Ibanez

You know, what’s really discouraging about political blogging for me is how often you have to repeat yourself about obvious, undeniable facts (as a fer instance pasted over there on the right is Stephen’s take on BillO and whether the tides are explicable by a little something Sir Isaac Newton liked to call THE LAW of Gravity, because it’s not just a suggestion you see).

In the Commonwealth of Massachusetts Banks and Securities Holders can no longer claim title to property unless they can produce a mortgage and a statutory chain of transfer for the note.

This not a new concept, Stare Decisis is CARPENTER V. LONGAN, 83 U. S. 271 (1872), which means that it’s not easily appealable.

This exposes the Banks to severe financial losses in the Trillions of dollars.

First of all, there is no reason for someone who owes a mortgage to continue to make payments if clear title can’t be shown.  The value of all that paper those photons and electrons and derivatives is exactly zero.

Secondly, the Banks are going to be forced to honor their contracts with the big Mortgage Backed Securities holders who won’t be rolled as easy as Freddie Mac, Fannie Mae, and Barack Obama, and buy back their fraudulent paper for more Trillions.

And finally (for the purposes of this piece at least), there’s the Hundreds of Billions they owe in title transfer fees (tax fraud) and fines.  Smart States are going to start tapping that you betcha, though it really falls in the rounds.

Felix Salmon writes about this and seems disappointed that another financial crisis is inevitable, but it is.

The legal craziness that this decision sets in motion is going to be huge, I’m sure. Anybody who was foreclosed on in Massachusetts should now be phoning up their lawyer and trying to find out if the foreclosure was illegal. If it was – if there was a break in the chain of title somewhere which meant that the bank didn’t own the mortgage in question – then the borrower should be able to get their deed, and their home, back from the bank. This decision is retroactive, and no one has a clue how many thousands of foreclosures it might cover.



Going forwards, every homeowner being foreclosed upon will as a matter of course challenge the banks to prove that they own the mortgage in question. If the bank can’t do that, then the foreclosure proceeding will be tossed out of court. This is likely to slow down foreclosures enormously, as banks ensure that all their legal ducks are in a row before they try to foreclose.

This decision won’t be appealed: the state law seems pretty cut-and-dried, every judge who’s looked at it has come to the same decision, and there’s no conceivable grounds for the US Supreme Court to take on the case.

What’s more, courts in the other 49 states are likely to lean heavily on this decision when similar cases come before them. The precedent applies only in Massachusetts for now, but it’s likely to spread, like some kind of bank-eating cancer.

If a similar decision comes down in California, which is a non-recourse state, the resulting chaos could be massive. People who are current on their mortgage and perfectly capable of paying it could simply make the strategic decision to default, if and when they find out or suspect that the chain of title is broken somewhere. They would take a ding to their credit rating, but millions of people will happily accept a lower credit rating if they get a free house as part of the bargain.

It’s not so much that the law and the facts are against them as that there are so many tables to pound on that they’re starting to look like tobacco lawyers.  If there are similar rulings (and it’s hard to see why not) in Connecticut, New York, and California then we could be looking at an entirely different political and economic landscape.

And one in which Republicans will pay the price, because the Vampire Squid doesn’t care which stone it squeezes to get its blood just as long as it’s red.

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    • on 01/08/2011 at 07:04
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    • on 01/08/2011 at 18:44

    this is Most Excellent News!

    i was just reading about banks uping their fees on checking accounts

    http://finance.yahoo.com/news/

    & came to see if you’d said anything about it here.

    now it seems not overdrawing your acct is not good enough to maintain free checking. you must have a direct deposit (what if you are unemployed for 2+yrs?) or maintain a $1500 balance (what if i don’t have that much anymore? (see above))

    why should i have to allow a bank access to MY $1500 to not be charged for access to MY money?

    am am so pissed off.

    fehhhh!

    • on 01/08/2011 at 19:38

    is in foreclosure here in NY. He told me today that there is a moratorium on foreclosures and that his lawyers are filing to have the foreclosure dismissed because BOA has yet to produce the proper papers and he was never behind in his payments. They haven’t even told him the reason for the foreclosure. Talk about screwed up.

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