Unsealed court-settlement documents reveal banks stole $trillions' worth of houses

[Whiskeytide]

18. That's true...

... but if I'm not mistaken, the issue you're talking about is who owns the mortgage rights after defective transfers occurred, not who owns the actual house. If a homeowner buys a home and pays for it per the terms of his mortgage, he owns it. Sure, there are a lot of instances where this gets screwed up, and innocent homeowners get caught in the grinder, but I don't think that is the issue here.

You get a mortgage from XYZ Mortgage Co. They then sell the mortgage to someone else for its investment value. Such mortgages were bundled and re-sold countless times, sort of in a pyramid scheme. It was these resales where the banks dropped the ball and cut corners. When a default occurred, and foreclosure proceedings began, they suddenly realized they didn't know who had the right to foreclose. That's when they started just going forward anyway, taking a risk that they'd get away with it. They got caught, and paid a fine.

But again, the real problem was how they got there. If you - or your retirement fund - invested in a CDO with an expected rate of return of 7%, and then 8% of the mortgages in that CDO defaulted, you're underwater. If 22% failed, you're wiped out. The crazy mortgage schemes, like no money down, variable rates, etc... virtually guaranteed default rates at a much higher clip than home mortgages had seen historically. They sold these things touting them as super safe because historically people don't default on their home loans. But people did. A lot. And that was because of the types of mortgages they let people get.

But its ok. We bailed them out. No one's going to lose their yacht or their second home in the Hamptons.