Jan VanDenBerg_

Why Did the Mortgage Market Go Out of Control?

On this bailout -- do we really need to pay $700bn to large financial institutions to buy these packages of mortgages?

Or, do we may need regulatory change to make clear which owner/custodian has the right to work out or foreclose and dispose of the underlying asset. Such costodians must be properly incentivized and indemnified so they can act.

These mortgages have been bundled, then sold in "slices." I understand that that means that the holders of the "equity slice" lose everything before the holders of the next "slice" start to lose capital . . . so who has the right/responsibility to decide whether to "work out" or foreclose and sell, and to decide on the sale price?

Each bond has hundreds of owners. And each mortgage has slices in more than one bond. Who has been authorized to handle the foreclosure-workout? Some custodian institution?

Ha.

I am currently trying to buy a house out of foreclosure from Wells Fargo and the bank is incapable of making a decision. Most offers to buy real estate expire in 48 hours. Buyers, even little old ladies with Alzheimers, are quite reasonably expected to make up their minds in 48 hrs or see the offer die. My offer to Wells Fargo has been on their desks for 2 months and they can't seem to make up their minds. They think they need that long to make a decision.

I've kept the offer alive mostly out of perversity, just to see how long this pack of bozos will drag this out.

This is absurd. They are surely not the final owners of this mortgage, but are merely handling it for the bond-owners. Hence, total incompetence.

This issue must be addressed.

In Japan, the primary obstacle to proper disposal of bad loans was multiple liens on one property, with the law unclear as to which had the right to foreclose and sell and unclear as to how the proceeds of the sale were to be split between multiple leinholders.

We have that problem in spades -- instead of two or three leinholders, we have HUNDREDS.

These issues must be addressed. Lienholders must be free to and also capable of doing work-outs, of seizing and selling or seizing and renting, of doing renovations. winterizations (frozen pipes, anyone? It's getting cold.), roof repair, locking up and otherwise handling these properties as would a competent individual owner.


And you want to send in the government???

We need legal changes which will, as quickly as possible, get these properties into capable, local hands and get the proceeds of the sales back into the coffers of the financial system.

The government is not my nominee for this job. There needs to be a legal entity created to commandeer and disagregate these bonds, with a right to future proceeds issued to their current holders (not cold hard cash but something which would have a specific, fixed value, so no money needed here), then the individual, intact mortgage to each specific underlying property should be sold at whatever price it would command to whoever is willing to buy it. That private lienholder could then proceed to manage the property as would any responsible Deed of Trust owner -- work out, foreclose, clean up, winterize, repair, rent or sell. Or move in. Money should be lent by the government to those who buy these notes. Those who are currently living in the houses should be first in line to buy these notes. These notes should be 30-year fixed rate notes.

Proceeds from these notes -- either total cash-outs as the properties are sold or monthly payments to the government entity financing these notes -- should be remitted on a pro-rata basis to the holders of the rights -- the banks who now own the mortgage bonds.

Thus, the government would be doing a huge accounting job but no actual money would be required to make it work, beyond substantial administrative costs.