Welcome to European Tribune. It's gone a bit quiet around here these days, but it's still going.
MFM.  I think that the problem is a technicality of the law.  When asked for proof that they are the entitled to bring legal action against the holder of a mortgage, the entity bringing suit must be able to produce the original document.  Else they have no standing in court.  I.E. someone else may have the original and have a better claim.  The laws apparently have not been updated to accommodate all of the fancy "move it around electronically" modus operandi of the present financial system.

Fixing this could get interesting if anyone stands up for the mortgagees.  No one thinks that real estate values are going back to even 2005 levels any time soon.  There is considerable sentiment that mortgages need to be written down to something closer to the true market value of the houses at present, if only to reduce the incentive for "jingle mail."  A price for so doing could be extracted.  This could take the form of Chris Cook's solution or others that have been proposed.  

Dealing with the slice and dice Mortgage Backed Securities situation with different parties holding different "tranches" of these MBSs is a different matter.  Clearly the high risk, high return bottom tranches should be wiped out.  But the decline has put at risk even the top tranches.  And when four different classes of investors all have a stake in the returns from a pool of mortgages the question arrises, "Who has the right to sue?"  And when no one can come up with the original document, when the mortgage broker who arranged the loan is long out of business....

"It is not necessary to have hope in order to persevere."

by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Mon Mar 2nd, 2009 at 03:18:28 PM EST
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