This week’s must read missive is about the chain of title on mortgages, and how big the fraudclosure problems are for the big banks embroiled in the mess. The situation isn’t pretty, and the implications could be dramatic.
David Kotok put together an easily readable explanation of the problem. The short version — when a bank doesn’t maintain the chain of title on a mortgage, that legal document is no longer valid. The consequence is that the borrower is no longer required to make payments on the mortgage.
Barry Ritholtz (who is a lawyer) introduced the above linked article with some caution. A single legal point (the mortgage not is no longer valid) will not necessarily result in a windfall for the home buyer.
The Kotok message also made its way into John Mauldin’s weekly email, where he adds his take on it too.