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KQED Forum: Richmond, California looks to eminent domain (me: but is there a who there?)

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California Counties and Court of Appeal Districts: wikimedia.org

Half the homes in the city of Richmond (red arrow) have underwater mortgages. And Richmond has a plan:

Richmond threatened last month to become the first city in the country to invoke eminent domain for underwater mortgages when it sent letters to 32 banks and other entities asking to purchase 624 home loans at a discount to current property values. If the institutions declined, the city said it would consider forcibly acquiring the mortgages through eminent domain. It would then help the homeowners refinance into smaller, more-affordable loans. - San Francisco Chronicle, August 20, 2013

A couple of weeks ago, San Francisco public radio KQED Forum devoted an hour program to Richmond and eminent domain; I heard the podcast later and embed it below with transcript.

"This is not really about eminent domain; that’s a tool. This is about principal reduction." - Steven Gluckstern, chairman, Mortgage Resolution Partners

Two of my favorite bloggers covered the story as well: Yves Smith at Naked Capitalism (Beware Private Equity Guys Bearing Gifts: Eminent Domain Mortgage Scam Hit with Well-Deserved Lawsuit) shreds the Richmond plan, because of MRP's role, and David Dayen at Salon (Take my house, please!) nevertheless wishes that the concept of principal reduction might succeed under a different model, like Boston's SUN initiative, whereby a nonprofit private equity firm bought distressed mortgages outright and refinanced the borrowers with affordable mortgages; no eminent domain involved.

Here's where I get mesmerized:

"Who do you turn to when you want to talk about something other than foreclosing the property? People who do not seem to be available or accountable to the government." - Rachael Myrow, KQED

When the city sent the letters, [__] immediately countered with a lawsuit. That would be:
a) "Two banks, Wells Fargo and Deutsche Bank, on behalf of groups of investors" per KQED below
b) "Investor group" per Wall St. Journal (pay wall)
c) "A coalition of banks and mortgage-securities firms" per San Francisco Chronicle above

According to Steven Gluckstern, the chairman of MRP, the company advising Richmond, all the mortgages chosen "were selected out of a pool of what are called private-label securitization mortgages." And:

Steven Gluckstern: I think Jeff gave a very good explanation that there are trustees and servicers who actually can make decisions about these loans. You’ll find ironic, as part of our advice to Richmond, we reached out to the servicers and trustees just to find out where to send the letters in terms of the request for purchase, and the trustees in general told us they had no power to make this decision, that we should send them to the servicers, and the servicers sent us a letter saying they have no power to make this decision; you should send them to the trustees. So the city of Richmond sent them to both, because between them they must have that power.

Except maybe not?

Richmond is in California's First District Court of Appeals; in the recent (published!) Fifth District decision, Glaski v. Bank of America, a homeowner successfully argued that the bank did not have standing to foreclose because the securitization and thus chain of title were faulty. (Hello, hello, hello! I think that would be covered by David Dayen's prior story, Your mortgage documents are fake!)

h/t william occam at Naked Capitalism, is there a there there now? Is there a who with standing and agency?

I wonder how this impacts the City of Richmonds eminent domain push? If a bank or servicer does not have legal standing to foreclose becuase they cannot prove ownership how can the City of Richmond pay for them for a mortgage?

Also h/t ima s on Glaski:

The highest California Court is the Supreme Court. There are several Courts of Appeal, which are intermediate appellate courts, so this decision only affects one California judicial district. The interesting question is whether the bank will appeal. Losing in the Supreme Court would be completely devastating to bankster interests. Of course, I have no idea of the composition of the Supreme Court. For all I know it could be composed of industry lawyers and tokens on the make. Does anybody know who these solons are and what interests they represent?

Here we go?

* * *

KQED Forum with Michael Krasny
Richmond Looks to Eminent Domain for Housing Solution
August 8, 2013

Host: Rachael Myrow, in for Michael Krasny

Guests:
Steven Gluckstern, Mortgage Resolution Partners chairman
Jeff Wright, Contra Costa County independent real estate broker
Dave Wert, San Bernardino County public information officer
Robert Hockett, Cornell University law professor

Transcript

Rachael Myrow: From KQED Public Radio in San Francisco, I’m Rachael Myrow, sitting in for Michael Krasny. This hour, the city of Richmond was willing to go where other cities and counties feared to tread, threatening to use eminent domain to force lenders to sell their underwater mortgages. Half of Richmond is underwater, and the city’s offering about 80% of market value, but banks are having none of it. As expected, two banks have filed suit, Wells Fargo and Deutsche Bank, claiming the proposed seizure of private property is unconstitutional, not to mention a serious threat to the nation’s home mortgage market. So what’s a city still suffering from the heavy overhang of the housing crisis supposed to do? Sit back and wait for things to get better? That’s coming up on Forum.

This is Forum. I’m Rachael Myrow, in for Michael Krasny. Today, if Richmond goes ahead with its plan to buy underwater mortgages, it will be the first city to use eminent domain to address its housing crisis. About half of homeowners with mortgages in Richmond are underwater, some owing three to four times as much as they paid for their homes. Other cities including Seattle and San Bernardino have also considered a similar strategy, which is opposed by banker and realtor associations. Today we discuss the pros and cons of eminent domain and what it would mean for Richmond residents. Joining us now in studio we have Steven Gluckstern, chairman of the Mortgage Resolution Partners Group that is behind this program.

Steven Gluckstern: Good morning, Rachael.

Rachael Myrow: Thank you for being here. And Jeff Wright, an independent real estate broker, but he’s also the past president of the West Contra Costa Association of Realtors in Richmond.

Jeff Wright: Good morning.

Rachael Myrow: Glad to have you here. And later on we’ll be hearing from some other voices, but why don’t we start with you first, Steven Gluckstern. Explain to us what it is that Richmond is planning to do.

Steven Gluckstern: Richmond has offered to purchase some 625 mortgages that are currently underwater and worth more than the value of the home. They made that offer last week to buy those. If they’re successful in purchasing those loans, they would then work with the homeowners to reduce the balance, refinance the homes, and allow the homeowners to remain in their homes with reasonable mortgages.

Rachael Myrow: Is this the same concept that cities like San Bernardino and Salinas were considering but decided not to roll forward with?

Steven Gluckstern: Yes, it is. We have a number of conversations. We’re a community advisory firm and we work with communities who are considering this. A number have considered and chosen to pass, a number have considered and are now in the process of working with the owners.

Rachael Myrow: So as you mention, the city’s already sent out letters to about 625 homeowners with underwater loans. How were those folks picked out of the pile?

These are mortgages that were originated in the last half a dozen years that are neither guaranteed by the federal government nor owned by banks. They’re essentially owned by investors in these pools of mortgages. We helped the city identify those.

Steven Gluckstern: Sure. First, just to correct, the purchase offer was not sent to the homeowners but rather to the owners of their mortgages, so that it’s not – the homeowners will opt in later on in this process. Those mortgages were selected out of a pool of what are called private-label securitization mortgages. Right? These are mortgages that were originated in the last half a dozen years that are neither guaranteed by the federal government nor owned by banks. They’re owned by, essentially owned by investors in these pools of mortgages. We helped the city identify those. These were ones in which the homeowners were severely underwater. They might have been current or in default, and in which when we did the appraisal of these loans their value was such that it was less than the value of the house, which will allow the transaction that Richmond anticipates to be successful.

Rachael Myrow: And I take it none of these loans are attached to second loans, equity loans, if you will, that would sort of lay Richmond open to the charge that it’s allowed people to sort of use their homes as ATMs and then get off easy a few years later?

Some of those homeowners actually also have some very small seconds, so it’s true, but the offer to purchase was for the first mortgages.

Steven Gluckstern: So, these 625 in this first sample, they’re all first mortgages. Some of those homeowners actually also have some very small seconds, so it’s true, but the offer to purchase was for the first mortgages.

Rachael Myrow: So let’s turn now to Jeff Wright. Is that a fair summation of what we’re talking about here?

Jeff Wright: I think that that is in fact a fair summation, without a doubt. I tend to look at things from the perspective of the residents and the overall impact that this process would have on the community as a whole. I’ve been in the real estate business for 34 years, and much of my activity has been in the Richmond area, and as always we’re concerned about the cost of credit for potential borrowers, be that someone that wants to purchase a home or refinance, and without a doubt I believe that implementing eminent domain to seize mortgages will invariably result in a higher cost of credit. If you just look at the numbers as a whole, we’re talking about 624, 625 mortgages. The population in Richmond is approximately 106,000 people. So for approximately 6/10 of a percent of a population, you’re going to implement a program that might have adverse implications for the wide majority of the residents in the city of Richmond. And even going beyond, just looking at it purely from the standpoint of how it might impact people in terms of credit for the purchase or refinance of real estate, I think about it in terms of how it might adversely affect the city as a whole. They have a very competent finance manager in the city of Richmond, a gentleman by the Jim Goins. Richmond has a multitude of problems including crime, economic development issues, as well as infrastructure problems, and oftentimes to finance and deal with infrastructure issues you have to go into the bond market. Now, by implementing eminent domain, what’s that going to say to the bond market and other areas where Richmond has to go in to get money? They’re going to be looking at the city with a very cautious and jaundiced eye implementing programs such as this.

Rachael Myrow: Do you think there’s a potential, would it even be legal, for banks and other lending firms to simply hear the word Richmond at this point and say, “Well, we’re not going to lend to that person who wants to buy a new home.”

The mayor threw out the word "redlining"

Jeff Wright: Well, I was listening to the mayor’s press conference and reading some articles whereby she threw out the word “redlining” should the financial community decide that they don’t want to lend in Richmond, or even if they have to put an additional risk premium in there, because again, if this eminent domain goes into effect, it’s greater risk for the lending community. So obviously when you have more risk, you have to build in a risk premium, which would be in the form of a higher interest rate. So I don’t think that necessarily equates to redlining. That equates more to being reasonable in terms of the risk that you encounter dealing in Richmond.

Rachael Myrow: So, Steven Gluckstern, now we’ve got a lawsuit pending as of this week, big banks on behalf of those groups of investors that you were talking about earlier, and they’re asking the judge to put a stay on this program. Does that mean I guess that we’ll have to see how this rolls out?

Steven Gluckstern: Well, certainly if a federal judge issues an injunction, then the program will be stayed. We have yet to be seen whether that actually will be true. Most of the arguments that were offered in that have been already argued in the press for a year, nothing particularly new in that, and we’re confident we will prevail. There’s everything that’s legal.

It’s a classic tactic of the financial services industry to threaten to do something. “If you do this, we will do that.” The truth is they’ve never really done the “that” when someone has done “this.”

I would like to comment on Jeff’s comment here about the fact that there could be a change in the cost of credit. First of all, using an old expression, the genie’s out of the bottle. The risk of eminent domain has always been there and always will be there. So to say that the market hasn’t priced for it is just incorrect. The second is, it’s a classic tactic of the financial services industry to threaten to do something. “If you do this, we will do that.” The truth is they’ve never really done the “that” when someone has done “this.” The state of Connecticut used the power of eminent domain to condemn covenants in their own bonds. Not even the bonds. They just said, “Well, we’ve issued these but we want to change these two or three things,” and of course everyone threatened that there’d be no credit lending and it would be more expensive for Connecticut to borrow. That happened until the moment they did it, and then of course the threats were completely ignored and idle. Money’s a wonderful thing. It’s completely fungible. And the day that somebody doesn’t want to lend in Richmond, somebody else will lend in Richmond.

Rachael Myrow: But you say eminent domain has been used before. It hasn’t been used before quite like this, has it? I mean, usually a city takes a property because it’s got some bigger plan, maybe a public park, it wants to raze a house or seven houses or whatever, and so it’s claiming the house for that purpose. This seems to be something all together different.

Steven Gluckstern: I think it’s a fair statement that this is different than how we conceive of eminent domain. We think of it as the street corner for the stop sign. But there are many, many examples of the use of eminent domain to condemn intangibles, to condemn bonds, to condemn easements, even as we know in this locality to condemn a football franchise. So while it’s never been used, we don’t believe, for the use of condemning a single residential mortgage, that’s new, there are many, many comparable and very similar uses.

Rachael Myrow: Jeff Wright, you’ve heard Steven say that other cities are considering something along this line. I believe El Monte is in the process now. Are you aware of other California, Northern California cities or counties that seem ready to follow Richmond into terra incognito?

Jeff Wright: I’m not familiar with any additional Northern California cities that are ready to move forward with this. Most of the activity has taken place in the southern portion of the state. Somebody mentioned something to me, and it was a rumor, maybe Steven can enlighten me, but I heard the city of Vallejo bandied about. Is that correct? Is Vallejo looking at utilizing eminent domain to seize mortgages?

Steven Gluckstern: Yes. Well, yes, the city of Vallejo has expressed interest in learning more, and there have been one or two public meetings there.

Jeff Wright: Okay.

Rachael Myrow: So, what do you say, though, Steven Gluckstern, to the fact that there are all these lawsuits? The fear of lawsuits, I should say. It seems to have done a pretty good job of killing off the idea in a number of cities.

Steven Gluckstern: Well, welcome to America. I think that’s the tactic of the opposition, by the way, to create fear on behalf of those who might take action. Obviously it was anticipated. We are well prepared and we look forward to having both sides their day in court, and we are highly confident we will prevail.

Rachael Myrow: Can you tell us what it is that your company, Mortgage Resolution Partners, gets out of it every time one of these eminent domain deals is done?

So we’re a community advisory firm and we work on a fixed fee basis, meaning that we will be paid $4500 every time we’re able to help a city keep one of its residents in their home. That payment, by the way, is not paid by the city and it’s not paid by the homeowner, it’s paid by a lender who lends the city the money it will use to purchase the loan. By the way, we chose $4500 not out of random, but we looked at what the United States government is prepared to pay the very people who are now suing us, by the way, when they resolve a mortgage as an incentive for them.

Steven Gluckstern: Sure. I’d be happy to. So we’re a community advisory firm and we work on a fixed fee basis, meaning that we will be paid $4500 every time we’re able to help a city keep one of its residents in their home. That payment, by the way, is not paid by the city and it’s not paid by the homeowner, it’s paid by a lender who lends the city the money it will use to purchase the loan. By the way, we chose $4500 not out of random, but we looked at what the United States government is prepared to pay the very people who are now suing us, by the way, when they resolve a mortgage as an incentive for them. In other words, they get that as an incentive payment. So we concluded that seemed like a reasonable and vetted amount for us to be able to earn if we keep somebody in their house. On average, by the way, the citizen would have received a benefit, I think in Richmond it’s going to be about $100,000 will be the reduction in the principal amount for them, and so we’re very, very happy to defend our position in this.

Rachael Myrow: Jeff Wright, I see you ready to leap in here.

Jeff Wright: Would you mind if I ask Steven a question because –

Rachael Myrow: Sure. Yes.

So they have a $400,000 obligation that they are owed; they’re going to get $160,000 under the proposal. Now if the property has a market value of $200,000, what happens to that $40,000, the difference between the $160,000 and the $200,000? You indicated that MRP receives $4500. What happens to that additional $35,500 under this example?

Jeff Wright: – this is all a learning experience for me too, and I’m trying to get a firm grasp on these numbers. Now as a hypothetical example, Steven, if someone owes $400,000 on their property and it has a market value of $200,000, we could fairly say that they would be $200,000 underwater. Now my understanding is, based on the proposal, if that property is now worth $200,000, then what would be offered to that investor on that loan would be 80% of that $200,000, based on some of the examples that I’ve seen come forward from MRP. So 80% of $200,000 would be $160,000. So they have a $400,000 obligation that they are owed; they’re going to get $160,000 under the proposal. Now if the property has a market value of $200,000, what happens to that $40,000, the difference between the $160,000 and the $200,000? You indicated that MRP receives $4500. What happens to that additional $35,500 under this example?

Steven Gluckstern: Well, first, let me, Jeff, compliment you on that analysis, because often we hear people describe it and they get the facts wrong. I think those facts are really quite good and quite spot on.

Rachael Myrow: Thank you for doing the math for both of us.

Steven Gluckstern: Right, and we’ll come back to why it’s really worth 160, I’d like to do that, but let’s, but do your math, let’s stick with the math for a second. So there's, in that example, let’s just refine it a little, the homeowner will be told by the city that they can refinance that loan for $190,000, right? So that the city will have purchased it for 160 and the homeowner will have the opportunity to refinance it for 190.

Jeff Wright: Correct.

Steven Gluckstern: So there’s a $30,000 we’ll call it spread for the moment there. The actual costs of doing this, going through the process and recording and title insurance, all this, is about $10,000. That includes the $4500 that MRP would receive. That’s about $10,000 of costs. That leaves about $20,000 –

Jeff Wright: Okay.

The company that loaned the city the $160,000 to do this needs to earn a return, and it earns around $10,000. So that’s another $10,000, to pay back the Wall Street firm that has lent the money to the city to purchase it. That leaves about $10,000, and that would go into the coffers of the city to be used for other housing programs or to be used as they see fit.

Steven Gluckstern: – for the difference. The company that loaned the city the $160,000 to do this needs to earn a return, and it earns around $10,000. So that’s another $10,000, to pay back the Wall Street firm that has lent the money to the city to purchase it. That leaves about $10,000, and that would go into the coffers of the city to be used for other housing programs or to be used as they see fit.

Jeff Wright: Well, Steven, some might argue that that's an unfair taking. That the investor that actually owned that loan, that's now taking a substantial discount with money winding up in the city coffers, some might argue that that's an unfair taking of someone else's resource and money, and as we both know, oftentimes the owners, the actual people that own this on a net basis, are pension funds, individuals that have money in pensions and that sort of thing, so isn’t that an unfair taking of their money, kind of a reallocation? It might even be somewhat of a Robin Hood type thing.

Rachael Myrow: It does sound like Robin Hood, Richmond making a decision that it’s in a better position to step into a contract.

One of the wonderful things about the process of eminent domain is that if anyone who owns the mortgage that’s purchased feels that the price being offered by the city is unfair, they have a right to a jury trial to determine value.

Steven Gluckstern: So first of all, one of the wonderful things about the process of eminent domain is that if anyone who owns the mortgage that’s purchased feels that the price being offered by the city is unfair, they have a right to a trial, a jury trial, to determine value.

Rachael Myrow: So we’re talking about potentially 625 lawsuits?

Steven Gluckstern: Well, it’d be by trustee, so it is possible, if the trustee wanted to argue they deserve more, but let’s talk about how did we get to the value of 160? Where did that come from? Right? That’s the value today that investors place on that mortgage. That is today what they trade for. That is today what Fannie and Freddie, who are making all these great arguments about this, that’s what in their published footnotes they value the loans for. In fact, the city of Richmond did an independent appraisal, but more important, that appraisal is based partially on the very numbers published by Fannie and Freddie. So if they thought it was worth 190, it would trade for 190. Locked in that trust, the way it finds itself today, that loan is worth $160,000, which is what the city offered.

Richmond is beautifully situated on the beautiful San Francisco Bay surrounded by communities that are going to stratospheric heights.

Rachael Myrow: But let me throw this question at you, though. That’s the value today. Richmond is beautifully situated on the beautiful San Francisco Bay surrounded by communities that are going to stratospheric heights. Now, Richmond may be the last to see its boats lifted as we rise up out of the recession, but give it a couple of years and many of these properties may not be at $200,000 or $180,000 anymore.

Steven Gluckstern: Right. That’s correct. They might be at 250. They also may be at 150. Because no one can look into the future. But that’s all embodied in their price today. Because prices are determined by people’s outlook into the future. If everybody thought those loans and those houses were going to be worth $100,000 more tomorrow, the loans would not be worth $160,000, they’d be worth some number higher than that. That’s the composite view.

Rachael Myrow: Well let’s bring in somebody else additionally into our conversation. We have someone from San Bernardino County. David Wert is the public information officer. As you’ve heard us mention before, the county and two of its cities were considering using eminent domain to deal with their housing issues, just the same way that Richmond has, but abandoned those plans in January. So we’re hoping to talk now to David Wert. Thank you for joining us.

David Wert: Good morning.

Rachael Myrow: Good morning. So I don’t know how much of this conversation you’ve been able to hear before this, but can you tell us why San Bernardino County decided not to roll ahead with this plan?

San Bernardino: I don’t think anything that our county has done has received as much attention in our area, in our state, around the country and around the world, as our consideration of this approach, so people knew about it, but we just didn’t have the public support, and without the the public support, and with the experts weighing in saying that this was something that could cause more harm than good, we really didn’t have much of a choice other than to not go forward with it.

David Wert: Well, really what it came down to was we conducted this process the way that government ought to conduct every process. Someone came to us with a very intriguing idea. I mean, keep in mind, no one here in county government is a real estate expert, no one’s a mortgage expert, and no one’s a securities expert. We rely on the public testimony and communications that receive from experts and try to make the best decision possible. So, you know, MRP came to us with what was a very intriguing idea. You know, we have a very deep problem here in our county. There’s a lot of misery in this county. A third to a half of our homes are underwater, which means a third to a half of our families are underwater, so it was a very intriguing idea and it was definitely worth looking into. And so what we did was we immediately made it public and we had public hearings and we invited everyone who might have something to say on this, experts, ordinary citizens, to tell us what they thought. And at the end of the day, what we had was a lot of people from the real estate community, the investment community, saying the world would come to an end if we did this, which, again, we’re not experts, we don’t know. The problem was is that we really didn’t have a whole lot of people saying that that would not happen and that it was a great idea, and most importantly to us as a government agency, we just didn’t have a lot of ordinary citizens, homeowners, approaching us saying, “Please do this. This will help us.” And it wasn’t because of any lack of publicity. I don’t think anything that our county has done has received as much attention in our area, in our state, around the country and around the world, as our consideration of this approach, so people knew about it, but we just didn’t have the public support, and without the the public support, and, you know, with the experts weighing in saying that this was something that could cause more harm than good, we really didn’t have much of a choice other than to not go forward with it.

Rachael Myrow: What was the thing that was most fear-inducing? Was it the prospect of multiple lawsuits, or was it the sense that, you know, San Bernardino might find itself, like the Richmond mayor suggested, redlined by a financial industry that just wouldn’t want to play ball after that?

Our primary economic engine here in the Inland Empire is homebuilding and homebuying. And if people weren’t going to write mortgages here because they were afraid that their mortgages were going to get seized by the government somewhere down the line, that would be a real concern to us.

David Wert: It wasn’t the lawsuits. I think it was probably the redlining, and, again, I don’t know if the redlining would have been legal, would have been possible, would have actually happened, but that was definitely a threat. And, you know, to a layperson it makes sense that if your area is going to be hostile to a certain type of business, that business might not want to do business in your area. So that was something to consider. Again, it had never been done anywhere, so we didn’t know that if we had gone forward with this, that no one would write mortgages in this county anymore. But that would be a very big concern. Because this isn’t the case in a lot of areas, but our primary economic engine here in the Inland Empire is homebuilding and homebuying. In some areas it’s tourism. In some areas it’s factories. In our area it’s homebuilding and homebuying. And if people weren’t going to write mortgages here because they were afraid that their mortgages were going to get seized by the government somewhere down the line, that would be a real concern to us. And, again, we didn’t have any experts saying that that wouldn’t happen.

Rachael Myrow: Can you give us a sense of what percentage of San Bernardino County homes are underwater?

David Wert: A third to a half.

Rachael Myrow: A third to a half.

David Wert: I mean, that’s what it was when this was being considered. I mean, things are looking up now. I mean, things have improved. There’s still plenty of misery to go around here, but, yeah, a third to a half is a pretty good estimate of the number of families that we have in our county that are underwater.

Rachael Myrow: We’re talking with Dave Wert, public information officer for San Bernardino County, one of a number of California cities and counties that have been considering using eminent domain to force lenders to sell their underwater mortgages and to basically fight neighborhood blight from foreclosed properties. We’re about to take a short break and come back, and we want to hear from you. If cities shouldn’t be using eminent domain, then what? What should they be using to save their collective quality of life? Join our conversation by calling 866-733-6786. You can also email us at forum@kqed.org, or you can go to our website, kqed.org/forum and add your comments and questions online. We’ll be back in just a moment. This is Forum on KQED public radio. I’m Rachael Myrow.

* * *

Rachael Myrow: Welcome back to Forum. I’m Rachael Myrow, sitting in for Michael Krasny. This half hour we’re talking about eminent domain and Richmond’s plans to use its legal muscle to force banks to restructure problem mortgages. What do you think? Join the conversation with us. Give us a ring at 866-733-6786. You can also e-mail us at forum@kqed.org, and of course we’re on Twitter @kqedforum and online, kqed.org/forum. Whichever way you want to weigh in, we’d love to hear from you, especially if you are a current Richmond homeowner or a prospective Richmond homeowner.

We’re sitting in the studio right now with Steven Gluckstern of the Mortgage Resolution Partners, which is the group that is helping Richmond put this package together, and Jeff Wright, an independent real estate broker who is also the past president of the West Contra Costa Association of Realtors in Richmond. Jeff Wright, can you give us a sense of whether this is something your prospective clients are talking about as they look at houses in the region?

Jeff Wright: Well, the local real estate industry is making a concerted effort to inform the public about what’s going on because we believe that this would have far-reaching implications. There hasn’t been a great deal of conversation initiated by clients, that sort of thing, because a lot of people were really not aware of what’s going on. And interestingly enough, listening to Mr. Wert from San Bernardino County make reference to the fact that this isn’t something that was necessarily driven by the community, the same situation exists in Richmond. This whole process has not been driven by the community. My understanding is this proposal is something that staff saw and staff took it to the Richmond City Council, and the city council decided to run with this, particularly the mayor and certain members on the city council. So this isn’t an issue that the public has brought forth and asked city government, “Please move forward or do something along these lines.” This is driven by staff and the city council.

Rachael Myrow: But you could make the argument that there are plenty of things in the arena of public policy where folks don’t have it top of mind, but for the general social public good, city officials are thinking about it. It may even be tickets at red lights. You know, we don’t enjoy receiving them, but it’s a good thing that we do. That kind of thing.

Based upon some information provided by MRP, and I think they got the figure from HUD, the cost to local governments when a property is foreclosed on is $19,227. I don’t see it.

Jeff Wright: Well, interestingly enough, and I’m really glad that Mr. Gluckstern is here because he’s – I’m learning a lot from him. I even learned quite a bit from him while we were sitting in the green room. But along those lines, I do have a question that I think would be helpful for everyone. Part of the pitch in this proposal, along with trying to keep people in their houses, is the fact that it’s good for the community and society as a whole because of the costs that are ordinarily associated when properties are foreclosed on and the blight that it brings to the community, so on and so forth. Now, based upon some information provided by MRP, and I think they got the figure from HUD, the cost to local governments when a property is foreclosed on is $19,227, and this is based on figures that MRP put in their information content. They say it’s in the form of lost property taxes, unpaid utility bills, property upkeep, policing, legal costs, so on and so forth. Well I’m trying to grasp these numbers again, Steven. With regard to lost property taxes, how are we dealing with an issue of lost property taxes? As you and I know, property taxes travel with the property, not the property owner. So even if someone is foreclosed upon and there are delinquent property taxes on that property, eventually when someone buys that property, those property taxes are going to be settled with. So the city nor the county is going to lose any money on property taxes, and as a matter of fact, because they’re delinquent, they’re going to charge delinquent penalties and fees which generally are higher than what they would be getting in return in the marketplace. So that being factored in the equation, I don’t see that, because that’s going to be covered. With regard to unpaid utility bills, the city of Richmond, they are not a utility. They do charge a small utility user’s tax. It might be 8, 9, 10%, so something along those lines. If somebody is paying a utility bill of $150 a month, even if it was 10%, that would only be $15, so that’s a negligible amount of money. With regard to property upkeep, the city of Richmond may have passed an ordinance, and particularly as it pertains to foreclosed properties, the owner, and if it’s a bank, they can be charged up to $1,000 a day in fines, and the city has been charging those fines and collecting on them too. So I don’t understand where there’s any loss of revenue there. With regard to policing, the city is broken down into sectors, and you have police patrolling anyway, so I don’t see where that’s a cost. I guess the net of it is inasmuch as the figure that’s used, $19,000 in costs, I don’t see it, so perhaps you can kind of break it down and explain it to me, because it looks like most of the costs are recoverable. So where are the costs actually being lost, or – ?

Rachael Myrow: Yeah. Steven.

This is not really about eminent domain; that’s a tool. This is about principal reduction. This is about the notion that you’re not going to fix the underwater housing problem in this country unless we find a way to reduce principal. By the way, every major economist has said that’s what’s necessary. By the way, when a business finds itself overlevered, the only thing they do is declare bankruptcy and reduce their principal on their loans. That is in effect what they do, and through capitalism we all know that’s what you have to do when you’re overlevered. And we have an overlevered society with some 10 million American families.

Steven Gluckstern: Sure. So let’s start with that figure, I actually believe the figure is higher than that, but that’s the figure that the Housing and Urban Development of the federal government put forth as on average what they find. Because not all the taxes do get repaid, and not all of the utilities, when these get resolved. So we could go through it, now is not the time, but I’d be happy to go through, but we could give you the HUD report itself if you’d like to see it. The basic issue, though, and I think it’s a conceptual one, not a dollars-and-cents one, for you to think about here, is that whether you think the society and our cities are better off by removing people from their homes and then forcing them to find housing elsewhere, if they can find it, and that’s the real – I mean, one of the underlying things we haven’t talked about this morning is that this is not really about eminent domain; that’s a tool. This is about principal reduction. This is about the notion that you’re not going to fix the underwater housing problem in this country unless we find a way to reduce principal. By the way, every major economist has said that’s what’s necessary. By the way, when a business finds itself overlevered, the only thing they do is declare bankruptcy and reduce their principal on their loans. That is in effect what they do, and they know, through capitalism, we all know, that’s what you have to do when you’re overlevered. And we have an overlevered society with some 10 million American families. That’s 40 million American citizens living in homes in which they have more debt than their house is worth that affects what they do, how they act, what they buy. The reason the recovery has not been felt for individual citizens at root is this hairball we talked about that is stuck there that needs to be removed.

Rachael Myrow: Well, hairball or no, let’s get some outside consultation on this. Joining us now is Robert Hockett. He’s a law professor at Cornell University and one of the originators of the concept of using eminent domain for this purpose. Professor, thank you for joining us.

Robert Hockett: Oh, sure, thank you guys, thanks for having me, and hello to my friend Steven.

Steven Gluckstern: Hello.

Rachael Myrow: So, tell us a little bit about, why is it that it is okay to sort of break something we consider sacrosanct in our economy, the contract, the private property contract? Why do you think it’s worth doing or something we should do in order to save cities and counties on the ropes?

We always allow, in an ordinary contractual circumstance, for the parties to the contract to rewrite the contract in the event that circumstances on the ground that were assumed in the original writing of the contract change in some fundamental way. Now, that is what happened with the housing crash. The problem, however, is that in this particular case, because of the complexity of the securitization arrangements pursuant to which modern loans are often securitized, it’s not possible for the parties in interest to do that themselves. These people are bondholders who are scattered all over the world.

Robert Hockett: Sure. So I guess there may be two answers to that. The first is to point out that you’re not only saving the cities and the counties and the homeowners, but you’re actually also saving the creditors, the bondholders themselves, right? That gets back then to the – but that takes us to the sort of second answer, which is that, you know, that’s a well established doctrine in contract law which is the doctrine of the stake or the doctrine or changed circumstances. We always allow, in an ordinary contractual circumstance, for the parties to the contract to rewrite the contract in the event that circumstances on the ground that were assumed in the original writing of the contract change in some fundamental way. Now, that is what happened with the housing crash. The problem, however, is that in this particular case, because of the complexity of the securitization arrangements pursuant to which modern loans are often securitized, it’s not possible for the parties in interest to do that themselves. These people are bondholders who are scattered all over the world. So what you need to do is you need to empower some collective agents to act on their behalves to rewrite a contract that helps them themselves in addition to the other party to the contract, namely the homeowner, in a circumstance like this. And this is exactly what the eminent domain tool is for. A very instructive comparison here is if you look at the rates at which banks’ portfolio loanholders who hold the loans right within their asset portfolios write down loans of the kind that Steven and I are talking about here, you see that those rates are quite high. But those rewrite rates are very low in the case of the securitized loans, and that in turn is not because it’s any less rational to do the rewrite in a case like this, it’s simply because there are all these structural impediments in the case of the securitized loans that prevent that from happening.

Rachael Myrow: Well, professor, let me let Jeff Wright jump in here. I want to throw this question to you, Jeff. We all of us, even as individual civilians, have heard that the days of the local bank mortgage lender are gone. The guy or the gal who knew the neighborhood, who knew the people involved, we’re talking now about collectively securitized mortgages, you know, hundreds, potentially thousands of people, packaged loans cut into tranches – there isn’t that person or people you can turn to for the most part to get a rational reassessment of your market situation, or is there? Are we running roughshod over what’s actually happening?

Jeff Wright: Well, I’m going to tell you what I find most interesting in this discussion, and as Mr. Hockett stated, that there doesn’t seem to be a mechanism in place whereby there would be a decision-maker who could adjust or modify these loans. But interestingly enough, there’s always a trustee or someone empowered, if that loan were to be foreclosed on, there is some trustee or some servicer that has the power to implement that process, the foreclosure process, if the people don’t make the payments. So it would beg the question, if you got the power to move forward along those lines, it would seem that someone would have the power to make some changes with regard to modifying those loans or what have you.

The funny part to me is this seems criminal in a sense to me. It seems as though fair play would be the people that have engaged in the contract, meaning the borrower and the investor, if it’s good for the investor to write these loans down, then they should be the ones taking the action to do that. It shouldn’t be the city's strong-arm gangster tactics, “I’m going to make you an offer that you can’t refuse.”

I don’t necessarily know all the technicalities that that involves, but I tell you what I do have a major issue with. The people that packaged up these mortgage securities, these bondholders, these people that actually own these instruments, to me it’s their call to do what they want to do with their instrument. You know, I was chuckling to myself last night. I grew up in the city of Richmond, the south side of Richmond, interestingly enough, and with Richmond having the crime rate that it has right now, that’s oftentimes expressed in the press, what caused me to chuckle was, oftentimes the city leaders are talking about crime and doing what we can do to mitigate crime, and the funny part to me is this seems criminal in a sense to me. The city is exercising strong-arm gangster tactics in order to bring this forward. And that rubs me the wrong way too. It seems as though fair play would be the people that have engaged in the contract, meaning the borrower and the investor, if it’s good for the investor to write these loans down, then they should be the ones taking the action to do that. It shouldn’t be strong-arm gangster tactics, “I’m going to make you an offer that you can’t refuse.”

Rachael Myrow: We’re going to go to calls now. Let’s talk first to Chris in Oakland.

Chris in Oakland: Yes. I’m all in favor of using eminent domain, but the problem is there’s very little incentive on the part of the investors and the crooks at Goldman Sachs who put all this together because they control the Fed and they’ve gotten the Fed to buy these securitized mortgages at face value. So that sort of rational conversation that your real estate guy was talking about can’t happen because they control the Fed.

Rachael Myrow: You want to respond to that, Jeff Wright?

Jeff Wright: No, because I don’t agree to that. I don’t agree with that, that they control the Fed. I don’t agree with it.

A couple weeks ago, L.A. settled, I believe it was with Deutsche Bank, over this issue, who do you turn to when you want to talk about something other than foreclosing the property? And Deutsche Bank, or rather I guess they would say their lender servicers, had taken control of hundreds of properties in the county and they were just going to seed. Yet when the county would go to the bank and say, “What can we do about these properties?,” the bank would say, “It’s not us. It’s the lender servicer.” People who do not seem to be available or accountable to the government.

Rachael Myrow: You know, I want to throw something at you. You might have seen a couple weeks ago, L.A. settled, I believe it was with Deutsche Bank, over this issue, you know, who do you turn to when you want to talk about something other than foreclosing the property? And Deutsche Bank, or rather I guess they would say their lender servicers, had taken control of hundreds of properties in the county and they were just going to seed. You know, the lawns going bad, or gone brown, you know, there are transients living in the properties causing damage there, people feeling unsafe in those neighborhoods. This is happening on a mass scale, and yet when the county would go to the bank and say, “What can we do about these properties?,” the bank would say, “It’s not us. It’s the lender servicer.” People who do not seem to be available or accountable to the government. Who’s doing the talking? Who’s ensuring that that chat about what needs to happen is taking place?

Jeff Wright: Well I think a lot of that was actually taking place in several communities. Richmond was faced with that problem, Oakland was faced with that problem, just speaking on a local basis, and as I indicated earlier, a lot of the local governments, they have instituted the $1,000 dollar per day fine process, and even many local banks, the BofAs and the Wells Fargos of the world, will tell you that they are doing much better with regard to monitoring the situation, making sure that the properties are, you know, dealt with from that maintenance standpoint. With a thousand dollar a day fine hovering over your head, that’s quite a bit of incentive for somebody to get it done.

Rachael Myrow: Professor Hockett, do you want to jump in there? A thousand-dollar-a-day fine?

Another factor that’s important just to bear in mind here, this is really unfortunate, but the Federal Housing Finance Agency, the FHFA, which appears to be captured by the real estate industry, has often quashed municipal efforts to ensure that these foreclosed properties are indeed abated.

Robert Hockett: Yes, I do. This highlights another problem here. First there’s of course the problem of who’s responsible, who do you approach. There are just so many different parties in interest here and I think it kind of varies from place to place. But another factor that’s important just to bear in mind here, this is really unfortunate, but the Federal Housing Finance Agency, the FHFA, at the federal level of government, has often quashed municipal efforts to ensure that these foreclosed properties are indeed abated, right, that they’re indeed maintained, right. So just last April of 2012, the city of Chicago enacted an ordinance essentially to impose the kinds of fines that your other guest was just mentioning on banks that weren’t maintaining their REO properties, right, the foreclosed properties that they hold onto, and immediately FHFA, which appears to be captured by the real estate industry, threatened the city of Chicago with redlining, saying, “Look, your loans originated in your city are not going to be eligible for purchase by the GSEs if you impose this ordinance," right? So you often have this particular agency of the federal government actually stepping in to prevent cities from protecting themselves even from the worst real estate effects that follow on foreclosure.

Rachael Myrow: Professor, thank you so much for talking with us.

Robert Hockett: Sure.

Rachael Myrow: It’s been a pleasure. We’ve been talking with Robert Hockett, a law professor at Columbia (sic) University. Let’s turn now to another caller. We have Susie in – oh, sorry, Gabriel in San Francisco.

Gabriel in San Francisco: Hi. It just occurs to me there’s so much money that’s going to be spent litigating these things. I don’t know the dollar figure. It sounds like no one knows that dollar figure. But why not take that money and use it directly to help people as opposed to spending it on lawyers and judges and all the other intermediate people? You know, there’s so many homes that could be – they have nuisance liens, as you’ve been talking about. You approach someone in the community and say, “Look, we’re going to help you find a loan to buy this distressed property, and we’re also going to just erase this nuisance lien if you agree to get it fixed up and you’re going to live in it.”

Rachael Myrow: Steven Gluckstern, that seems like your bailiwick there.

I think Jeff gave a very good explanation that there are trustees and servicers who actually can make decisions about these loans. You’ll find ironic, as part of our advice to Richmond, we reached out to the servicers and trustees just to find out where to send the letters in terms of the request for purchase, and the trustees in general told us they had no power to make this decision, that we should send them to the servicers, and the servicers sent us a letter saying they have no power to make this decision; you should send them to the trustees. So the city of Richmond sent them to both, because between them they must have that power.

Steven Gluckstern: Oh, it’s a great idea. It’s a great idea, and the people that filed suit, you should, we could talk to them and ask them why they don’t do that. You know, I want to just make a couple of comments of mine. I really like, actually, Jeff’s comment about sort of gangster tactics, because that’s exactly what the financial services industry basically has done in perpetrating an incredible scheme of predatory lending in places like Richmond and then now in tactics being used to prevent the city from trying to actually make some change here. I don’t think it’s fair to accuse the city of gangster tactics. They’re using a constitutional right given to them both in the California state Constitution and in the U.S. Constitution. But by the way, Gabriel, I think the comment is actually quite interesting, which is we are now going to waste an enormous amount of money that could otherwise be used to help solve this problem, whether by being able to pay more for the mortgages. I think that the notion that you’ve offered is a very good one. It’s a question of how do we implement that. The last thing I just would like to comment on for a moment is, and I think Jeff gave a very good explanation that there are trustees and servicers who actually can make decisions about these loans. You’ll find ironic, as part of our advice to Richmond, we reached out to the servicers and trustees just to find out where to send the letters in terms of the request for purchase, and the trustees in general told us they had no power to make this decision, that we should send them to the servicers, and the servicers send us a letter saying they have no power to make this decision; you should send them to the trustees. So the city of Richmond sent them to both, because between them they must have that power.

Rachael Myrow: Thank you for that question, Gabriel, a great one. Let’s turn now to Susie in Alameda.

Susie in Alameda: Good morning, thanks for taking the call. I have a few different questions, and the first one would be, why would the bank hold onto a property that’s heading to foreclosure, that is already in fact in foreclosure, because if they sell those foreclosed properties through an auction they won’t get 80% of the outstanding loan. I mean, I would doubt that they could. And then the other thing is, the city of Richmond seems to be trying to hold the community together and keep people in their homes, which actually strengthens a community, and if these houses would go through a foreclosure process, statistics show that most of the buyers now are in fact investors that just either flip them for profit or turn them into rental properties, and every day it’s on the news that cash buyers are the ones that are picking up the houses that the young working couples or the first-time homeowners are not getting the loans because they don’t have as much cash on hand.

Rachael Myrow: Well, those are two questions, as you pointed out, Susie. We’ll let Jeff Wright tackle those. Why is it in the interest of the banks or the loan servicers to hang onto foreclosed properties?

Jeff Wright: Well, it’s certainly not in the interest of them to hang onto foreclosed properties, and in most instances when they actually go through the foreclosure process and they then become REOs, real estate owned, on their books, in most instances they want to get that property off the books, for a number of reasons.

Susie in Alameda: Could I ask you one more question – I’m sorry for interrupting, but does that mean then, Jeff, you as a realtor, would you be one of the realtors that has a connection with the bank and then you would be able to sell the REO?

Jeff Wright: I don’t specialize in REO business per se, but just the same I’m in business, so if they want to send me some, I’m not going to necessarily turn it away.

Susie in Alameda: But there are just certain realtors that are connected with the banks and are looking – or they’re connected with the banks to sell the REOs, isn’t that the case?

A lot of the cities have requirements with regard to the upkeep and the maintenance of the property, and oftentimes if you’re a listing agent on that REO or that bank-owned property, they’ll shift that responsibility and that burden to the agent themself, so the agents can wind up spending several thousand dollars out of their pocket with regard to maintenance and issues related to the property. They’ll recover that money but they have to get a reimbursement from the bank.

Jeff Wright: There are several realtors that have REO accounts inasmuch as when the banks foreclose on the properties they will contact certain realtors who specialize in that area, and part of the reason why I don’t get too heavily involved in the REO side of the business is because it can be very demanding. Most of the larger entities, they work through asset managers now, and it’s the asset managers that actually distribute the listings, and they can be very demanding. You know, as I explained earlier, a lot of the cities have requirements with regard to the upkeep and the maintenance of the property, and oftentimes if you’re a listing agent on that REO or that bank-owned property, they’ll shift that responsibility and that burden to the agent themself, so the agents can wind up spending several thousand dollars out of their pocket with regard to maintenance and issues related to the property. They’ll recover that money but they have to get a reimbursement from the bank. So if you’re a large REO broker, you manage several accounts, you can have tens of thousands of dollars out of your pocket regarding the upkeep and the maintenance of listings that you have and that you’re handling on behalf of the bank, and then once the –

Susie in Alameda: But they do get it back from the bank, ultimately the bank pays them back.

Jeff Wright: Yes, they will ultimately get it back, but you have to be –

Susie in Alameda: So do they –

Jeff Wright: – you have to be willing to forward and advance that money.

That goes back to my question of what is in it for the banks to allow a house to go through the foreclosure? Is there a government entity that’s reimbursing the bank the difference of the outstanding loan and the amount of money that the –

Susie in Alameda: That goes back to my question of what is in it for the banks to allow a house to go through the foreclosure? Is there a government entity that’s reimbursing the bank the difference of the outstanding loan and the amount of money that the –

Rachael Myrow: So in other words, the property is losing money. If the mortgage was $400,000, the homeowner can’t pay it, and now it would only be worth $200,000 on the market today, uh – yeah.

Jeff Wright: So your question in essence is basically, if the property, if there’s a $400,000 obligation on the property and it’s only worth $200,000, why go through the foreclosure process to wind up with a $200,000 situation if you can just assume, or keep the situation where it is, reduce the principal and let someone stay in the property for $200,000? Well, I’m sure there’s a number of complications and issues that the banks would be in a better position to answer, but they have a fiduciary responsibility to their noteholders, so on and so forth, and I think oftentimes, I’ll just be frank about it, sometimes rather than making a decision to perhaps reduce the note and deal with the repercussions on the investment side or what have you, it’s easier to just follow the original terms of the agreement. And what most original agreements state, there’s a promissory note that a borrower sign agreeing to make payments at a certain rate, certain interest rate, on certain terms. There’s also provisions within the agreement that in the event that they default, the lender has a right to take certain actions which ordinarily is foreclosure. So because of a vast array of complication, investor relations, so on and so forth, sometimes the banks might find that it’s easier to just go with the contract as was originally signed and agreed to in order to eliminate other types of complications.

Rachael Myrow: Susie, thank you so much for your questions, plural. It’s only fair to the other listeners and folks writing in that we let some of their questions come in, but I do thank you. Those were all awesome questions. Michelle in Richmond writes, “This sounds great. I’m a Richmond resident with a home worth half of what I paid for it. I’m current on my mortgage and would love to refinance but my bank just laughs at me. How do I get in on this?” Steven Gluckstern, how does she get in on it?

Steven Gluckstern: So, the city of Richmond is in the process of adding some information on its website to help identify this program and others that are available. I don’t think it’s quite up yet but I think in the next few days you’ll see that, and I would urge you to call the city.

"What about focusing on renter’s rights? Richmond has no protections for renters."

Rachael Myrow: Dory writes, “I live in Richmond. I’m a renter. Our house we rent was recently sold for $125,000 over its foreclosed price just two years ago. The house next door just had the same quote unquote “flip price.” We are forced to move again, twice in two years, even though we’re under a 12-month lease and pay well over the going rate. What about focusing on renter’s rights? Richmond has no protections for renters.” I don’t believe that’s actually true. Do either of you want to talk to that? There are renter advocates, renter rights laws that are often ignored by folks who own homes.

Jeff Wright: Well, I’m trying to understand and get the gist of the question. I think the last thing I heard you say is she has a 12-month, a one-year lease on the property?

Rachael Myrow: She is a renter. She’s signed a couple of times; a 12-month lease is very typical for a renter. She’s paying the rent and then somebody new owns the home and boom, out you go. And typically it’s against the law to do that unless you pay some kind of a relocation fee. That kind of communication, that check isn’t always cut, but there are laws on the books against that sort of thing.

Jeff Wright: She might want to get some legal counsel on that. If she has a valid lease agreement on that property and as a matter of fact in the course of a transaction, and I’d like believe that the transaction was handled on a professional basis, any realtor that was involved in the transaction and was aware of that lease, and that’s a disclosure that the seller would be obligated to make, that disclosure would have the obligation to make that disclosure to the new property owner. You understand that there’s currently a 12-month valid lease on this property. So some type of arrangement would need to have been made with the person, the renter, in that case, if they wanted to cancel that lease.

Rachael Myrow: But, as you say, a lot of people just want to clear the books, take the simplest action, and there’s plenty of evidence that that’s the kind of thing that happens, even if the old owner or the new owner could be making rent, you know, having some money coming in from that willing renter over the course of the foreclosure process.

Jeff Wright: I don’t know if I grasp that question correctly.

Rachael Myrow: Okay, so in other words –

Jeff Wright: I was under the impression that that property has been sold.

Rachael Myrow: That property had been sold, yeah.

Jeff Wright: And they had a lease on the property.

Rachael Myrow: But we’re running up towards the end, so I just want to ask, really quickly, Steven Gluckstern, where do we go from here? I guess we have to wait to see what the judge says?

Steven Gluckstern: Yes, certainly with respect to that case, we continue to talk to new communities. There are more and more people looking at this.

Rachael Myrow: Thank you so much. That’s Steven Gluckstern, chairman of Mortgage Resolution Partners, and Jeff Wright, independent real estate broker, past president of the West Contra Costa Association of Realtors in Richmond. Earlier we were talking with law professor Robert Hockett of Cornell University. I’m Rachael Myrow. You’re listening to Forum.

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Also, h/t Hugh, commenting on DDay's Your mortgage documents are fake!:

As for mortgages, it’s been my position for several years now that virtually every mortgage written from about 2000 to 2008 is so defective that it would be unenforceable if we had a normal, functioning court system. As Yves has also pointed out for years, all the trusts and securitizations based on these defective mortgages are themselves defective both because of the defects in the underlying mortgages but also because of massive failures to correctly place the mortgages in the trusts. The resulting securitzations cut the link between the mortgages and the promissory notes. Indeed those promissory notes were fractionated in the CDOs, and CDO squared and cubed. So their holders had a monetary claim against the homeowners (which the homeowners could have discharged through bankruptcy) but should not have had any claim against the homes. The banks who held the mortgages should have had no standing to pursue foreclosure because, not holding the promissory note, they had no monetary claim against the homeowner. Unfortunately, we have a corrupt judicial system in the pay of the banks and so an ongoing foreclosure crisis.

(It's that mortgage-note thing... I can lose the pea even when there's only two shells. And then when you put shells inside of shells... Mesmerized.)