Why Zombie Houses? Local government budget deficits

The appearance of zombie homes and the destruction of hundreds of thousands of them thus destroying entire neighborhoods and subdivisions illustrates a fundamental truth about the foreclosure tidal wave that hit in 2007-2008: the banks didn’t care about the property, they just wanted the record to reflect a foreclosure sale. This alone represents probative evidence that the banks, pretending to act as intermediaries, were actually players in an illegal scheme wherein they were working against both investors and borrowers.

Local governments have been missing the mark in nearly every case. Instead of challenging the lenders as having committed multiple violations of state, county and municipal law including initiating false foreclosures forcing the burden of loss onto the restricted budget of local governments, they are following in the footsteps of pretender lenders and foreclosing on their tax liens, from which they gain nothing in most cases. Were they confront the banks with reality, their budget problems could be cured.

 

Zombie homes occur when “banks” foreclose and then walk away from the property as unsalable or too expense to maintain and insure. The entry of a Foreclosure Judgment or a certificate of sale is actually the first “legal” document in a long chain of nonexistent events. The foreclosure raises the presumption that all that previously transpired was real even when the courts and the borrowers and their attorneys were presuming facts that were simply untrue. In cases where securitization claimed it is fair to say that none of them were real and the foreclosure was initiated based upon fraudulent representations.

For a true lender or creditor the worst possible thing for them is to end up with nothing. That is exactly what happens in the current marketplace. Investors are left in a position of having an empty unenforceable promise to pay from the nonexistent trust that would be empty even if it did exist. Investors think their investment is secured but it isn’t. They have received a promise to pay from the nonexistent trust that is secured by nothing.

And the ability of the trust to pay them never existed because none of the money went through the trust. The entire plan of giving the investors a secured investment was a ruse. And that is why I have said that investors would do far better firing and terminating all relationships and illusions and forming their own servicing entities who would act in the best interests of the investors with respect to the “underlying loans” that the intermediary banks are claiming as their own.

Since the trusts were never used it is fair to say that the trust instruments are irrelevant and that volunteer payments by third parties were neither from a servicer nor were they advances. Without foreclosures the execution of workout agreements would preserve home ownership preserve neighborhoods, maintain the tax base, and most importantly preserve the value of the loan as an asset.

Before the late 1990’s the custom and practice of the industry was to do a workout, if at all possible rather than foreclose. This was true in commercial and residential lending. In commercial loans the business borrower could force the workout in Chapter 11 but homeowners rarely can get any traction in bankruptcy court.

Now, even faced with a cash payoff conditioned on revealing the creditor(s) the servicers relentlessly pursue foreclosure because that is what they are instructed to do by the TBTF banks. No servicer would “lose” the paperwork on a modification 10 times if they were really interested in working things out. Many attorneys representing the servicer and the alleged trust have actually argued that they have no obligation to take the money and that they would rather have the foreclosure.

The fundamental issue is that having committed dozens of illegal acts with respect to each alleged loan neither the servicer nor the broker dealers have the slightest interest in preserving the property or the loan. To the contrary, it is only when the house is foreclosed that the Master Servicer gets to “recover” something called “servicer advances” that neither come from the servicer nor are they an advance since they are paid from the investor’s capital.

The bigger issue is that a foreclosure sale frequently closes the door on attacks from the dozens of traders , investors, hedge funds and insurance companies who remain ambivalent about coming out and saying point blank that they were defrauded, and that there was no underlying loan for the loan documents that were executed.

The actual debt was left hanging without the knowledge of investors or borrowers. The banks created that situation and then grabbed the debts as if they were owned by the banks who held RMBS in street name as nominee for the investors. To all the world it looked like the banks owned the first layer of derivatives, whose value was intended to be derived from “underlying loans.” In truth, the debt relationship arose between the borrower and the capital sunk into a slush fund of investor capital. The source of funds were the investors. The note could only have been legally executed in favor of the investors or an authorized existing entity. That entity could have been the named trust, but it wasn’t.

Look for any indication of any kind that any transaction was ever completed using the name of the trust as a principal. You won’t find it. So in addition to Zombie houses, we have zombie investors, and zombie borrowers.

7 Responses

  1. Hammertime — you nailed it.

    Liked by 1 person

  2. Local officials can no longer get a pass especially in high equity areas. Chain of titles never fixed as agreed and county recorders letting still toxic modifications be recorded

    Liked by 1 person

  3. Don’t bet on it.They will change the laws to protect the banks before they allow YOU to get your equity back. Revolution, folks.
    Send the Donald your foreclosure paperwork. I am.

    Liked by 1 person

  4. Our home was illegally foreclosed using defective assignment of mortgage. Could we get it back someday when laws change?

    Liked by 1 person

  5. Reblogged this on Deadly Clear and commented:
    Too expensive to maintain or resell? Think logically. How about the fact they can’t sell the property because they do NOT have clear title which makes another sale a liability? Even a tear down is saleable for a price – and let’s face it – “something” is better than nothing. But selling something you don’t legally own and delivering bad paper might be considered criminal. Selling properties within the syndicate (GSEs) is not the same as to the general public. Judges should get their heads wrapped around this.

    Fannie and Freddie, under the FHFA federal government agency, are standing outside the foreclosure courts while plaintiff banks and servicers fake foreclosures and sales to “sell” them [back] to the GSEs. Astute judges know the foreclosure paperwork, bank affidavits and declarations are flawed – just as the banks, their attorneys and GSEs do. Does this meet the Conscious Avoidance standard? Google the criminal standard.

    Liked by 4 people

  6. How can we be so right and everybody else is so wrong?
    It’s called GOVERNMENT BY THE BANKS.

    Liked by 3 people

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