Posts Tagged ‘Mortgage Market’
For those curious why many people are scratching their heads how the market cap of Bank of America has nearly doubled in the past year, here it is: “Bank of America Corp. has amassed $64 billion of mortgages that are at least six months delinquent and have yet to enter foreclosure, more than twice the amount held by its four largest competitors combined.” $64 billion is more than half the market cap of Bank of America as of this moment.
This number in the context of the BAC market cap:
In other words, by keeping tens of billions of mortgages off the market, Bank of America is hoping to limit the supply of houses in the market, creating an artificial shortage, in the process pushing up the prices of all other house higher, and only then to start dumping its pre-foreclosure inventory to a witless housing market.
And of course, this number excludes any of the tens of billions of mortgages that are in process of discharge and full write off, as well as the tens of billions in associated Reps and Warranties legal fees, which will go from accrued to paid out status as soon as Bank of America loses the MBIA litigation.
Also, recall “Foreclosure Stuffing” aka the most obvious housing subsidy in the past 4 years? There you have it. And there are those who wonder why we are experiencing merely the fourth dead cat bounce in the housing market.
Sometimes law is complex, nuanced, difficult. Other times it’s black and white…you just read the words, look at the facts and the answer is unavoidable. Such is the case with the simmering dispute over the fact that the notes that are part of nearly every residential foreclosure case are not negotiable instruments. Oh sure, too many courts won’t take the time to consider the argument and…just yesterday I heard an appellate court argument where the judges just kept repeating the mantra, “this is a negotiable instrument” without ever doing any analysis at all and without any finding of that “fact” from the trial court. The attorney needed to stop the appellate judge right there and say, “No Your Honor, it’s Not A Negotiable Instrument”.
Matt then goes into a rather complicated and technical discussion of what all this means. I’ll try to simplify it.
A negotiable instrument is (under the UCC Section 3) something that involves only (1) the payment of money, and (2) possibly the payment of interest. It can be payable on demand or a specific time.
Because it is an instrument that has no real interpretation available as to whether the terms were complied with or not (it’s just about money) these can be passed around as if they were cash by simply “negotiating” (signing) the back. You can pass a check around like this; it is a negotiable instrument because it is payable on demand and it is only an instrument for a given amount of money.
A mortgage inherently contains other conditions, such as “you will maintain insurance”, “you can prepay without penalty (or with one)”, “the following things can be charged to you other than principal and interest”, and “the note might be accelerated (due in full) if I do (or don’t do!) x, y or z.”
None of these are simply the payment of money on a given schedule or upon demand, coupled with a possible payment of interest. All involve other conditions, which make the note non-negotiable.
The reason it’s not negotiable is that the formal process of assignment transfers not only the note but also the obligations of the parties, including the beneficiary — who might have obligations. It is thereforemuch more formal than something that is “negotiable”. Assignments require formalities like notaries and such, because everyone has to agree – - not just the borrower. And if the formalities are not followed then the assignment simply never happened and title to the note in question remains with the original party.
The import of this decision, assuming it stands, is significant. It means that the “defenses” to all the fraudclosure crap may just evaporate, as once you force recognition of all of those formalities if they didn’t happen then the guy standing in front of the judge asking to steal your house fails, as he’s not the right person to be making the request — that is, he’s a thief instead of a forecloser!
And once you force these institutions to come to court with true and complete documents you find that they can’t — they have played “fast and loose” with the documents, they don’t have them at all, they try to cheat and forge them, and in some cases it appears they are trying to collect twice on the same instrument!
You can bet this ruling will be challenged, but there is hope so long as we have some real jurists that remain on the bench. And as Matt explains, attempting to use these arguments “pro-se” is dangerous,but the fact remains that there is progress in this decision.
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