Card of Houses

2010 October 11
by drdog09

‘House of Cards’ maybe, but way too many houses and not enough cards left in the deck to resolve this problem. —

Being forced to suspend all foreclosures has obvious “material” economic consequences to the CDO note holders.

Having title companies pull out of the residential real estate market because they no longer trust the veracity of bank provided documents presages claims by mortgagors who lost their properties as well as the subsequent purchasers of same. The only way to conclusively cure that kind of problem is to get waivers, and releases from the various claimants wherever they may be or pass retroactive curative laws or laws doing things like creating a bailout fund to indemnify those who are injured (yikes!). You cannot simply say this is immaterial, sprinkle in the word MERS and hope this will all go away.

The CDO note holders will have potential claims stemming from the interruption of non-performing loan processing. Think breaches of the trust servicing agreements and allegations of “gross negligence or willful misconduct”, the latter being magical legal hurdle in these types of agreements. However, the much more troubling aspect, is the growing realization that the various pools of securitized mortgages may never have been properly assigned, transferred and recorded at inception. If this turns out to be the case, game over–the noteholders will have to be made whole (here we will be expanding into the universe of securities “underwriter” liability).

How these problems are all handled in public disclosure documents is another key area to watch. The standard for “materiality” is whether a reasonably prudent investor would consider an item of disclosure important in making an investment decision. What would you say is important?

Remember that RICO is what brought down Drexel. RICO claims can be brought by the state or by private parties. Private RICO actions have apparently already been filed by certain litigants. This is a securities and white collar crime litigators wet dream.


Lest we think that all this mess is limited to men in three piece suits overseeing a Manhattan skyline think again —

1. Aug. 2010: BofA Tries To Foreclose On Couple With Current Mortgage

Even though they have made every payment in full and on time, Bank of America sent one couple a letter asking them for the deed to their house….

Bank of America said sending the letter was an accident, the folks were completely current on their mortgage, and they would be looking into what caused the error.

2. Sept. 2010: BofA Forecloses On Man’s House, Even Though He Has No Mortgage

Bank of America stole Jason’s house from him, putting it through foreclosure even though he has no mortgage, with them or anyone, and he paid for it in cash.

3. Oct. 2009: Bank Of America Seizes Wrong House, Causes Big Stink. No, Really.

Bank of America screwed up and seized a vacation home that didn’t belong to them. They also changed the locks and shut off the power, leaving 75 pounds of salmon and halibut rotting for a week before it was discovered.

4. March 2010: Bank Of America Seizes Wrong House, Holds Parrot Hostage

After mistakenly believing that the property was in default, BoA instructed Snyder Property Services to “enter, seize, padlock, ‘winterize’ and take possession” of the plaintiff’s home. This included turning off the water, cutting power lines, filling her drains with antifreeze… and confiscating her parrot.

5. Jan. 2010: Not Having A Mortgage Doesn’t Stop Bank Of America From Foreclosing

Charlie and Maria Cardoso managed to do something few homeowners can: They own their vacation home in Florida outright, with no mortgage. But that didn’t stop Bank of America from kicking out a tenant who was renting the house, tossing out the Cardosos’ possessions, and, yes, foreclosing on the debt-free home.

Articles courtesy of

Isolated incidents? Ok. But consider that this is just ONE bank, BofA.

The point of all this? Well two fold, one economic, one political. In the economic sphere, one should consider that this could be the very sand that brings the system to its knees. The major banks are still holding underwater assets, TARP was merely a bandaid. If the banks cannot over time resolve and release their REO’s then one has to wonder about the overall solvency of all of them. More in a moment.

On the political front, Dear Reader you know that the Wall Street crowd is going to run down to Pennsylvania Ave. frantically waving their hands about financial armageddon. Unable to unload their assets to anyone they will paint a pattern of woe and failure that no one has ever seen. The untold story is that these same banks as a group are holding $6Tn in commercial real estate paper with an asset valuation today approximating half that number. Its not that they are whistling past the graveyard, but are already in it. Somebody just needs to push the dirt over on them. The failure is already baked in.

More than that the financial issues are merely a cover folks. “Remember that RICO is what brought down Drexel. RICO claims can be brought by the state or by private parties.”, this line in the aforementioned piece is what Suits will really be trying to get out of Congress. The Telcos were issued a blanket amnesty for any possible infractions that they would have incurred as a result of helping the government after 9/11. The Suits will be looking for something similar to avoid any RICO ramifications. Money woes the Suits can handle, but Sardi’s does not deliver to the federal penal system last I heard. So expect whatever goes down will include some form of blanket amnesty.

What will make this revealing is the Republicans will be in control of one or both Houses of Congress. How this works out, whether amnesty is provided, will be a clear indicator of whether the Republicans this time back Wall Street or Main Street. If they back Main Street them some folk at Wall and Broad will be trading chalk stripe for bright orange. That choice may well decide the fate of a nation.

65 Responses leave one →
  1. 2010 October 11 10:04 am
    mpthompson permalink

    Why do I get the feeling that those of us who simply borrowed what we could pay back and kept our noses clean are about to get reamed again? The last 10 years have given me zero faith that the GOP will back main street.

  2. 2010 October 11 10:07 am
    JustMary permalink

    I read this yesterday in a forum discussing the foreclosure halt:


    Was this common?

  3. 2010 October 11 10:19 am
    drdog09 permalink


    Very common. Most retail banks seldom hold RE notes. They get paid a fee for processing the paperwork, they might hold the note 6 months for seasoning, but then it is sold off to Fannie or Freddie in 80% of cases. So yes the bank is not the note holder.

    But that is where they get you again. Many banks also do the post processing for payment collection, foreclosure, etc. They have authority to act in the CDO holder’s behalf on a foreclosure. Its not a matter of whether the bank ‘owns the note’ but that they had the fudicary to do so. The challenge would rightly be pressed against the CDO. In some cases I doubt they could prove clear possession of the debt.

  4. 2010 October 11 10:27 am
    drdog09 permalink

    Do not underestimate the clear political ramifications of this foreclosure mess. If it comes to pass that the banks get blanket amnesty the message that gets sent is the following —

    If you are going to steal or screw up, then do so on a massive scale such that it becomes untenable to consider any judicial-penal solutions to the problem. In the ’30’s it was the Big Lie, in the naughts its the Big Steal.

    The Pols need to consider that they are riding a tiger that cannot be sated. It can’t be placated. Knows no political preferences. If the Pols think they can stay on top, then they need to contemplate killing the tiger. Otherwise its banana republic time.

  5. 2010 October 11 10:30 am
    justrand permalink

    someone DOES have to go to jail…but it can’t just be those who aren’t politically connected ENOUGH.

  6. 2010 October 11 11:31 am
    mpthompson permalink

    I think we have to get over this “someone has to go to jail” thing. Rather, the best way to discourage abuse of the system is to make people poor — the rich fear that more than anything — even a stint in prison. Take away their ill gotten gains to the point they are in poverty and you’ll see sphincters tighten all up and down Wall Street.

  7. 2010 October 11 11:36 am
    justrand permalink

    i agree, MPT…but it’s more fun to say: “someone’s gotta go to jail!” 🙂

  8. 2010 October 11 11:50 am
    MI Conservative permalink

    Barney in trouble as an workers says it smells like Scott Brown!

  9. 2010 October 11 11:51 am
    mpthompson permalink

    Well, if we add in a “tar and feather part” to the “make’m poor” it can still be fun. 🙂

  10. 2010 October 11 12:01 pm

    The icing on the cake would be for the but bandit from boston to go tits up.

  11. 2010 October 11 12:05 pm
    drdog09 permalink


    Surprisingly, the going to jail thing is very effective. It really did not phase the Enron mucky mucks that they could lose it all. But after the Enron debacle cleared and Sarbanes-Oxley was passed, you would be amazed how fast new disclosure rules were put in place at most corporations. At my former employer they had folks even at my level sign documents acknowledging SO. The Suits were deathly afraid of having dates with Bubba.

  12. 2010 October 11 12:08 pm

    RAS tracking: 48/51

    RAS generic: GOP+8

    What say you BC ???????????????????

  13. 2010 October 11 12:23 pm
    MI Conservative permalink

    This has to piss MSNBC off when they have to report it.

  14. 2010 October 11 12:34 pm
    drdog09 permalink

    Not the Change the incumbent Hoped eh MI?

  15. 2010 October 11 12:39 pm
    justrand permalink

    in news sure to piss everyone her off…apparently the VFW has decided to endorse BARBARA BOXER. They apparently also endorsed (or are preparing to endorse) Col. Allen West’s opponent in Florida.

    Insanity…pure & simple. Just like the NRA endorsing Democrats in muliple races.

    These groups go with the money…and the Democrats deliver the money. The actual purpose of the organization be DAMNED!

  16. 2010 October 11 12:44 pm

    They’ve turned into a bunch of drunks, with their own private little hangouts. Screw em.

  17. 2010 October 11 12:49 pm

    New Gravatar alert folks!

  18. 2010 October 11 12:55 pm
    drdog09 permalink

    Krugman spouts another ‘we didn’t spend enough’ article at NYT and he gets eviscerated in the comments by the Joe Plumbers. Barney Frank is in the fight for his life. Rahm can’t even get some attention in Chicago. This election could be more historic than the Reagan – Mondale battle as it relates to numbers.

  19. 2010 October 11 1:00 pm

    17. It’s all about grabbing a 24 hour headline for these idiots. I guess business is so bad that folks will do just about anything to make a buck.

  20. 2010 October 11 1:14 pm

    Again, EPH’s gravatar sucks.

  21. 2010 October 11 3:09 pm
    RepublicanPundit permalink

    The Hopium has worn off.

  22. 2010 October 11 3:15 pm
    mpthompson permalink

    This has to piss MSNBC off when they have to report it.

    Can we hope that some of these abandoned candidates will go into total meltdown mode within a week or two and start to lash out at Obama, Reid and Pelosi? Trapped animals tend to do that.

  23. 2010 October 11 3:16 pm
    mpthompson permalink

    The Hopium has worn off.

    Well, actually it just shifted to the 48% of the voters who didn’t vote for Obama.

  24. 2010 October 11 3:38 pm
    RepublicanPundit permalink

    Can you find anyone who voted for Obama.

  25. 2010 October 11 3:43 pm
    RepublicanPundit permalink

    The Opium has worn off and bugholes are sore. Do you think they have figured this out?

  26. 2010 October 11 3:46 pm
    RepublicanPundit permalink


  27. 2010 October 11 3:52 pm

  28. 2010 October 11 3:54 pm
    RepublicanPundit permalink

    The Generic Ballot forecast from Gallup. republicans 14 points ahead. That means addd 14 points to polls, subtract whatever lead the poll says the dems have, and we will get the actual forecast.

  29. 2010 October 11 4:17 pm
    drdog09 permalink

    sigh…Hopium — RP

    Eh, you had it right the first time. 🙂

  30. 2010 October 11 4:20 pm
    justrand permalink

    I may have to do another round of contributions…*sigh*

    just read that Ike Skelton may FINALLY get voted out in Missouri…where he had no business being! Vicky Hartzler has a shot with the race now called “Toss-Up” in RCP, and Cook calling is “Lean Democrat”.

    Cook, btw, has a stated policy that cracks me up: “we rarely rate unindicted incumbents worse than a Toss Up to win reelection”.

    But Hartzler has a “money-bomb” up…so we’ll see how she does! 🙂

  31. 2010 October 11 5:18 pm
    RepublicanPundit permalink

    Dr. Either way, I hope I got the message across.

  32. 2010 October 11 5:24 pm
    drdog09 permalink

    Changing the subject, BC you out there?

    I don’t have any dog in the hunt on the football pool. But I was curious, how the BJG ladies doing against the BJG men on the spread?

  33. 2010 October 11 5:27 pm
    brucefdb permalink

    Holy Cow, say it ain’t so….the VFW is my wife’s favorite charity…..sigh….it will be an ex-favorite and you do not want to be on her enemies list.

  34. 2010 October 11 5:30 pm

    Post 28 may ameliorate the situation. The rank and file of the vfw is pissed, and heads will roll, methinks.

  35. 2010 October 11 5:33 pm
    brucefdb permalink

    Hmmm, just read the statement at the VFW site which is at odds with the PAC. Probably what IP’s video says which takes too long to watch on my slow DSL connection.

    Appears the VFW is ok but their PAC is not…..not sure how that happens.

  36. 2010 October 11 5:34 pm
    brucefdb permalink

    IP…. 🙂

  37. 2010 October 11 5:36 pm

    The crap weasels have inflitrated every facet of our lives, Like a case of mongolian crabs, they must be ferreted out like villagers after frankenstein.

  38. 2010 October 11 5:42 pm
    drdog09 permalink

    More like these suckers.

  39. 2010 October 11 5:43 pm
    gnqanq permalink

    Getting closer and closer to pitch forks and torches!

  40. 2010 October 11 5:44 pm
    drdog09 permalink

    Federal government word cloud —

  41. 2010 October 11 5:51 pm
    drdog09 permalink


    They pull that off, it will also include hand grenades. I don’t think however that this session was specifically for this issue. Remember that the Senate turkeys are meeting once a week right now to prevent Obama from doing any recess appointments.

  42. 2010 October 11 5:52 pm
    RepublicanPundit permalink

    Current democrat party is sorrier than a wet turd

  43. 2010 October 11 5:55 pm
    drdog09 permalink

    Hot Air has the clips of the Frank – Bielat on air debate —

  44. 2010 October 11 6:10 pm
    retlaw permalink

    As to the Dems HOUSE OF CARDS this election cycle…their whole deck is full of 52 race cards that they continue to play unashamedly and (to them) counterproductively.

    They fail to follow Kenny Rodgers sage advice:

    “You gotta know when to hold em,
    Know when to fold em…”

  45. 2010 October 11 6:15 pm
    justrand permalink

    IF the government was stooopid enough to try and seize the 401ks they would literally set off a revolution. As the saying goes: “when you got nuthin’…you got nuthin’ to lose!” If they were gonna take my money anyway I’d simply withdraw it all first, not pay the taxes, and use it to buy “sporting equipment”…LOTS of “sporting equipment”.

    I don’t think even THIS groups of crooks is THAT stoooopid!

  46. 2010 October 11 6:16 pm
    gnqanq permalink

    Over the weekend I figured out how the Democrats are going to win in November. They are going to DEEM that they were re-elected. I mean if it works for legislation, why not for elections.

  47. 2010 October 11 6:16 pm
    TLS permalink

    Well it looks like Dan Benishek in Stupak’s district will be ok, he just got endorsed by Palin.

    The 401K issue is a real sore spot for me. We already looked into how to cash out our current funds but it would take 30 to 90 days. I’m sure if they choose to pursue this option they will take that into account and make sure the legislation takes effect before people have a chance to take their own damn funds.

  48. 2010 October 11 6:25 pm
    drdog09 permalink


    Don’t know your situation but I have moved highly into cash and I have the investment funds tied to a LLC. I could write a check for about 70% of it in 24hrs. Be paying some penalties for early withdrawal but better that that losing it to the government.

  49. 2010 October 11 6:33 pm
    TLS permalink

    DrD, the rest of our investments are good, but my husband’s 401k is employer contributions quarterly. The account is their choice, their rules. They chose no partial distributions, no loans.

  50. 2010 October 11 6:44 pm
    drdog09 permalink

    ah-ha. Not much flexibility there.

  51. 2010 October 11 6:56 pm
    mpthompson permalink

    Democrats in the Senate on Thursday held a recess hearing covering a taxpayer bailout of union pensions and a plan to seize private 401(k) plans to more “fairly” distribute taxpayer-funded pensions to everyone.

    I can’t believe they would be that stupid to attempt such a move. The bailout? Sure, why not while they still have the votes until January. What’s a few hundred billion more of borrowed money. However, seizure of 401K plans? Wow! I couldn’t think of a better move to trigger a revolution.

  52. 2010 October 11 7:00 pm
    TLS permalink

    Wow! I couldn’t think of a better move to trigger a revolution.

    Especially as angry as people are right now. It makes you wonder if that’s not exactly what they are trying to do.

  53. 2010 October 11 7:01 pm

    They would have to overcome a sure filibuster of such a move, plus get it passed the house. Not likely.We may have 2 more GOP senators who will be seated ASAP.

  54. 2010 October 11 7:13 pm
    mpthompson permalink

    It would seem to also trigger the dissolution of the Democrat party. I can’t imagine more than 50% of the Democrats supporting such a move.

    I’ll admit there is a part of me would love to see them try such an insane move. The recoil would provide enormous momentum to not only repeal anything passed since 2006, but perhaps going much further back — perhaps all the way to the 60’s.

  55. 2010 October 11 7:17 pm
    drdog09 permalink

    Anything from Roe v Wade forward should be nullified. The Wheat Case should be overturned, which would nullify how the Congress uses the Commerce Clause to control everything we do. Let it begin.

  56. 2010 October 11 7:24 pm
    brucefdb permalink

    No way this gets past the Senate…..we have enuff to filibuster and no dem up in 2012 will vote for it. It won’t even get thru the House.

  57. 2010 October 11 8:45 pm
    drdog09 permalink

  58. 2010 October 11 8:50 pm
    justrand permalink

    drdog, the Republican “internals” are pretty darn accurate this cycle!!

  59. 2010 October 11 8:55 pm
    JustMary permalink

    The 401k issue really pisses me off. We took a HUGE hit already, anything else and we may as well say screw the penalty, gimme the cash. They will probably make it so no one can do any withdrawal, or frankly have a chance of knowing about it……at midnight…..on a Saturday…..followed by a banking holiday.

  60. 2010 October 11 8:57 pm
    JustMary permalink

    I should throw in there, how is it fair that we have saved that 10% aside every month if others did not? We could have used that money. We could have only saved what the company matched, but we knew SS would leave us high and dry. Screw taxpayer funded pensions. UGH

  61. 2010 October 11 9:14 pm
    drdog09 permalink

    Cook’s has downgraded Barney Frank from safe to likely

  62. 2010 October 11 9:26 pm
    drdog09 permalink


    Keep in mind that bank runs these days are conducted on line.

  63. 2010 October 12 3:22 am

    Such a mass withdrawl would of course destroy the market.

  64. 2010 October 12 6:43 am
    drdog09 permalink

    Interesting tidbit if true —

    * Is Coons in trouble? The polls don’t say so, but maybe there are some internals indicating the independents swinging.
    * Does this mean Shea-Porter is being written off?
    * Can Boehner tie Polesi to the Tea Party railroad tracks?

    All this and more Nov 2nd.

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