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The
Mortgage Morass
| by Paul Krugman
Now an awful truth is becoming
apparent: In many cases, the mortgage foreclosure documentation doesn’t
exist.
In the frenzy of the bubble, much home lending was undertaken by
fly-by-night companies trying to generate
as much volume as possible. These loans were sold off to mortgage
“trusts,” which, in turn, sliced and diced them
into mortgage-backed securities. The trusts were legally required to
obtain and hold the mortgage notes that specified
the borrowers’ obligations. But it’s now apparent that such niceties
were frequently neglected. And this means that
many of the foreclosures now taking place are, in fact, illegal.
This is very, very bad. For one thing, it’s a near certainty that
significant numbers of borrowers are being defrauded
— charged fees they don’t actually owe, declared in default when, by
the terms of their loan agreements, they aren’t.
Beyond that, if trusts can’t produce proof that they actually own the
mortgages against which they have been
selling claims, the sponsors of these trusts will face lawsuits from
investors who bought these claims — claims that
are now, in many cases, worth only a small fraction of their face value.
And who are these sponsors? Major financial institutions — the same
institutions supposedly rescued by
government programs last year. So the
mortgage mess threatens to produce another financial crisis.
What can be done?
True to form, Obama’s response has been to oppose any action that might
upset the banks,
like a temporary moratorium on foreclosures while some of the issues
are resolved.
Instead, it is asking the banks,
very nicely, to behave better and clean up their act.
I mean, that’s worked so well in the past, right?
One thing that keeps popping up?
Obama's inability to learn from his past (and very recent) mistakes.
He KEEPS trusting the banks like he trusted BP like he trusted Bitch & Boner, etc.
I wish Obama had gotten into selling drugs when he was
using them.
Had he sold some drugs, he'd have a lot more clues about human nature
and whom to trust.
and drug dealer in Tulsa County and I got twenty years of education in those two years.
But what will it take for our president to learn he can't trust lying sons of bitches?
...and why can't our president learn?