By MICHAEL GRAY
Up until now, large banks and mortgage servicers have stated that they used false documentation and illegal signings and notary signatures to alleviate the huge backlog of foreclosure processings.
Although filing a false document with a US court would be fraudulent if you or I did it, this is only the tip of the iceberg for the banks.
Once it is revealed that the rash of foreclosures was begun to allow the banks to clear their balance sheet of toxic assets before mark to fantasy expired and also profit by it, the entire mortgage securitization market will crater.
Here is how it works:
If you have a delinquent $250K loan that the bank wishes to get rid of. It bundles this loan with other bad loans and sells it at $0.40 on the dollar.
The purchaser of the paper then forecloses on the house and sells the house for $150K. That’s a 50K profit on the foreclosed property.
Now if you do this 100,000 times the bank clears the bad paper and makes a tidy profit because the seller is either another arm of the bank or has a kick-back clause tot he bank.
Now if this scenario is “allowed to be” unveiled by any of the many ongoing investigations into this mess, then the entire mortgage market will seize.
This fraud will make robo-signing look like jay-walking in the grand scheme of things. It was a means to get the bailed out banks out from under the mess they caused.
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