Heyer Capital, LLC

investment management and timely advice from a local CPA (Fox Valley, Wisc.)

Foreclosure resolutions

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It’s extraordinarily difficult to summarize the mortgage/foreclosure/note transfers/securitization mess.   I point you to 4closurefraud.org and foreclosurehamlet.org blogs to get you started on the grassroots horror stories.

Karl Denninger’s Market Ticker is a good source of much of the background on the financial ramifications.  It’s unknowable at this point, but I understand that nearly all of these mortgage backed securities (MBS) have the legal structure that requires the mortgage notes to be delivered by a specified closing date to receive the special tax treatment of the interest.  Think of it as Noah’s Ark… if the mortgage note isn’t in the boat when the door closes, tough luck. If the special REMIC tax treatment is violated, it’s revocable to inception, and the revenuers will have a field day.

Portfolio managers might discover their mortgage backed portfolio doesn’t legally own the notes it thinks.  Portfolios (mutual funds, pension funds, etc.) may very well have to chase down the Wall Street bank that sold the MBS and sue for fraud and nonperformance.  Where will the investment banks get the capital to reimburse the damages, if found in judgment?    Personally, if I was a portfolio manager with a pile in what are supposed to be valid mortgage notes, I’d have someone seriously sampling the collateral.

A political take-away is be sure to chuckle and shake your head at the next candidate that says they want to get rid of the office of the Secretary of State.  The leading elected official to cry ‘foul’ in this mess is Ohio SecState Jennifer Brunner.  With her prompting, the Ohioh AG is suing GMAC – known now as Ally Bank — for fraud to the tune of $25,000 per false notarization on foreclosures.  Doing the math, of  one bank, in one state …

It was humbling to leaf through the foreclosure notices posted at the town hall this week.  These are my neighbors. If they pledged their property as collateral, and things didn’t work out, they get to suffer the consequences.  But property rights and contract rights are inviolable, and our justice system and our legislators must not permit shortcuts.

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Written by heyercapital

October 7, 2010 at 6:04 pm

Posted in Uncategorized

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