printVox Day, friend and fellow (libertarian) rebel on WND.COM, has objected to my comments about his bank foreclosure comments in the BAB post titled “Financial Paperwork Crisis (No Conspiracy Thinking, Please).” Vox and I have been exchanging emails on the topic. Vox traces the arguments back-and-forth in his post “A dialogue with Ilana (UPDATED).”
Consider: You’re a homeowners. You have a mortgage with the bank. The title deed is yours; you have a legal right or title to the property. However, this obtains just as long as you honor your mortgage payments. The bank has a lien on the property until you pay-up the mortgage. If you pay your monthly mortgage installments, and the bank has cashed these payments, your bank account will reflect that. If you’ve met these conditions, and the bank, nevertheless, proceeds to foreclose on you—this is an error, and a legal and statistical anomaly; an outlier case.
It is my understanding that Vox refutes the above; says the latter scenario may be the norm, or could easily become the norm due to endemic fraud.
Distilled, I contend that it is almost always true that a necessary condition for a foreclosure is for the homeowner to have failed to make his mortgage payments. It is my understanding that Vox disputes this.
I told Vox that the one article he referred me to “began with a one-case study as its proof. This is statistically worse than insignificant. The article graduated to assertion. Then added another one-case study.” Vox may well be right, “but the data in the column he provided do not prove his case.
I have since Googled some of the terms Vox deploys in his post. One search led me to the Washington Post’s Ezra Klein. When Ezra does get something right it is only by accident. In any event, the Klein article does not support the Day case (as I understood it), namely that the foreclosed upon are being treated unjustly, even routinely robbed of their property.
Understand: I have no dog in the fracas other than the truth; am quite ready to find for Vox. So far, the hard evidence is missing.
Our debate might be delayed for a while, but it will continue. Stay tuned.
UPDATED I (Oct. 18): Difster’s comment hereunder is mostly waffle unless he is able to address what I wrote in the post: has the homeowner being foreclosed upon been paying his debt or not. He can’t. I really can’t abide argument that doesn’t cleave to reality and evidence. Bring me evidence of all the cases of paid-up homeowners who’ve been foreclosed upon. Present that here, please.
UPDATE II: Judging from this tale of woe, the lawyers for the defaulting borrower are themselves using what they consider irregularities of procedure to try and get their delinquent client’s debt forgiven. I am not saying that “MERS, the electronic mortgage tracking system,” and the banks that use it, are following the letter of the law, but what people seem to be skirting here, much to my horror, is that these borrowers owe money they borrowed. You don’t forgive someone’s debt because the debt-holder’s bureaucracy is bad, or even dubious. And you don’t accuse bankers as a group of robbing home owners of title to their homes, because of problems of paper trail. (As I pointed out here, to argue against the bankers, in this case, on the ground that they are, moreover, embroiled in the fractional reserve system is to make an error of logic, maybe even a categorical error. Along the lines of releasing murderers because justice system is corrupt, etc.)
Note too that nowhere do the delinquent borrowers deny that they have not paid their debts, only that they are struggling “to figure out who owns their loans, who can negotiate loan modifications with them, or even how to get a call returned.”
Also: Borrowers are deploying the very argument the bankers are using: it’s the bureaucracy.
What do you know, it seems that, as outlined in this BAB post, “the latest foreclosure crisis is indeed bureaucratic in nature.”
UPDATE III: The thing to take away from Vox’s WND column today is this line: “the law is very clear on the matter: ‘If the chain of title is broken, then the borrower’s loan is no longer secured by the property.'”
This is the positive law. The fact of the borrower’s debt is unchanged. A took from B in order to buy C. That’s another “chain” to keep in mind.
UPDATE IV (Oct. 19): STILL ABOUT DEADBEATS. From all the reports so far, FBN’s Gerri Willis’ being the latest, it is as I said. The defaulters owe boatloads of money. The bankers bungled the paper work in a manner that verges on the criminal. The reality, in as much as property rights go, comports with my distillation on this post and the one linked to it, “Financial Paperwork Crisis (No Conspiracy Thinking, Please).”
Ilana,
I have to side with Vox on this one. I’ve been reading about this for quite a while.
However, this obtains just as long as you honor your mortgage payments. Should you default on these, the bank will acquire a lien on the property.
Not quite accurate. The homeowner hold title to the house and there is a lien on the property in the form of a mortgage or trust deed (depending on the state – there is a legal difference between the two that’s irrelevant to this discussion).
Distilled, I contend that it is almost always true that a necessary condition for a foreclosure is for the homeowner to have failed to make his mortgage payments.
You are correct. But Vox (along with I and others) contend that it’s the foreclosure proceedings that are exposing the fraud that was committed by the banks at the time of loan origination. The “errors” of homes being foreclosed on that do not even have a mortgage assigned to them is merely a symptom of a much larger problem.
Please click This link to see the in-depth legal, social and political commentary by Karl Denninger of The Market Ticker. He’s been on this for years, it’s finally just getting noticed. He’s not some conspiracy nut either.
In short, consider this (and I worked in the mortgage industry not to long ago): When the chain of title is broken for whatever reason (except fraud on the part of the homeowner) then the underlying mortgage against that property is no longer valid.
Put another way, when the chain of title is broken, it can no longer be proved who the homeowner owes the money to or who has the right to foreclose so in essence, the homeowner no longer owes anyone.
In order for the banks to unwind this mess, they would have to pay back BILLIONS to their investors since the money didn’t actually come from the banks to fund these mortgages. They’re not going to do that.
I urge you to read the Denninger material and reconsider your position. I think you will find it very informative and chock full of smoking gun evidence of the fraud.
While there is no question (at least for me) that failure to pay a debt is or should be grounds for foreclosure, that’s not the biggest issue here. The banks and other financial institutions committed a much more massive fraud that inadvertently destroyed their legal standing to foreclose. Essentially mortgages were bundled into securitized packages which were then sold (derivatives). The bundling process separated the notes and mortgages. The question isn’t whether or not the home buyer defaulted. It is, rather, who owns the right to foreclose. This is a much bigger deal–and one that threatens to sink the entire financial industry and, with it, the national economy.
I think you and VOX are both right and that the squatter-purchasers (incorrectly called “homeowners”) AND the banksters are BOTH in default via the propagation of garbage money. Somewhere along the line are real creditors who have to be paid when both these homes and Citigroup, etc. are put in default.
A friend with a house that I’m interested in OWNING (outright) has a home assessed at $546,000 – but he’s asking $729,000. People are saying he is ENTITLED to that because he bought (at market peak) at $675,000 (2006 assessment was $701,000) and put money in it. I stated “he is no more entitled to $729,000 from me than I am entitled to $35 for GE because I paid $35 per share (now selling for $17)”. But the softhearted think that bad economic decisions should be mitigated by others. Needless to say, I will not be the one who buys a house 34% over assessment (when they are going for 8% over assessment on my street).
The banksters, the bundlers, the AIG insurers, and the home purchasers made bad economic decisions. Bailing them out guarantees that the same malignant pattern continues indefinitely until Economic Armageddon results.
I’ve been watching this closely because I have a mortgage that might be caught up in the fracas. I have no idea how it came to be but after changing hands multiple times my mortgage is now a Fannie Mae, Freddie Mac mortgage registered with MERS but with Wells Fargo collecting the payments. Go figure.
What I want to know and haven’t seen in any of the reports is if this problem also affects home sellers as well as banks. I plan on retiring and selling in about 10 years. I would hate to find out 10 years from now that I don’t have standing to sell the property.
As for the banks erroneously foreclosing on properties I say bring it on. I’m about $100k underwater and that would be a godsend.
“The title deed is yours; you have a legal right or title to the property. However, this obtains just as long as you honor your mortgage payments.”
Wrong. This obtains _until_ a court with jurisdiction issues an order foreclosing your right to pay-off the entire mortgage loan.
“Distilled, I contend that it is almost always true that a necessary condition for a foreclosure is for the homeowner to have failed to make his mortgage payments. It is my understanding that Vox disputes this.”
Necessary, but not sufficient. The sufficient cause is that the mortagee has justly proven his foreclosure claim in a court of law, with certain other legal concepts implied, such as notice, evidence, etc. etc.
My understanding is that Vox is disputing that the banks have been able to justly prove their cases in court –they can’t find the original, or best available documents, they blatantly disregarded federal and state laws regarding aspects of executing the documents, there’s a big and growing dispute amongst third-party purchasers of the rights to those mortgage payment streams regarding the terms of the sales of those streams, etc. etc. etc.
That said, what’s seems to me to be omitted from most of the blog conversations about this is that, at least by my prediction, the vast majority of US citizens will admit, at least at some stage of any legal proceeding, that they took out a mortgage for so and so amount of dollars on or about such and such date. That basic honesty, however, is being challenged as the other side of the deal gets continually bailed out and retroactively favored by the powers that be. Chalk up another one for the overwhelming state: incentive to immorality for its put-upon citizens.
Pardon, I see that Difster beat me to the punch.
I have a metal pipe fencepost in my back yard that will be more willing to concede your point; before anyone from the other side will.