Wells Fargo Sells Woman’s House In Foreclosure After She Reinstates Loan for $141,441.81
Editor's Note: In all of these cases you need to start with the premise that the bank has a gargantuan liability in the event that it took insurance, credit default swap proceeds, federal bailouts, or the proceeds of sales of mortgage bonds to the Federal Reserve. Most experts in finance and economics agree that if the Federal Reserve stops making payments on the "purchase" of mortgage bonds the entire housing market will collapse. I don't agree.It is the banks that will collapse in the housing market will finally recover bringing the economy back up with it. The problem for the Federal Reserve and the economy is that most likely they are buying worthless paper issued by a trust that was never funded and that therefore could never have purchased any loan. Thus the income and the collateral of the mortgage bond is nonexistent.Many people in the financial world completely understand this and are terrified at the prospect of the largest banks being required to mark down their reserve capital; if this happens, and it should, these banks will lack the capital to continue functioning as a mega-bank.So why would a bank foreclose on house on which there was no mortgage and/or no default? The answer lies in the fact that they have accepted money from third parties on the premise that they lost money on these mortgages. If that turns out not to be true (which it isn't) then they most probably owe a lot of money back to those third parties.My estimate is that in the average case they owe anywhere from 7 to 40 times the amount of the mortgage loan. It is simply cheaper to settle with the aggrieved homeowner even if they pay damages for emotional distress (which is permitted in California and perhaps some other states); it is even cheaper and far more effective for the bank to give the house back without any encumbrance to the homeowner. Without the foreclosure becoming final or worse yet, as the recent revelations from Bank of America clearly show, if the loan is modified and becomes a performing loan all of that money is due back to all of those third parties.
I say shit is gonna hit the fan, this time Wells fargo