Apparently I got written up on Balloon Juice by Often-Wrong himself, which is a privilege. Specifically, he was responding to my admittedly intemperate post responding to his derisive comment that a national foreclosure moratorium made no sense.

Aww. I hurt his fee-fees.

So: what substantive point did he make about the reasons I outlined in the post?

None, that I can tell.

His defense? This is really good, so get some popcorn and come back.

I’m not siding with the banksters, I just don’t understand what good would come from a national moratorium. Forty state AG’s are on the ball, what exactly could a national moratorium do? The idea is to stop the bad foreclosures, not grind every single transaction in this sector to a damned halt.

You aren’t hurting the banksters when you do something like that. You’re hurting every single buyer and seller in the market. It would be catastrophic. On top of that, under what legal authority does the White House declare a moratorium on a specific type of business transaction? How would that happen? Who would be in charge of it? Geithner? Warren? Under what legislative or Constitutional authority?

And finally, I’ve spent pretty much every single day bashing the banksters. The idea that I’m now just siding with them to either show blind devotion to Obama or any other reason is just insane. This was one of the first blogs to really pitch a fit about the Notary bill last week. I’ve said it before, I’ll say it again- I say and do enough stupid shit that you don’t need to make things up about me. And there really is a fringe of the American left that has almost the same DNA as the teahadist right. “Just do it! You’re President! Make it happen!”

There seem to be 3 points here, so I’ll address them in turn.

1: Shutting down the foreclosures would lock up the mortgage market! What good would it do if 40 states are already investigating?

Answer: No fucking shit, man. That’s the entire point. This post from Market-Ticker (which I meant to write about in the last post but, geez it was long) has a great set of basic steps to start weeding through the foreclosure mess. You want to know what the very first one is?

Halt all foreclosures and sales – stand-still – until this process is completed. Those who currently have possession will continue to have it for the time being.

See, here’s the thing; the market isn’t functioning now. It’s rapidly worsening, digging itself in deeper by the day. It’s not a little technicality when you sign a false affidavit or ‘borrow’ someone else’s notary stamp, and the courts aren’t likely to see it that way. Combine that with the countless tales of horrific abuses, easily located by anyone with half a brain and Google, and you quickly realize that this is an emergency. Whether the Feds or the states intervene, the outcome is going to be the same; the mortgage market is DOA until this is sorted out. Title insurers are already balking, and 40 states are digging. Real estate lawyers probably need a smoke after the repeated serial orgasms they get after reading the news each morning. Face reality for a change: this moratorium is happening.

We have but two choices: do it in an orderly fashion, with rule of law, or let it happen in anarchic disarray, and cross our fingers. Hoping that the same individuals who hired hair stylists to forge legal documents by the thousands will suddenly have a change of heart and ‘fix’ this is fantastic delusion akin to believing Saddam Hussein was an imminent threat to the United States of Americ… oh wait. Darn.

Look who I’m talking to.

As for what good it would do? Well, for one thing, in case you were unaware, the overwhelming majority of new mortgages are eventually sold now to Fannie and Freddie, who are, err, us. The Federal, United States of America ‘us’. Majority owned by the Federal Government. The big banks wronged us as a nation, continue to wrong us as a nation, and so it might be a good idea to handle it, as a nation. What, we should keep buying their toxic mortgage shit through Fannie and Freddie? You like backdoor bailouts that much?

Also: 40 states are investigating. That means 10 aren’t. That’s 10 more than 0, which is the number of states where this shit didn’t go on, and 10 more than we can accept.

Also: Investigations take time we don’t have anymore. We’re not talking about imprisonment or execution without trial here (that’s Obama’s game, not mine). We’re talking about putting a temporary pause on the massive fraudsters who have already admitted, except for Wells-Fargo, to filing false, robo-signed, improperly evaluated documents with the courts across our nation. They confessed! I think we’re justfied in stopping their theft for a while until we can sort out the damage they’ve done, and continue, daily, to do, to homeowners, communities and investors across this country.

2nd Point from Cole:

You aren’t hurting the banksters when you do something like that. You’re hurting every single buyer and seller in the market. It would be catastrophic. On top of that, under what legal authority does the White House declare a moratorium on a specific type of business transaction? How would that happen? Who would be in charge of it? Geithner? Warren? Under what legislative or Constitutional authority?

This one’s easy: none. Under no ‘legislative or Constitutional authority’ do you have to declare a moratorium. You simply make it happen.

How? Well, I can think of two ways that could be done without passing a new law, though it’s sad that that option is discounted so easily with one party in control of both houses and the Presidency.

One: Fannie and Freddie put the screws to these parasites, like they threatened to do today, only harsher. Currently, under already existing authority, Fannie and Freddie want to clawback losses on bad foreclosures. Good, do that. But also, why don’t you also tell the banks that, if they’re still foreclosing in a week, Fannie and Freddie won’t buy a single mortgage from them. Eat shit and die, in other words.

Voila! One ‘business’ refuses to buy defective goods from another. The free market works, hallelujah.

Two: Prosecutions. Make a lot of good cases and haul a few (dozen) executives off in leg-irons. Make it publicly known that the DOJ’s new big priority is filling a few wings of medium security prisons with bankster criminals. That should do it, and would be a useful tonic to our lawless aristocratic class. Added bonus: it’ll be hilarious to watch on tv. Downside: very slow.

I’m not an econoblogger here, though, I’m sure there are more elegant solutions. My background is CJUS, originally. When I think of dealing with banks, I think of dealing with organized crime. You hit them with the biggest stick you can find that doesn’t actively break the law, and if they get up, you hit them again, until the problem is reduced to a manageable level.

This isn’t a manageable level. I’m well aware a moratorium hurts buyers and sellers; I’m looking to buy soon, which is why I want this fixed. When I buy my home I want to be able to obtain clear title, with title insurance, so that I know it’s mine, fair and square. I want to pay my mortgage on time each month, and I want no hassles. I don’t want to be unjustly foreclosed upon, I don’t want to buy a house that the seller doesn’t actually own, and I don’t want to be stuck five years down the line unable to resell if I need to move.

Mr. Cole’s Third Point:

And finally, I’ve spent pretty much every single day bashing the banksters. The idea that I’m now just siding with them to either show blind devotion to Obama or any other reason is just insane. This was one of the first blogs to really pitch a fit about the Notary bill last week. I’ve said it before, I’ll say it again- I say and do enough stupid shit that you don’t need to make things up about me. And there really is a fringe of the American left that has almost the same DNA as the teahadist right. “Just do it! You’re President! Make it happen!”

I read BJ to see what Obama supporters are laundering into the lefty blogosphere, so naturally, I see this a lot. “I’m against Special Interest X. I say bad things about them all the time, I just don’t support any concrete actions against them.”

The template works for health care reform, for the big banks, for gay rights, you name it. Make bold statements of personal distaste, then portray any actual action as extremist or fringey.

Right. That’s productive.

So to recap: 1) He can’t see what good comes from stopping rampant fraud if the states might get to it, someday, eventually, most of them 2) He can’t see how you could stop buying shit (it tastes so good!) from con men with billions of taxpayer dollars laundered through Fannie and Freddie, and 3) He’s not backing the banksters, and I’m a genetic Tea Partier in disguise for suggesting that the Obama administration do something about this or get out of the way of people who give a shit, and perhaps tell David Axelrod to shut his useless gob.

Nice.

Plus for some reason Akismet is flagging all the comments today as spam. Odd. I wonder if they’ve had an ouchie.

This is a personal blog so don’t expect a ton of service here. I don’t make money being perpetually wrong; if you like that, you know where to go.

Update 1: Handy hint; fake emails won’t get past the registration screen while Akismet is set to manual like this; I see those. Get bent, ‘BugMeNot’. You don’t have a special right to break the rules and comment here.

Update 2: Ha! I knew it was my fault. When I set up the spam filter I forgot to uncheck the box that requires previous commentor authorization to post a comment.

Yeesh. My only excuse is that I was working on two blogs that day and I guess I thought I’d done this step on both. Oops.

This needs to be said up-front, and quickly too: the Obama administration’s refusal to deal with the foreclosure fraud epidemic is part and parcel of their refusal to support the rule of law.

First, we had their insipid ‘look forward, not backward’ cowardice, allowing the torturers and murderers of the Bush administration to get off scot-free, and in many cases, like McChrystal, for example, promoting those up to their necks in abuses instead of prosecuting them.

Then we got the radical expansion of assassination and drone attacks overseas, a flagrant violation of international norms and, almost certainly, international law as well.

Next, the Obama administration turned its eye on the independent judiciary, assaulting the very concept of judicial oversight with ttheir outrageous ‘state secrets’ claims, trying to put themselves entirely beyond review, even as they (attempt to) murder American citizens without due process.

But everything old is perpetually new again for Obama supporters, so when David Axelrod went out to argue against a national foreclosure moratorium in light of what may be the largest fraud ever perpetrated on a court, tens of thousands of counts of fraud lined up in a row, we get the usual suspects like John Cole arguing that it’s just common sense to side with the banksters:

That isn’t taking the side of the banksters, that is taking the side of common sense. What possible use could there be for a nationwide halt to foreclosures?

I can understand selective moratoriums where states deem it necessary, but wouldn’t a nationwide moratorium on foreclosures be disastrous? Is there any precedent for this? Do they even have the authority to wave a pen and halt all foreclosures? Or is this where the magical bully pulpit comes in again?

What possible use could there be? How about preserving the very concept of property rights in the face of fraud on a scale literally unseen, prior to this, in all of human history?

We should all be very concerned about the foreclosure situation in Florida. If you are a homeowner or potential homeowner, you should find it offensive that people’s property rights are being violated in such a flagrant way. If you are an investor, either as “bond vigilante” or someone with a generic 401(k), you should be worried that servicers have gone rogue and the incentive structure to maximize value instead of fees associated with foreclosures has broken down.

And if you care about basic Western liberalism–the classical kind, with a Lockean understanding of freedom to own property along with freedoms of speech and religion– you should be pissed off. This is a clear-cut instance of the rich and powerful decimating other people’s property rights, rights that are supposed to protect the weak from the strong, in order to preserve their wealth and autonomy. Unless you think property rights are mere placeholders for whatever the financial sector demands are, this should be resisted. This should be viewed as a problem an order of magnitude larger than Kelo v. City of New London.

The courts are ignoring the law to force people out of their homes on the basis of fraudulent affidavits and forged documents at an unbelievable pace. In some states, like Florida, special kangaroo courts have even been established to make it easier on the banksters to steal homes through fraud.

Why should there be a national foreclosure moratorium? Because only 23 states deal with foreclosures in the courts, and for the rest of us, tough luck. There’s no oversight at all. What little oversight there is in those 23 states has shown the problem, the outright theft, to be on a larger scale than anyone could have conceived. From Ohio:

This is big news. I just got off a conference call with Richard Cordray, the Attorney General for the state of Ohio. He has filed a lawsuit in Lucas County (Toledo) Common Pleas Court against GMAC Mortgage and their parent company Ally Financial, in a suit which names Jeffrey Stephan, the infamous “robo-signer” who signed off on up to 10,000 foreclosures a month across the country with affidavits, without verifying the information in the foreclosure documents. The lawsuit alleges fraud on the part of GMAC, along with violations of the Ohio Consumer Sales Practices Act, in filing false affidavits to mislead the courts in what they describe as “hundreds” of Ohio foreclosure cases. And, the Attorney General is treating every single false affidavit filed in an Ohio court as a separate violation, with a fine of up to $25,000, plus additional restitution for the homeowner of an unspecified amount.

This is a major lawsuit, and as Cordray told reporters, “We’re at the beginning of this, not the middle or end, and we’ll see where it leads us.” For context, approximately 450,000 foreclosures have been filed in Ohio since 2005, and potentially all of them used this robo-signing process. At the outer edge of this, if every one of those foreclosure processes is seen as a single case of fraud, the fines for the entire lending industry would add up to $11.25 BILLION dollars, just in the state of Ohio, not including the extra restitution for homeowners.

Got that, Cole? 450k potential cases of fraud on the courts in one state alone. One state! How on Earth are we supposed to deal with this on any level but nationally?

But, you might ask, in the 27 states without judicial foreclosure, there’d be no fraud on the courts, so no problem right?

Wrong. That’s just one tiny facet of the enormous gem that is our mortgage fraud industry. You see, the banksters didn’t just rip off homeowners, they ripped off the investors they sold the mortgages to, in tiny pieces, as well:

The admission by GMAC that it produced improper affidavits, followed by suspension of foreclosures by GMAC, Chase, and Bank of America in 23 judicial foreclosures states, is the tip of the iceberg of widespread foreclosure abuses. Yet comparatively few members of the media have asked the right question: why would servicers and law firms engage in fraudulent activity on such a widespread basis?

The ugly answer, as we have detailed long form in earlier posts (see here and here for more detail) is just as the front end of the mortgage securitization pipeline broke down, with originators increasingly simply pumping any deal through in the interest of pulling out fees, the same behavior spread to the back end.

Evidence is mounting that the various parties responsible for getting the notes (the borrower IOU into the securitization trust, failed to perform a series of tasks that were clearly set forth in the governing contract, the pooling and servicing agreement. These procedures were designed to thread a path through a complex thicket of multiple legal considerations (state real estate statutes, federal securities law, trust law, IRS provisions, to name a few). The failure to do it right means any retrospective fixes run afoul of multiple boundary conditions. Thus to industry participants, fraud, bizarrely, looks to be less bad than admitting to their colossal failures to respect contractual obligations and legal requirements.

So, aside from hundreds of thousands of cases of fraud and countless thousands if not millions of investors stolen from, we’re all good? Guess again, because there are so many mortgages in doubt that the very concept of owning title to a house is beginning to crumble, and we’ve had to invent a new term in English to describe the fallout: ‘blighted title’.

Here’s a big one: Title insurance companies may be scared away from offering “clear title” guarantees on foreclosed homes. That would throw into doubt who actually owns many thousands of houses — those going into foreclosure and those purchased out of foreclosure — all across the state.

Who’s going to buy a home if they don’t have a guarantee that they will legally own it?

If the courts finally acknowledge that many foreclosure documents are inaccurate, people who have bought thousands of foreclosed homes may have to reassert their legal ownership. Some former owners already pushed out of their homes by foreclosure proceedings could find they still own their houses, only to face a second round of foreclosure just to get the ownership documentation right.

So in addition to the courts being spat upon hundreds of thousands of times, and investors cheated out of their legal rights in countless investments, now every single home ever foreclosed upon may be unsaleable because nobody will insure their titles. Is that a big enough problem for you yet, Mr. Cole? No?

How about this then: because of the way the mortgage industry decided, unilaterally, to stop following the law regarding notarization and document filing, there may be no way to determine who actually owns millions of mortgages, in foreclosure or not:

Since the repeal of Glass Steagall, the creation and trading of mortgage-backed securities have become a norm, enjoying less regulatory oversight than for traditional securities trading. Mortgages now became parts of “tranches,” a French word for “pieces,” that back securities sold. Mortgage notes, which must to be recorded to become a lien on real estate are now, through a sleight of hand, secondary to the interests of the mortgage backed securities traders with the advent of Mortgage Electronic Registration Services, Inc. (MERS) which facilitates trading without recording the changing ownership interests in mortgages. Local governments lose revenue from recording those changing interests, and the original note often becomes lost in the brisk shuffle of trading and reassigning them to various tranches that back purchases of them from all over the world.

Let’s repeat that: every time a mortgage changes hands, by law for the transaction to be legal, it has to be locally recorded. Since the advent of MERS, the banksters just decided not to do that, in large part to avoid paying fees to local governments that would go to pay for silly things like public services. Instead, they just made private, unreviewable, unenforceable, illegal sales amongst themselves using MERS to hide. As a result, there is no easy to way to determine who actually owns many of these mortgages. The bank trying to foreclose upon you may not have the right to do so; moreover, even if you’re paid up in good faith, some OTHER bank may claim to actually own your mortgage and demand payment, and you have no way to know if they do, or do not, have that right.

The entire system of land ownership in America has broken down.

How many mortgages does this entail? Well, up to 62 million of them, as it happens. More on that later.

So, to recap: according to the Obama Administration, as well as its online defenders, the fact that an entirely undocumented, private system has been illegally substituted for the long-established state and local system of land-ownership? Not a reason for a national moratorium on foreclosures. The fact that the title insurers could collapse at any time, bringing almost all home sales in the United States to a dead stop in a completely uncontrolled manner? Not a reason for a national moratorium on foreclosures. The imminent collapse of the entire mortgage backed securities market? Not a reason for a national moratorium on foreclosures. The potential for hundreds of thousands, perhaps literally millions of acts of fraud perpetrated on our courts? Not a reason for a national moratorium on foreclosures.

Is there literally nothing these people won’t defend, if perpetrated by the banksters? Here we stand on the verge of a raw financial panic, with tens of millions of Americans having no clear legal claim to their own homes, with the courts clogged with foreclosures, buried in fraud, with title insurance about to implode and investors swindled in violation of their own contracts, and the official Obama line is… we’re opposed to stopping the madness?

Yeesh.

Update: Since I started writing this, the White House and Elizabeth Warren both came out in favor of the State AG’s investigating the industry. Apparently 40 states are now involved; I can’t imagine the other 10 holding out forever. So, good news for O-bots: their exalted leader gets to force the hard work off on the tax-starved, understaffed states, and remain nobly above it all so that he can continue to bank bankster checks in his upcoming re-election campaign.

Such moral leadership is truly a blessing on our nation.