Everyone by now is aware that several of the largest mortgage providers are holding up on their foreclosure proceedings because they have not offered legitimate proof that they own the mortgages and that they are in default. We don’t get to toot our own horn very often about things but this is a situation that I discussed over a year ago when the home mortgage rescue was being pushed by the politicians in Washington. Then there was discussion of the way the mortgages were bundled into packages and sold and re-sold several times with serious questions as to who was the real owner.
There was concern expressed that many of the home owners were being foreclosed on wrongfully and that they had been tricked into taking the loan n the first place. I pointed out then that anyone who thought they had been defrauded or were being foreclosed on wrongfully already had a perfectly adequate remedy by using the court system. The lender has to have two things to proceed with a foreclosure. They must be the owner of the mortgage itself and the debt. The law has for centuries recognized that real estate transactions are very special and that they must be handled correctly–in writing and filed of record in the appropriate county office for land records. The mortgage can be sold as can the debt to another person. There is nothing inherently wrong with that transaction but it must also comply with the laws regarding real estate rights. That means the owner of the mortgage at any point in time must be in writing and filed of record to have effect against third parties.
Because these lenders were doing so many of these and bundling them like so many carloads of corn they got sloppy and careless with their paperwork. I predicted that. I predicted that many of those “lenders” would not be able to prove they were the legal owner of the mortgage they sought to foreclose on. The current scandal is that they cannot produce definite ownership but that they in the hurry have been signing false affidavits for foreclosure proceedings. There must be a proper chain of title to that mortgage and the signers of those affidavits obviously were not checking the records to determine the truth of the facts they were swearing to. If the lender can’t prove a proper chain of title then they are not allowed to foreclose under the law. The are in the eyes of the law a stranger to the original transaction and have no standing. It is not complicated to transfer such an interest in a mortgage but it must be done correctly. They got too fancy for their own good and were processing way too many of these transfers and now they are paying the price for their mistakes which is as it should be not only under the law but as a matter of morality.
Also there is the issue of the debt. A mortgage is meaningless unless there is a corresponding debt to go with it. That is another reason it is so important that the chain of title be correct–so that the mortgagor who has been making payments is given the correct credit and that some stranger he did not deal with cannot foreclose on his property. When the mortgage was sold to another investor the note supporting the mortgage should have been sold with it. This would normally be done with one document and one transaction but again you have to be the owner of a debt from the homeowner to foreclose. If you hold a mortgage against A but if fact you have no proof that A owes you any money you can’t foreclose against him which again is as it should be. It generally is the burden of proof on the mortgage and note holder to proof the legitimacy of their instruments, the debt and the mortgage. The homeowner typically can just say “prove it”.
These mortgage holders who got many of these dubious mortgages can probably in most instances correct the paperwork. There is nothing legally wrong with a correction deed or deed of trust or mortgage. For example if everything was correct in the original mortgage but the land description was wrong it can be corrected later and the corrected instrument filed of record. But with the tens of thousands or hundreds of thousands of these mortgage out there in these bundles it will take a long time to go back through them one by one to verify the chain of title and then properly record them.
Again the government jumped in where it was unnecessary. Politicians wanted to win points. The legal system already had the mechanism in place to deal with these issues and we would be so much further along in restoring the housing market. Those that were defrauded would be protected and those lenders who didn’t have proper paperwork would have to correct it or lose. I said long ago that there can’t be a mystery owner of a mortgage who gets to foreclose on you. You are entitled to know who holds your debt and mortgage and that was true then and now.
We don’t need a federal remedy for every perceived problem. This can be straightened out and will be. I don’t feel sorry for those who took out loans that couldn’t afford in the first place with federally subsidized money nor do I cry tears for the lenders who gambled on those loan packages sold like a commodity on the market.
“A slack hand causes poverty, but the hand of the diligent makes rich” Proverbs 10-4. www.olcranky.wordpress.com
With the current mania for Government, Inc. to take over the world of finance, industry and health care it might do to recall some events from the early ’70’s in Britain. At that time Britain was certainly not a bastion of conservative politics or economic theory. The Cold War was still in full flower and so was the rise of government intervention into every aspect of the business world. The Arab oil embargo and their own misguided economic policies of statism and welfare benefits gone wid had brought the hills of Avon low. The left was pushing hard for more government intervention into every nook and cranny of the world of industry. The unions were very strong. They had had increasing power and dominance over the affairs of industry since the end of the War. The empire had already been mostly unraveled and the last vestiges were being shed as quickly as Britain could make the arrangements for transfers of power.
Britain and other European countries had just given in to the demands of the Popular Front for the Liberation of Palestine by releasing hijackers of international flights. It was in decline economically and in prestige at home and abroad. First there was a strike by dock workers and imports were critical to the economic health of Britain then as it had ever been so. The Prime Minister, Heath, paid them off. They got their demands which increased the price structure and made Britain just that much weaker in the world trade picture. That dock business was bailed out pure and simple. At the time the Trade Minister said that he would not “bail out companies where I can see no end to the process of propping them up”. Of course they didn’t stop there. Next up was millions to Rolls-Royce to cover its losses and keep the union workers happy. Then the utility workers got a huge increase with only a work slow down and the threat of a strike. After that the Bris nationalized portions of Rolls-Royce operations. There tax rates were off the charts going up to a 75% rate. Because of the decline ever since the war the government had campaigned on a promise of immigration reform, tax cuts and free market reforms to encourage new business development and reining in the power of the unions. The British government caved into the pressures of the moment.
They capped it all off with imposing wage price controls and the creation of a large bureaucracy to oversee the impositions of these controls. The costs of everything was regulated–from plumbers to taxi drivers and rents. The government was in charge of pricing everything. More bailouts of the coal industry were paid out. Interests rates skyrocketed and shortages of gas and many other essential commodities emerged. One speaker in Parliament asked “does not my honourable friend know that it is fatal for any Government or party or person to seek to govern in direct opposition to the principles o which they were entrusted with the right to govern?” Gas rationing was re-imposed and the economy sank further into the abysss.
It was not until the election of Margaret Thatcher at the end of that decade that the economy began to right itself when she fulfilled the reforms that had been promised by the Conservative Party in the late ’60’s but then never delievered. All the bailouts and buy offs to unions and crushing taxes were abated under her. The economy began its climb which lasted for over 25 years under a free market approach to their economic challenges. Those policies of the early ’70’s are the same ones we are invoking now to deal with our economy. They were a disaster for Britain. Even the left leaning Brits of that era ran out of patience with the smart guys telling them what was good for the country. Do we want to emulate that experience now? What is there to justify a belief that bailouts and pay offs to appease unions will have a different outcome now than they did then? Much thanks to Roberts and his History of the English Speaking Peoples for some of the history recounted here.
Popular opinion is the greatest lie in the world. Thomas Carlyle
As the government embarks on its various and numerous interventions into our economy it would do us well to reflect a bit on the direction those interventions may take us. The free market system that we have followed for lo these many years has served us very well. By any measure of economic activity or national wealth we have prospered greatly since the War. We have had only a few interruptions along the way and mostly the graph has been on the uptick for us. The worst performing years were the ones when the Government had the most direct hand in our economic functions and systems. Notably that was during the ’70’s when we had stagflation and two oil embargos and wage price controls and rampant inflation and huge expansions of the entitlement programs. That staggering economy and the ennui in the public were the leading casuses of the Reagan win in 1980. He promised less Government. It had run things for quite some time and the results were miserable to say the least.
Our economy is like a great ship at sea. It is slow to turn but once turned the inertia and weight drives it in a new direction that can’t be changed easily or quickly. I do worry about the new direction we are charting now and what port of call it will take us to. It might not be where it wanted to go after all. I know we want out of the immediate mess we are in and we are probably the most impatient people in the world. These quick fixes were are coming up with now are huge and will have profound and fundamental effects on our economy and lives for years to come. Any time you are making such changes you should do them slowly and carefully. I love the market going up as much as anyone, believe me, but I worry about the long term consequences to my children. Mr. Obama was quoted as saying to the plumber famously this week that he just wants to make things fair and equal out the wealth. What I hate about that as policy is that you have the Government deciding what is “fair” and how to go about spreading the wealth around. I much prefer that the playing field be even and fair and then let the spreading process work itself out by all those choices we each make for good or ill. Our own individual success or failure being dependent upon our worth, merit and willingness to work and sacrifice for a better future. I don’t want the Government to ever be in the role of deciding what is fair in terms on ownership or income production. I mean I think it is ridiculous that some rock star makes $20 million a year. But if we believe in freedom, and I do, then I think it is ok if folks want to spend their hard earned money watching a concert. But will the Government continue to allow that? I mean is that fair? Why allow someone with no Phd or entrepenuerial skill to make that kind of money? It is a slippery slope once we allow the Government to spread the wealth around because we are giving the Government power to decide who has too much and who has too little. I can’t think of anyone less qualified to make those choices. No one ever confuses the Government with Solomon. Success and failure, rights and responsibilities are the bedrock of our American values. We should be treated like grown ups by the Government not coddled like kids in the nursery.
Remember if you turn the heading on that huge ship just a couple of degrees it wouldn’t even be noticeable to the naked eye from the bridge, but hold that course for only a couple of days and you will be off course by hundreds of miles from where you wanted to go. We do indeed need a steady hand on the tiller now more than ever.
Andrew Jackson fought with the banks of his day. He was distrustful and disdainful of them. He won the short term battle with his populist approach and by demonizing them. But his victory against the banks in fact impeded our economic progress for quite some time. Political rhertoric when put into action by do gooders has consequences. Reasonable and sensible minds are our best protection for the future.