Monday, October 11, 2010

What Must Be Done To Clean Up Fraud Foreclosure Mess

What Must Be Done – Today

Foreclosuregate is rapidly spiraling out of control, and is going to get worse.

As I have repeatedly said since 2007, this is not about bad paperwork. It is about fatally-defective securities sold to investors for half a decade and the fraud up and down the line that enabled those sales.

In no particular order the biggest (but by no means the only) problems are:

Borrowers overstated income, assets or both. In some cases they did so willingly and knowingly. In others loan officers changed numbers to “ram it through” the computer-operated approval systems, submitting files multiple times while doctoring figures. In the latter case perhaps the borrower knew, perhaps not – many people didn’t read the entire 100+ page stack of paper at closing. That’s dumb but it’s not criminal. Changing the figures or lying, on the other hand, is criminal.

Lenders stuffed paper they either knew was bad or had the ability and legal duty to verify the provenance of but intentionally did not into securities sold to investors. This has been disclosed in FCIC hearings and is no longer speculative, although as I noted in 2007 it had to be the case because it was the only way the deals that were being done could have possibly been done. This was an act of deception and in my opinion (along with many others, including plenty of attorneys) meets the legal definition of fraud.

The land title system in this nation was intentionally subverted and corrupted by both intentional act and intentional laziness, all driven by the motive of profit. Original paperwork was either shipped overseas or intentionally destroyed. In even more cases it was not conveyed as legally required by the trust documents. This has massively-corrupted the chain of title for perhaps as much as one third to one half of all residential housing units in this country and if not corrected will render these homes unmarketable in the future. This is the vastly unappreciated problem with what has been done to date.

There is a template for resolving this sort of problem, and The States can implement it right now. It was used in large part in Florida to resolve the “swampland” mess that arose during the 1920s, and with minor changes we can adapt it to what we face now.

The correct, just, and only way to resolve these problems is to force a clearance of the chain of title, which in turn forces proof of provenance of the indebtedness claimed to be owed by the homeowner. FULL STORY

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