the buyer agrees to care for them in old age, the buyer could also inherit the Husik's retirement home in Arizona, according to Associated Press.

Source:

Priam.eu.

(An international property newsletter)

Thank you for your comment.

A mortgage “lender” may have shown paperwork to homebuyers at the time of signing, but when the “lender” sells the mortgage on the secondary market, the Note can get lost, or mis-assigned. Without a Note, there is no legal way to tie a particular mortgage to a particular property.

Where is the Note? What does it say? Was the homeowner notified of the transfer of mortgage ownership? Can an investor in Singapore truly foreclose on a homeowner in Iowa?

Lenders must show they have a right to foreclose, but now their burden of proof has been affirmed in a federal court. Thus, the bank is no longer always “right.” If a banking trust cannot find the note, how can it legally foreclose?

The real damage here is that homeowners will now question their assumptions, thereby undermining much of the financial world, which largely subsists on assumptions.

I received a letter last spring asking me to resign some lending disclosure documents that the bank said they had misplaced. I had never seen these documents before and , of course, refused to sign them and told the bank so. I believe they failed to put these required documents in the loan package and are now worried that I would notice. I would have never missed them, but now I have a nice copy of every loan origination document that they failed to have me sign. How nice of them.

I am not going to use it - I have never missed a payment on anything, but it did alert me that the banks are scared of something - something legal out there!

"As to the real ramification of the Ohio decision, aside from slowing the foreclosure trains, is that the fact that there were no “original” assignments rendering the sales of the mortgages to the trusts, in violation of the true sale obligations imposed by securities law."

I'll be looking into this much more carefully . . . stay tuned!

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"Money" has no value - people do.

Read the whole post and read through the four comments to it.

At first glance, I can tell you that detractors make some good points, like the following (to name a few):

1. this problem doesn't affect all lenders, just the ones who will have trouble locating their notes,
2. the case was dismissed without prejudice, which means as soon as the defect is cured, the banks can file again, and
3. the struggle is by no means over

However, (1) lenders who potentially cannot find evidence that they own the note represent a good chunk of the market and the shadow that this ruling casts could be huge since the securities market is ALL about confidence; (2) some of the "cures" that they're talking may not be something that they can do without getting the borrower to recommit to the obligation - SO, BEWARE OF LETTERS FROM YOUR MORTGAGEE ASKING YOU TO SIGN SOMETHING!!! and finally, (3) the struggle may not be over - but, we have to start somewhere - and this is a great place to start! ESPECIALLY if massive numbers of homeowners question their mortgage commitments all at once.

So, YES - I think this is a very significant development.

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"Money" has no value - people do.