The Foreclosure Paperwork Mess

You might be starting to read about the big mess with foreclosures and the paperwork.
During the bubble so many mortgages were given out and then resold to investors, and it was all happening so fast, that the paperwork was not looked at very closely. See this explanation. The result is that it might be clear that you have a mortgage and ought to be making payments, but it is in no way clear who owns that mortgage and who you should be paying, and who should be foreclosing on you if you are not.
That is the root of the huge problem that is opening up right now. It is becoming very clear that the paperwork on many of these mortgages was not done correctly, and sometimes was even done fraudulently. If an investor bought a mortgage or package of mortgages, like a CDO, it was with an assurance that the paperwork was correct. So now that investor has recourse they they might not have had before and might be able to go back to whoever sold them the toxic assets and demand their money back.
The implications:
* People who have been paying mortgages might have been giving money to the wrong people. One investor has been getting extra payments while the correct investor was getting no payments. Now they are all going to have to sort that out and get the money to the correct people.
* Banks sold these packages of mortgages with assurances that the paperwork was correct and will now be on the hook to buy them back.
* Those banks might not have the means to buy them back.
We might be heading for a second round of the really big banks being insolvent again.

m4s0n501

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