Did you make payments on your mortgage? Can you prove it? Can you prove you made the payments to the right entity? Who is the right entity? Does anyone know? Mortgage servicers don’t have great incentives to get distressed homeowner’s records correct
The foreclosure scandal, at first sight, does not seem like much of a scandal. A bunch of people borrowed large amounts of money against houses, usually with false or nonexistent documentation of their income and assets and grossly inflated valuations of the houses. Then they did not make their payments. Then some random person attempts to foreclose on them, and they complain that the guy trying to foreclose lacks standing to foreclose. What is so bad?
Somehow, one does not feel any great sensation of outrage and pity, but yes, there is a scandal here and it is really bad. Also very, very complicated.
The dud loans were made into dud mortgage backed securities, which were divided into tranches, some of the tranches being more senior, that is to say less dud, than the others. So when it all has to be unwound, it is a total mess and complete chaos. To make things worse, the various entities that arranged the loans were fly by night scamsters who cannot be found. Even worse, the senior tranches all wound up being sold to the government: Freddy Mac, Fannie May, the Federal Reserve, and the FHA.
Why does the feds holding senior tranches make things worse? Because the holder of the senior tranche should be defending his own interests, should be making sure that foreclosures benefit himself, should be organizing the foreclosures to be most lucrative to himself, but the federal government could not run a pie stand. The labyrinthine and rigid federal bureaucracy is at the top composed largely of people who graduated in political correctness from the most eminent universities. Which means that these assets (the rights to foreclose on various houses) are ill defended, therefore apt to be stolen at worst, and incompetently exercised at best.
So it looks as if houses are often being foreclosed to the benefit of those who merely hold the junior tranches and thus have no right to benefit by the foreclosure, or perhaps do not hold anything at all – it is difficult to tell, perhaps impossible to tell.
It is also unclear how much money the people being foreclosed upon actually owe – again, it is difficult to tell, perhaps impossible to tell. When the scammers sold mortgages on to the next guy in line, they tended to pad up the mortgage, tended to exaggerate the amount of money owing.
But the big scandal is a fraud upon the taxpayer: Goldman and Sach, and other well connected and too big to fail securitizing entities guaranteed that 9999 out of 10000 mortgage notes would be valid. It looks like few or none of them are valid. Thus the people that securitized these the mortgages are liable for the full value. Unfortunately, since the senior tranches were all purchased by the taxpayer, this claim against Goldman and Sach is unlikely to be exercised. It may well be exercised by the holders of junior tranches, which will produce further chaos.