Another kick in the pants for CDOs — mortgage note-holders told ‘no’ on foreclosures

Mortgage investors may not have a legal right to foreclose on property.

Judge Christopher A. Boyko of Federal District Court in Cleveland dismissed 14 foreclosure cases brought on behalf of mortgage investors, ruling that they had failed to prove that they owned the properties they were trying to seize.

You think CDOs are crap now? If lending institutions assume this ruling will be upheld on appeal, they’re going to go right in the toilet.

Writer Gretchen Morgenson notes this has been a common practice for years, letting holders of mortgage security notes foreclose, but it had never been legally challenged.

The increased slicing-and-dicing of CDOs was making mortgage securities-based foreclosures more difficult anyway.

Here’s how the judge’s decision came down:

On Oct. 10, Judge Boyko, 53, ordered the lenders’ representative to file copies of loan assignments showing that the lender was indeed the owner of the note and mortgage on each property when the foreclosure was filed. But lawyers for Deutsche Bank supplied documents showing only an intent to convey the rights in the mortgages rather than proof of ownership as of the foreclosure date.

Saying that Deutsche Bank’s arguments of legal standing fell woefully short, the judge wrote: “The institutions seem to adopt the attitude that since they have been doing this for so long, unchallenged, this practice equates with legal compliance. Finally put to the test, their weak legal arguments compel the court to stop them at the gate.”

A spokesman for Deutsche Bank declined to comment on the ruling. But the inability of Deutsche Bank, as trustee for the pools, to produce proof of ownership at the time of the foreclosures will fuel borrowers’ concerns that they are being forced out of their homes by entities that may not even hold the underlying loans.

Here’s how the mortgage security process starts, without including the part of different slices, or tranches, being mixed together into CDOs, which would make the picture below even more complicated:

The process of putting together a mortgage pool begins when a home loan is originated by a bank or mortgage lender. That loan is typically sold to a Wall Street firm that pools it with thousands of others. Once a pool is packaged, it is sold to investors in different slices, based on risk. A trustee bank oversees the pool’s operations, ensuring that payments made by borrowers go to the appropriate investors.

Lawyers who represent troubled borrowers complain that trustees overseeing home loan pools often do not produce proof, usually in the form of a mortgage note, that their investors own a foreclosed property. And a recent study of 1,733 foreclosures by Katherine M. Porter, an associate professor of law at the University of Iowa, found that 40 percent of the creditors foreclosing on borrowers did not show proof of ownership.

About 40 percent? Do you hear the wheels of the foreclosure machine grinding to a halt?

And here’s why the situation exists:

When a loan goes into a securitization, the mortgage note is not sent to the trust. Instead it shows up as a data transfer with the physical note being kept at a separate document repository company. Such practices keep the process fast and cheap.

In other words, another corner gets cut. And when securities holders bitched, Boyko told them where to get off:

e plaintiff’s argument that “‘Judge, you just don’t understand how things work,’” the judge wrote, “reveals a condescending mindset and quasi-monopolistic system where financial institutions have traditionally controlled, and still control, the foreclosure process.”

The article goes on to say that the cases can be refiled in state court, whether or not a federal appeal is being pursued. But, I’m betting attornies for debtors block that, depending on where either the putative note-holders, or the actual note-holder is, on interstate commerce grounds.

I’m surprised that word of this ruling hasn’t spread more, and thus become even more of a downer on mortgage brokerages and other financial institutions.

Depleted uranium IS a health hazard — is its military use a war crime?

An upstate New York town that was the location of an old uranium plant demonstrates just how hazardous it is.

The US federal government and the firm that ran the factory, National Lead (NL) Industries, have been assuring former workers and residents around the 18-acre site for decades that, although it is true that the plant used to produce unacceptable levels of radioactive pollution, it was not a serious health hazard.

Now, in a development with potentially devastating implications not only for Colonie but also for the future use of some of the West's most powerful weapon systems, that claim is being challenged. In a paper to be published in the next issue of the scientific journal Science of the Total Environment, a team led by Professor Randall Parrish of Leicester University reports the results of a three-year study of Colonie, funded by Britain's Ministry of Defence.

Parrish's team has found that DU contamination, which remains radioactive for millions of years, is in effect impossible to eradicate, not only from the environment but also from the bodies of humans. Twenty-three years after production ceased they tested the urine of five former workers. All are still contaminated with DU. So were 20 per cent of people tested who had spent at least 10 years living near the factory when it was still working.

Of course, the U.S. and U.K. defense establishments have denied repeatedly that DU-enhanced tank shells and other ordinance fired during the Gulf War was the cause of soaring Iraqi cancer rates, or Gulf War Syndrome among their own troops.

When DU “penetrators” — armour-piercing shells that form the standard armament of some of Britain's and America's most commonly deployed military aircraft and vehicles — strike their targets, 10 per cent or more of the heavy DU metal burns at high temperatures, producing oxide particles very similar to those at Colonie.

TV footage shot in Baghdad in 2003 shows children playing in the remains of tanks coated with thick, black DU oxide, while there have long been claims that the DU shells that destroyed Saddam Hussein's tanks in the 1991 Gulf war were responsible for high rates of cancer in places such as Basra.

Parrish's team includes David Carpenter, an environmental health expert from Albany University. “DU burns, it releases particulates that can be breathed in, and it doesn't go away,” he says. “The issue does not concern military personnel as much as civilian populations in theatres where they are used. Now we know that we can still find measurable levels of DU among the people of Colonie, we need a much bigger study to establish whether they have suffered disproportionate ill-effects such as cancers as a consequence. If they have, it would raise a serious ethical challenge to the use of these weapons. Arguably it could constitute a war crime.”

Nice lie by the governments. Would they like to try again? Or just add one more war crime to the list of W and his British lapdog?

Depleted uranium (DU) is the residue left in massive quantities when bomb-grade uranium is refined to make reactor fuel and nuclear weapons.

The densest naturally occurring metal, it is used to make armour-penetrating shells, standard armament for some of the West’s most widely deployed military aircraft and vehicles, such as Bradley armoured cars, Abrams tanks, and Jaguar A10 fighter planes.

Less intensely radioactive than bomb-grade uranium, DU emits alpha particles, known to cause cancers.

DU weapons that strike their targets produce clouds of tiny uranium oxide particles, which lodge in the lungs and other soft tissues such as the brain and bone marrow.

DU shells were widely used in the 1991 Gulf war; in Bosnia and Kosovo; and are being used now in Iraq and Afghanistan.

Assuming we can get an international convention to ban DU, this then affects the nuclear power industry. Without being able to dump off DU remains from U-235 production onto the military, that’s more toxic waste the nuclear industry has to get rid of.

Latest sign of pending recession?

Three top auto-industry investors, including Kirk Kerkorian, are predicting a 15-year low in U.S. auto sales next year. The most optimistic of the three said sales might “only” slump to 1998 levels rather than 1993.

If oil stays anywhere above $80/bbl, let alone $90, I’m guessing almost all the bleeding would come from the trio of companies once known as the “Big Three,” rather than Japanese companies.

Iraq and even Iran aren’t enough? Well, let’s invade Pakistan!

Michael O’Hanlon continues to prove that he and Brookings aren’t anything close to liberal, as O’Hanlon teams with Fred Kagan to call for military action to “stabilize” Pakistan. Among the options they support is, though they say it much more politely, U.S. troops moving in to back up a military coup. I would guess they’re scrolling through the ranks of Pakistani generals as we speak to find the Punjabi Augusto Pinochet.

Just when you think neocons and their “fellow travelers” (yes, that’s you, O’Hanlon; can’t Brookings can his ass?) can’t get any more nutbar, they pull some new surprise rabbit out of their collective asses.

And Trinity toll road backers are trusting the Corps of Engineers WHY?

Turns out the Army Corps of Engineers’ post-Katrina upgrades to New Orleans levees only provide about 6 inches of additional flood relief rather than the 5.5 feet initially claimed. The ACE buried the 6-inch figure in an appendix in its voluminous report on levee upgrades. That led to this assessment by an outside engineering expert:

Ivor van Heerden, a hurricane and levee expert with Louisiana State University, said the mistakes are the latest example of sloppiness and a lack of scientific peer review in Corps’ work

“It’s peoples lives we’re playing with and all we’re getting is fuzzy science,” van Heerden said.

Isn’t fuzzy science how a four-lane parkway expanded to a four- six-lane toll road in the first place?

John McCain, master of irony on Armageddon

McCain says, in talking about Twelver Shi’ites, that he doesn’t get their beliefs:

“I don’t claim to be an expert on the Muslim religion ... but everyone I know that is an expert on the Muslim faith says the president of Iran’s theory is one that is not shared by the overwhelming majority of people of that faith, that there has to be an Armageddon and the 12th or 13th — I thought it was the 13th — Imam comes to power," McCain said. "I'd find that very disturbing if that view was shared by a lot people.”

Yet, he has no problem cozying up to Christian fundamentalists who believe that a pure red heifer has to be born, and sacrificed in Israel, so that a new Jewish temple of Soloman can be built, so that Jesus can return, not caring whether or not that the necessary destruction of the Dome of the Rock would bring about the equivalent of Armageddon, no metaphysical deities needed.

But, that first statement wasn’t enough. We also have this:

“It is dangerous to have a leader of a nation who believes and desires and promotes Armageddon to advance a particular religious outcome.”

Our current “crusader” president notwithstanding?

That’s our Schmuck Talk Express™ — the master of unwitting irony!

And, I don’t know what “experts” in Islam McCain is talking to, but Twelver Shi’ites are 80 percent of all Shi’ites, and not just Iranian President Ahmadinejad. The percentage of Twelvers among total Shi’ites is higher in Iran, in fact. And, while they all believe the now-hidden Twelfth Imam, the Mahdi, will eventually be revealed to restore the world to justice, this doesn’t necessarily involve “Armageddon.”

And, what if it does? McCain’s would-be fundie buddies all expect a literal Armageddon, no, they lust for it.

Hell, the Schmuck Talk Express™ has enough to worry about with Christian Armageddon theology from his church-hopping.

So, Big John, how about a nice, steaming cup of STAFGU — Shut the ArmaFuckingGeddon Up?