Tuesday, February 15, 2011

Housing - Two Big Developments

It is human nature to ignore problems versus understand them.  The housing market is no different.  There has been almost zero coverage of two very large developments over the past few days.  Many have failed to understand robo-signing or mortgage-gate in the first place.  The media has stopped almost all coverage of the subject so the majority of investors think this issue has gone away.  Well, it has not.  

In courtrooms across the country rulings are being made almost every day that continue to find fault at the mortgage servicing industry as it relates to foreclosure and mortgage back securities.  This problem is not going away, it is festering but until the market euphoria wears off, these issues will not be priced in.  Still, as investors our edge is in understanding the issues now so we can act when the time is appropriate.

Development 1:

A NY bankruptcy court ruled that the process used by MERS to transfer title is invalid.  Plain and simple, the law is the law and MERS violated it.  The implications are massive as the judge states but the law is clear and it was violated.  

“MERS’s theory that it can act as a ‘common agent’ for undisclosed principals is not supported by the law,” Grossman wrote in a Feb. 10 opinion. “MERS did not have authority, as ‘nominee’ or agent, to assign the mortgage absent a showing that it was given specific written directions by its principal.”

Development 2:

Legislation is passing through the state of Arizona, similar to the findings above that if a foreclosing party cannot show clear endorsement of title and thus ownership, then foreclosure cannot happen, period! Anyone who is being foreclosed upon can use this legislation to halt the foreclosure and seek attorney fees and damages.

I find it funny that today JPM is up over 2% at one point as were BAC, WFC.  Just last week the rating agencies issued a report claiming RMBS put back risk to JPM, WFC, BAC and C was 60 billion and yet again the bank stocks rose.   As a trade, OK as an investment?  No way!


No comments:

Post a Comment