Monday, October 18, 2010

How to Fix the Mortgage Mess

I think Vox nails the core of the issues here -
The only way to respect the law and minimize the effects of the damage that has already been done to the American economy by the mortgage-selling banks is as follows:
1) Free and clear title must be granted to homeowners who took out loans in which the chain of title was broken. This will mean that some people will get free houses – better innocent homeowners than criminal banks. This will support the housing market as well as the credit market since many people who are presently underwater on their home loans will be able to borrow against the value of their debt-free property.

2) Audit the mortgage-backed security sellers and force them to reimburse all buyers of fraudulent securities. This will significantly help state and local governments, whose pension funds were the primary victims of the security fraud.

3) Shut down MERS. State and local governments that lack laws enforcing the ancient land title system should immediately pass laws banning the use of electronic documentation as a legal substitute for actual paper documentation with signatures held at the county.

4) State and federal prosecution of banking employees responsible for committing MBS fraud, title transfer fraud, and foreclosure fraud, beginning with the CEOs and boards of directors.

5) Wind down the insolvent banks, including Bank of America, Citi, Wells Fargo and JP Morgan Chase. If they are not bankrupt already (and there is sound reason to believe that they are since at least 40 percent of their reported assets are in fact worthless), they will be after reimbursing the pension funds and international investors they ripped off by selling fraudulent mortgage-backed securities.

6) Congressional investigations of the regulatory bodies whose failed oversight made this vast series of banking frauds possible.

There is no question that this will be a long and painful process for the economy, but the important thing to remember is that the damage has already been done. There is no way to retroactively undo it. Every attempt to deal with the matter in any less straightforward manner is not only doomed to failure, but will definitely make matters worse because the banks responsible are still engaging in exactly the same activities that led to the present situation.
The Real Effect
Exactly. This is not going to be resolved by bailing out the banking industry again, throwing mortgagees in prison or burning down "unwanted" houses. We fix this by going back to the beginning and letting the chips fall where they should. If that bankrupts the industry, then the American people need to come with grips that we are only realizing a situation that has existed for years if not decades.

1 comment:

Halilue said...

Unfortunately 'fixing' the problem is never profitable to the government so they have no intention of doing so...Besides we cannot get them all thrown in jail for fraud so what do they care if they rip up contracts and deny mortgage claims..