MERS 2

The other day, I posted on what may be seen as a colossal fraud. American mortgages appear to have been wrongly validated. To save money and to get around state rules and taxes, banks and mortgage providers set up a shell company which 'electronically registered', and held title to, mortgages. They should not have done this. Worse, the shell company did not check the mortgages properly. People are under threat of being thrown out of their home, or have been thrown out of their home, on what are essentially false terms, and state attorneys-general are currently investigating. This is a huge bomb under US banks.

The Congress, true to form, entertained a bill recently to post-validate the behaviour of the mortgage providers. President Obama, to his credit, vetoed it. The Congress attempted to over-ride the veto last night.

Every single Republican present voted to override and to hand power to a vast, fraudulent mortgage industry (as far as I can tell). Most Democrats did not. The veto stands.

Some Tea Party. Some change. Look out for the return of this one in the new year. How long can ordinary conservatives, populists, and tea party people allow themselves to be dupes for this corrupt mob?

Comments

Toni said…
Her blog is interesting and she raises some good points. Mers however is just a "black box" exchange. There are still lots of traders who trade mortgage backed securities, although unsurprisingly, it is one of the least attractive desks in any trading room.

The thing most people fail to understand about the US mortgage market and to a much smaller extent, the UK MBS market. Is that the investment banks have zero interest in mortgages. They are raw product that is scooped up and pored into an offshore security, (offshore means off balance sheet), and sold to eager investors looking for any A rated security with some kind of yield. In the eighties MBS market, which decimated the S&L industry, people actually took an interest in the things that made up their portfolio. The arrival of CDO's made such things impossible. Simply put, the commercial banks employed companies to generate mortgages by offering unobtainable loans to people who couldn't afford them, (didn't matter because if property prices keep rising there will be enough equity for them to remortgage). The commercial banks lent the money after which they were transferred into securities by Fanny and Freddie using their quasi state guarantees. After which they were sold into the market where they were repackaged by the investment banks and traded as any other security. In order to meet the demand from the investment banks the bank would lend to increasingly marginal borrowers which is why you had strippers in Florida and bell boys in Vegas owning multiple properties. These securities could only be sold to most eager buyers if the credit rating wasn't downgraded. Luckily Moody's and S&P fees are paid by the bankers. The whole CDO cubed and squared thing happened because the oversupply in the property markets was too much and there was still demand for paper so traders started packaging existing portions of CDO's together. think of it as taking 6th or 10th mortgages on your house. The risk managers, and to be fair some did, who should have said this doesn't seem wise were basing a lot of their assumptions on computer models using 2 yr data sets, even though most mortgages and cash flows are 20 year duration.
John said…
I think a lot of ordinary Republicans and conservatives are low-information voters or they tend to get their news mostly from Fox News and right-wing radio.

But there are also a lot of people who, for some reason, get angrier about the sins of the poor than those of the rich and powerful, and this is what I find so puzzling about conservatism as it is defined in America.

I am much more worried about corrupt bankers than I am about welfare cheats, primarily because the former are much more powerful.

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