What is going on with the subprime debacle?

There’s a lot going on with the foreclosure situation.  I heard that Bank of America halted foreclosures for the time being.  So, what’s going on?

Have you ever heard the old saying “the job isn’t finished until the paperwork is done”?  Well, the job isn’t finished until the paperwork is done PROPERLY.

I think it goes like this:

  • Banks digitized mortgage notes
  • Digitized mortgage notes went to MERS
  • MERS bundled the notes into REMICs (Real-Estate Mortgage Investment Conduits, a special vehicle designed to hold the loans for tax purposes)
  • Notes were sold to different investors but neither MERS or the REMICs owned the notes
  • Chain of title is broken
  • Owner no longer owes on the loan
  • Congress tries to make the fraud legal by sneaking through the Interstate Recognition of Notarizations Act
  • President vetoes the bill
  • Bank of America and other mortgage holders halt all foreclosures and foreclosure sales

If I have it wrong, I am certainly open to correction!


In the crazed frenzy to get as many mortgages securitized during the Oughts, banks took shortcuts with the paperwork necessary for the Mortgage Backed Securities. The reason was because everyone in the chain of this securitization mania got a little piece of the action—a little slice of the MBS pie in the shape of commissions.

So in the name of “improved efficiencies” (and how many horror stories are we finding out, carried out in the name of “improved efficiencies”), banks digitized the mortgage notes—they didn’t physically endorse them, like they were supposed to by the various state and Federal laws.


“MERS was the repository of these digitized mortgage notes that the banks originated from the actual mortgage loans signed by homebuyers. MERS was jointly owned by Fannie Mae and Freddie Mac (yes, those two again …I know, I know: like the chlamydia and the gonorrhea of the financial world…you cure ‘em, but they just keep coming back).

“The purpose of MERS was to help in the securitization process. Basically, MERS directed defaulting mortgages to the appropriate tranches of mortgage bonds. MERS was essentially where the digitized mortgage notes were sliced and diced and rearranged so as to create the mortgage-backed securities. Think of MERS as Dr. Frankenstein’s operating table, where the beast got put together.

“However, legally…and this is the important part…MERS didn’t hold any mortgage notes: the true owner of the mortgage notes should have been the REMICs.

“But the REMICs didn’t own the notes either, because of a fluke of the ratings agencies: the REMICs had to be “bankruptcy remote,” in order to get the precious ratings needed to peddle mortgage-backed Securities to institutional investors.

“So somewhere between the REMICs and MERS, the chain of title was broken.

“Now, what does ‘broken chain of title’ mean? Simple: when a homebuyer signs a mortgage, the key document is the note. As I said before, it’s the actual IOU. In order for the mortgage note to be sold or transferred to someone else (and therefore turned into a mortgage-backed security), this document has to be physically endorsed to the next person. All of these signatures on the note are called the ‘chain of title.’

“To repeat: if the chain of title of the note is broken, then the borrower no longer owes any money on the loan.

“Read that last sentence again, please. Don’t worry, I’ll wait.

“You read it again? Good: Now you see the can of worms that’s opening up.

“As soon as the White House announced the pocket veto…the very next day!…Bank of America halted all foreclosures, nationwide.”

“The move by the United States Congress last week, to sneak by the Interstate Recognition of Notarizations Act? That was all the banking lobby. They wanted to shove down that law, so that their foreclosure mills’ forged and fraudulent documents would not be scrutinized by out-of-state judges. (The spineless cowards in the Senate carried out their master’s will by a voice vote…so that there would be no registry of who had voted for it, and therefore no accountability.)

“And President Obama’s pocket veto of the measure? He had to veto it…if he’d signed it, there would have been political hell to pay, plus it would have been challenged almost immediately, and likely overturned as unconstitutional in short order. (But he didn’t have the gumption to come right out and veto it…he pocket vetoed it.)


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21 Responses to What is going on with the subprime debacle?

  1. timesr says:

    These guys are economic terrorists.

  2. Wizcon says:

    All states recognize each others notarizations already, There is basic common language in the notorial acknowledgement as well as the Jurats (where the signer swears or attests tto the truth of the content of the document.) Recently, the NCCUSL (National undrwriters) completed a update of source of suggested notary procedures and laws. Many states adopt this work wholesale as their state law. E notarizations have been a huge discussion. Personally I am not willing to do e notarizations.

    I have noticed, however, that many lenders are attaching Allonges to their notes.

    Because a bill of exchange is transferable through endorsement, it may be exchanged among so many parties that these parties don’t all fit on the bill. In this case, a separate piece of paper – the allonge – is attached to the bill, acting as a legal extension of the document.”

    Allonges do not list who the additional endorsements are. Napoleon came up with allonges. Those of you who are familiar with fencing terms, Allonge is a long deep thrust. Hopefully to the heart.

    I have been working for years to get Notary law in my state tightened up. Maybe now they will do something. I was recently interviewed by the American Society of Notaries on notary law. Lax knowledge by notaries contributed to some of the modification scams as well. Notaries were used and paid pretty good fees to go sign up people. The notary gave the air of authenticity. Virtually all the notaries were scammed as much as the homeowner.

  3. Wizcon says:

    And a side note. I ahve not closed any modifications. What the lenders are doing is approaching their more solid homeowners with offers of a lower interest rate. The homeowners who are not necessarily out there looking for better terms. This is because their competition can and will try to lure them away.
    A lot of people in their 50′s are switching to 15 yr mortgages at as low as 3.75%. They still end up with lower payments and many plan to pay additional on the principle to further shorten the loan. Remember, the bulk of the interest is paid at the beginning of the life of the loan because there is more principle to figure the interest against.

    timesr Reply:


    I appreciate your sharing your personal knowledge with us.

  4. skyagunsta says:

    This link a friend posted in another site might apply to this heere

    Wizcon Reply:

    @skyagunsta, ““One of the most common things we see is a paper with a notary stamp that gives the bank the legal authority to foreclose. Well, anyone can buy those stamps. I can buy those stamps. A lot of what’s going on is law firms desperate to win a case are hired by banks who don’t know what those law firms are up to.”
    This is one of the things I have been fighting to remedy. I know a notary in WI that got a call from a sherriff in FL. Someone had a stamp made up with her name and was using it to notarize applications to open blind mailboxes at UPS stores. They traced the source to Finland.
    Also, a title company was duplicating our seals from all over the country and using them a couple of yrs ago. This is why I keep a journal of everything I notarize.
    We are constantly asked to provide affifavits that could be attached to anything.
    The person signing the doc’s MUST appear in person and be ID’d by the notary. They must witness them signing the document.

    skyagunsta Reply:

    @Wizcon, this is all so very scary that they can get away with all this …

  5. AliSilver says:

    Did I already tell ya’ll about my mortgage? It was intially NORWEST but a few years later WELLS FARGO bought a ‘bundle’ of loans and now it’s wells fargo. ( actually i got a letter last year saying it was fannie mae :O ) but my slips still say wells fargo. Anyway I called them and asked for a title or DEED so I could homestead it. They said they don’t have one. I asked who does and they said they don’t know. :) I asked what will I get when I pay it off and they said they don’t know. I asked if I have to keep paying it since they don’t have proof that they OWN it and they said YES !

    skyagunsta Reply:

    @AliSilver, this is such an anxiety producing world these days.
    Ali save everyone of your cancelled checks or payment slips and whatever paperwork you had when you originally bought the house.
    I can’t believe all the crap our government is allowing to go on.

    AliSilver Reply:

    @skyagunsta, I toyed with the idea of not paying BUT my land , which is considerably valuable is put up as collateral on the home, so I gotta pay it ! :( Just my luck a giant fix for homeowners and I cannot take advantage of it, LOL. For those keeping track, I am down to $13,500 WOOHOOO

    skyagunsta Reply:

    @AliSilver, O:-)

    AliSilver Reply:

    @skyagunsta, I think it’s a fine line betweeen ‘allowing to go on’ and ‘making go on’. I just don’t see the fed govt ALLOWING these big corps and banks etc to rape the people UNLESS there was something in it for them.

  6. Wizcon says:

    What I worry about is that very few of the borrowers I see buy title insurance. With all the questionable chains of title now, I would think they would want that protection. Its a minimal price to pay for so much protection.
    I know a young couple who have been trying to close on a foreclosure for 3 months. The note was sold and the first bank (who sold the note) is the one who foreclosed. They are allowing them to live there but they are afraid to move in to much. They are sleeping on an air mattress.
    Because of these scenario’s like this. Many title searchers are closing their doors because the mess and liability have gotten hopeless.

    Sage Reply:

    I thought Title Insurance was pretty much a requirement. I know I have it on this house and had it on my two previous houses.

    Wizcon Reply:

    @Sage, In the purchase of the house, it is almost always required. Refinancing a house no. They have the option to buy it but they are always trying to save a couple hundred bucks.

    Sage Reply:

    Got ya! Now that you mention it I don’t know if we got it when we refinanced or not. Yikes.

  7. skyagunsta says:

    This might be a redundancy but Huffington Post published this and Dylan Ratigan talked a lot about it yesterday with the author of the piece.

    And Ali, yes, the government is allowing it to happen as their hands are tied due to republican obstruction (according to Senator Byron Dorgan who was also on the Ratigan show yesterday).

    AliSilver Reply:

    @skyagunsta, I wouldn’t take the word of Senator ‘ fillintheblank” on anything Sky. As long as one side blames the other and we think one side is the hero and the other is bad, we’ll get nowhere. Obama has had a full congress at his disposal and passed health care against OVERWHELMING opposition. You think he can’t pass anything he wants? I dont’ in any way lay this at Obams doorstep. I lay it at the doorstep of uncle sam and ANYONE who works for him. :)

    skyagunsta Reply:

    @AliSilver, Ali when Senator Byrd caved in during the Bush administration that to prevent a filibuster on anything the democrats would have to have a majority of 60 plus one vote that was a bad thing … he gave the republicans a lot of power then and they are still using it today.
    I do agree when the blame game goes on, but I think there is some reality to what Dorgan was saying yesterday.

    AliSilver Reply:

    @skyagunsta, If Republicans caused it, let’s say for arguments sake they did, then if Democrats allow it to go on during THEIR time in power, you gotta ask yourself why. It’s not because they are innocent. Maybe it’s a you turn your head while I do this and I’ll turn my head while you do that and one party is more with banking and one is more with real estate or whatnot. There is no innocence in DC.

  8. Wizcon says:

    New developement? Notaries in several states are reporting getting emails from Bank of America for 60 days of employment at $19 hr.
    Here is the one from the Pitssburgh area
    “”60 Temporary Positions

    60 Days

    Full Time

    Certified Notaries

    (Company name) has a temporary employment opportunity for 60 on-site notaries lasting up to 60 days in the greater Pittsburg area. Our client requires on-site assistance at their location to perform notary services only on single or multiple page affidavits. The candidate must be a certified notary in good standing in the state of PA. The notary will represent (company name) by providing service notarizing the signature of the lender employee.

    This is a temporary assignment for approximately 60 days. We are looking for notaries who will be able to work onsite one of our client’s offices located in Pittsburgh and provide daily notary functions as requested. This 60 day assignment will start on Monday, October 25th. We would need you to be available for 8-10 hours per day, 5-6 days per week, depending on the work load during regular business hours. The pay rate is $19.00 per hour and overtime would be paid according by state law.

    If you are interested in this new opportunity or for more information, please respond to this email by ASAP with your name and a contact number so we can call you to schedule an in-person interview.

    Thank you,

    Human Resources”

    Just hope they follow the law on the notarizations.

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