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More On GMAC/Ally Fraudulent Foreclosures

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Stephan Deposition This is likely to derail many foreclosures - at least from a standpoint of time. It may also void some of them and force them to be re-litigated. This will have a SEVERE impact on loss severities - at minimum. Worse, in the case of non-agency notes, some of the notes may have never been conveyed properly into the trust in the first place, as I have repeatedly noted for more than a year now! There are some very serious potential problems here folks. As you remember I wrote a Ticker about this in 2009 in which I raised the issue of possible endorsement in blank into some of these trusts - and the fact that there are multiple problems with such a thing, including both state law restrictions that bar "in blank" assignments into trusts as well as possible TEFRA implications (1980s law relating to bearer instruments and tax implications thereof.) If the time has passed to be able to make reasonable corrections to these so-called "ministerial errors" (and it probably has) then the impact on MBS holders who happen to have the "hot potato" in non-agency securitizations could be catastrophic. In turn you can expect them to come after the institutions (big banks) involved, which could easily wind up in some catastrophic outcomes for them! This is particularly true if the "back end" processing was intentionally derailed. A pattern of conduct is entirely different than a "few errors." If courts and/or prosecutors find that a pattern of conduct was involved in these "errors" to the point that they are deemed intentional then the entire securitization structure collapses on itself as it holds no collateral at all, but rather holds only a naked promise to pay. While this doesn't exactly get the owner a "free house" it's damn close especially in states with an unlimited bankruptcy exemption for homestead property, as if the note is deemed "naked" (without security interest) the owner of the house could declare bankruptcy out from under it while keeping the house! The only thing worse you could add to this might have happened too - we might get a finding that in an attempt to cover up over a trillion dollars in intentional misconduct that these institutions engaged in systemic and intentional forgery. Small ball or "insignificant"? I think not - nobody's going to take a trillion dollar reaming without going after everyone and everything involved in this, up and down the line - and that's exactly what this is increasingly looking like it will turn into. The chuckle factor on this for me is extraordinary, while the pucker factor for those who pulled this garbage ought to be running at about a 9.5.

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