In short, the mortgage processors and servicers did not keep a proper chain of custody and MBS Pool 'C' which believes they own the mortgage does not have the paperwork proving they purchased it from Loan Company 'A' which sold it to 'B', who packaged it up into MBS (Mortgage backed security) 'C', and Bank 'D' now owns said MBS.
Some people along that chain over ownership have been caught forging paperwork. It's a long and nasty tale that will remain stuck in the courts for a while.
If you know of someone who is going through foreclosure and they want to keep the house this is something to keep in mind. Talk to a lawyer about ensuring the bank has all the proper paperwork.
From the WSJ, October 4
First, the affidavits IndyMac used to file the foreclosure were signed by a so-called robo-signer named Erica A. Johnson-Seck, who routinely signed 6,000 documents a week related to foreclosures and bankruptcy. That volume, the court decided, meant Ms. Johnson-Seck couldn't possibly have thoroughly reviewed the facts of Mr. Machado's case, as required by law.From Bloomberg, October 4
Secondly, IndyMac (now called OneWest Bank) no longer owned the loan—a group of investors in a securitized trust managed by Deutsche Bank did. Determining that IndyMac didn't really have standing to foreclose, a judge threw out the case and ordered IndyMac to pay Mr. Machado's $30,000 legal bill.
Citigroup Inc. and Ally Financial Inc. units were sued by homeowners in Kentucky for allegedly conspiring with Mortgage Electronic Registration Systems Inc. to falsely foreclose on loans. The homeowners claim the defendants filed or caused to be filed mortgages with forged signatures, filed foreclosure actions months before they acquired any legal interest in the properties and falsely claimed to own notes executed with mortgages.Video from NBC Nightly News, October 1
Nakedcapitalism has posted several entries regarding this topic. Here's just one entry:
Lender Processing Services, a crucial player in the residential mortgage servicing arena, has been hit with two suits seeking national class action status (see here and here for the court filings). If the plaintiffs prevail, the disgorgement of fees by LPS could easily run into the billions of dollars (we have received a more precise estimate from plaintiffs’ counsel). To give a sense of proportion, LPS’s 2009 revenues were $2.4 billion and its net income that year was $276 million.Here's one MSNBC Video on the mess:
I don't do this nasty tale of cutting corners and deception any justice with this overview. Read all the links above for a fuller story.