Grayson Wants Foreclosure Fraud Investigated as Systemic Risk, Calls for National Moratorium

[Joanne98]

In a letter to the Financial Stability Oversight Council, the board made up of chief regulators of the financial industry, Rep. Alan Grayson has called for a national moratorium on all foreclosures because of the systemic risk of fraudulent practices.

Grayson has essentially taken this up a notch, beyond the documentation problems that were the source of the anguish over the now-vetoed HR3808. He thinks, as I do, that the documentation fraud covers a much larger fraud, rooted in the securitization of mortgages and the improper processes in which that slicing and dicing played out. This has confused the chain of ownership of the titles of the properties, throwing into question not just foreclosures but the mortgage-backed securities behind them, which represents trillions of dollars. So there’s more than enough reason for the FSOC to step in.

Yves Smith, who has done excellent work on this, reacts:

Although the data points we have seen so far could be considered anecdotal, we have evidence that strongly suggests that major RMBS originators, the investment bank packagers, and the bank trustees failed to convey the notes (the borrower IOU, which is critical to having the legal standing to foreclose in 45 states) to the RMBS trusts starting in 2005, perhaps even earlier. And comments from industry insiders suggest this problem is pervasive.

That puts a cloud over the entire US RMBS market, the biggest asset class in the world. This paper was sold as secured; the ability to offset the cost of borrower defaults by seizing and selling his house is critical to the value of the instruments. And if no assets were conveyed to a particular trust by closing, an even uglier possibility exists: under New York law, which was elected by RMBS as governing law for the trust, it would be considered to be “unfunded”, which means it does not exist.

http://news.firedoglake.com/2010/10/07/grayson-wants-foreclosure-fraud-investigated-as-systemic-risk/

[ljm2002]

1. I said it from the beginning...

...the watchword of the financial crisis is FRAUD. That is why Hank Paulson et al were in a panic, international creditors finally figured out they had been scammed and were none too happy about it IMO. So we, the citizens of the United States, had to make good -- at 100% no less -- on the IOUs that were fraudulently put out there by the banksters.

Then to add insult to injury the banksters continued to award themselves outlandish bonuses, living high on the hog while thumbing their noses at the little people.

I truly hope these scum get their just desserts.

Thanks Alan Grayson for pursuing this.

[DCKit]

3. What you said. n/t

[The Magistrate]

2. This Needs To Be Pursued, Ma'am, With The Full Weight Of The Law

"Some men rob you with a six-gun, and some with a fountain pen."