"It's a problem because so many hands touch a mortgage during the process," said Steven L. Antonakes, Massachusetts' commissioner of banks. "The level of responsibility and the ability to effect positive change can vary from relationship to relationship" among the different players.
Fpr example, more than 20 percent of foreclosure actions in Massachusetts in the last year have been initiated on behalf of a unit of Deutsche Bank Group, the German financial services giant, according to ForeclosuresMass.com, which tracks cases. Deutsche, while listed on the deed as the mortgage holder and technically the legal owner, is a trustee for investors such as hedge funds and other financial firms that hold the securities that are backed by these mortgages.
A spokesman said Deutsche Bank has no economic interest in the mortgages and is not responsible for foreclosures or for selling foreclosed property. Such decisions are made by servicing companies, according to contracts with different investor trusts, the spokesman said.
Moreover, mortgage-backed bonds are usually sold with legally binding commitments that create more obstacles for delinquent borrowers. For example, reductions in loan amounts are often needed to keep people from losing homes, but mortgage-backed bonds are usually sold with prohibitions against forgiving loan principal, except in rare cases, said McCoy, the UConn professor.
"Anyone seeking a loan workout is going to have to face these impediments," McCoy said."
These are not subprime mortgages. Now people will finally pay attention. In the subprime world these financial institutions took advantage of "inexperienced poor people," who probably should not have received a mortgage in the first place.
Now you have middle class folks finding themselves in the same situation. These financial institutions have turned brokered mortgages into junk bonds.
Last week the "market" dropped. What wasn't reported is the "market" is the market is still over 13,000. The respectable financial institutions will survive in some incarnation. The bankrupt homeowners may not get that same opportunity.