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Big Move, Big Stories

In our October newsletter, I wrote about MERS, the electronic system used by banks and the government to transfer mortgages. Then I mentioned it on "Fox & Friends" and my radio show Saturday, and I've been deluged with emails. Most have been heartbreaking stories of people that have tried to hold onto homes even though values are lost and odds are impossible. There is also more info on MERS, the Mortgage Electronic Registration System, which could propel it into the national spotlight. At the heart of the matter is a system that may not only have lost the trial on the true ownership of mortgages, but even enabled the piecemeal selling of worthless loans during the height of the housing bubble. From 2005 to 2008, 97% of mortgage originations occurred via MERS.

If would-be banks can't prove they hold the note then they will not be able to foreclose. There are several lawsuits making the rounds, including a Kentucky class action suit possibly covering 100,000 homeowners. The suit alleged RICO laws were violated by Citigroup (NYSE:C), Ally Bank (GMAC), Deutsche Bank (NYSE:DB), National Star Bank, Aurora, Bank of American (NYSE:BAC) and US Bank (NYSE:USB), along with MERS. With several banks admitting mistakes in recent foreclosure processing, maybe there is a chance to show a pattern of fraud and wrongful foreclosures. Last year in Kansas, an appeals court ruled that MERS does not have standing to bring foreclosure action on behalf of owners of mortgage notes archived in its system.

http://www.kscourts.org/cases-and-opinions/opinions/ctapp/2008/20080912/98489.htm
 
There are other cases and allegations, including banks hiring foreclosure mills which have engaged in falsifying mortgage contracts.

There is a class action lawsuit filed by a couple in a bankruptcy proceeding in Mississippi, claiming fee-splitting between servicers and attorney firms. One defendant named in the suit is Lender Processing Services, which also faces scrutiny from the U.S. Attorney Office and Florida Attorney General Office over allegations of misconduct at its DOCX subsidiary.

This is a tough situation because the majority of people losing their homes haven't paid their mortgage. By the same token, the entire process must be fair and transparent. I think many homeowners, with nothing to lose, will demand banks prove they hold the mortgage. This could get very ugly. In fact, initially it looked like these foreclosure freezes would push the bottoming of the housing market into next year, but now it's possible this could drag out another couple of years. There are already hearings scheduled on Capitol Hill next month, and politicians calling for freezes now could begin calling for homeowners to keep the home even if they failed in their obligations to pay for the home.
 
Laws Based on Fear & Guilt

I've written about creating laws based on guilt and (unsubstantiated) fear and how its ruinous impact has made the nation less competitive and in my mind, less confident. You see, guilt can't be completely erased with money, so we walk around with the ball and chain of knowing we killed all the animals, and soon the planet itself will be a notch on our belt. There was a time when man was just happy to know how to make fire and didn't care if it came from rubbing a couple of dried sticks of brush or keeping a pool of crude oil lit for as long as possible. Now, as we have become wiser and have moved closer to divine intelligence, it's okay if some people actually go without heat as long as we are helping the planet and keeping the air clean.

The planet got one degree hotter in the last 100 years, and we are told a repeat of that would lead to Armageddon. I know I sound like an ignorant boob but I don't buy any of it, at all. I'm still down for cleaner air, fresher water, and more species of animals. But, I'm not down for the guilt trip that comes with it these days. I also don't think it's wise, or fair, for life to become so much more expensive based on a hunch or dubious theories formed by those same people that think I'm an ignorant boob anyway. This brings me to the blockbuster news out Friday. According to the California Air Resources Board, the pollution estimate adopted by the Air Resources Board in 2007 was slightly off base.

It turns out that the pollution estimate was 340% too high. The news comes at a difficult time for California, which is preparing to implement the Global Warming Solutions Act of 2006 unless the citizens of the state come to their senses and hold off. (I will say Proposition 23 is unrealistic about unemployment being at 5.5% for any length of time, so in that regard it's disingenuous, but the alternative is economic suicide.) I personally don't think this is a mistake, and as we know by now it's not an isolated incident. On the contrary, it seems like there is a sense of urgency to push through laws on shaky ground before facts actually surface, and actually matter. On the PR front, the scientists and their ideological backers have won, so I wonder if all their assumptions are turned upside down it would even matter.

The stakes are enormous and expensive. The Global Warming law cost construction companies $12.0 billion, and that cost the state construction jobs. Mary Nichols, chairwoman of the California Air Resources Board, says she doesn't know why the calculations were so off base. It seems strange. What seems even stranger, and more sinister, is the fact Nichols knew that the head scientist in charge of the study, Hien Tran, faked his credentials. The guy in charge of the study lied about a doctorate from UC, but he headed the scientific side, and the person that headed the decision-making board pushed through a law that served their ideological beliefs. This stuff is destructive, wrong, and expensive. Moreover, I think part of that ideology is that America should be less competitive and less powerful.