So Friday Bank of America
in order to "review" its foreclosure practices. As
Things are spinning up faster and faster. And there's a new wrinkle—one I neglected to consider in my
, and one which may ultimately prove to be the undoing of some banks, lenders, bagholders, whatever they call themselves. Turns out that in some cases, maybe, probably, the note—that is, the promise to pay generated by the original mortgage—did not transfer to the bond holder that ultimately lays claim to the house once the occupants stop paying their mortgage. Yves Smith at
has been writing about this for a week or two, and some in Congress are taking notice. Florida Congressman Alan Grayson (D) sent a letter to the
, calling for an investigation of this aspect of the problem. Excerpts from Grayson's letter (via NC):
The quick fix for this ginned up by the industry (and passed with no debate in Congress) was for all states to suddenly start accepting out-of-state notarizations. Presumably this would have allowed the perjury to continue unabated.
So, if the alleged note-holder lacks standing to foreclose on the house, does that mean that the homeowner doesn't owe the money? No, it doesn't. It means that the loan is uncollateralized. In order to get a free house, the home debtor would have to file for bankruptcy. Meanwhile, the note-holder would sue the bank or lender that neglected to transfer the note, to try to recoup some of the money lent. The legal maneuvering might go on for years. The idea that this might be "good" for anybody—particularly anybody who relies on the real estate market—is fairly dubious.