Like Vikas Bijaj, New York Times’ Gretchen Morgenson is required reading if you want to understand what is going on in the world of credit and mortgages. In today’s New York Times, she reports that a judge in Cleveland rejected the claims by a trustee of a mortgage portfolio that they had not submitted adequate proof of ownership.
This adds salt to the wound of the issue of rising foreclosure activity. Not only are lenders and investors are being cut off from the income stream of mortgage payments, but the remedy is in question as its likely to become more difficult to retrieve the asset to soften the damage of lost cash flow.
One of the alarming trends that has been reported recently has been the high costs of foreclosure as well as properties fraudulently foreclosed.
Proof of ownership is an essential element of issuing the collateral to begin with so foreclosing on the property should be held to the same standard. I suspect we will see this disconnect cleared up in fairly short order.
I can see legions of attorneys protecting their clients by using this court case as the poster child for problems with mortgage securitization. This event will lead to higher costs for new borrowers as lenders won’t be able to afford the same spreads as their internal costs rise.
As I have said many times, I don’t think Fed policy gives enough credit to the economic drag caused by housing as more problems continue to unfold every day. I mean, who would have even considered this specific issue 6 months ago?
Every day its a new surprise….any way you tranch it.
. She steals stories from blogs without attribution, and makes glaring errors which are unforgivable if you write for the NYT.
I’m not saying, I’m just saying.
Actually, I think that it should be trivial for the true mortgage owner to provide the judge with the correct documents. I bet that there is a little more fraud in this case than is reported.
If you spent more than $100k to purchase a loan, wouldn’t you pretty much insist on having the right documents?