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Friday, February 20, 2009

No note, no mortgage

It's quite interesting to see what was once considered borderline economic conspiracy theory in the New York Times:

Kathy Lovelace lost her job and was about to lose her house, too. But then she made a seemingly simple request of the bank: Show me the original mortgage paperwork.And just like that, the foreclosure proceedings came to a standstill.

Lovelace and other homeowners around the country are managing to stave off foreclosure by employing a strategy that goes to the heart of the whole nationwide mess. During the real estate frenzy of the past decade, mortgages were sold and resold, bundled into securities and peddled to investors. In many cases, the original note signed by the homeowner was lost, stored away in a distant warehouse or destroyed.

No note, no mortgage. And since this isn't necessarily a foreclosure-related issue, I suspect the mortgage banks may find themselves in even deeper water than anyone suspected. Remember, we should expect to see more and more frauds and scams uncovered as the contraction continues.

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