Mortgage Problems

On October 19th of this year, BaseOp2 posted an article about the particular legal question of having a mortgage without a note attached. Here is the latest facing BAC.

From Bloomberg:

Testimony by a Bank of America Corp. employee in a New Jersey personal bankruptcy case may give more ammunition to homeowners and investors in their legal battles over defaulted mortgages.

Linda DeMartini, a team leader in the company’s mortgage- litigation management division, said during a U.S. Bankruptcy Court hearing in Camden last year that it was routine for the lender to keep mortgage promissory notes even after loans were bundled by the thousands into bonds and sold to investors, according to a transcript. Contracts for such securitizations usually require the documents to be transferred to the trustee for mortgage bondholders.

In the case, U.S. Bankruptcy Judge Judith H. Wizmur on Nov. 16 rejected a claim on the home of John T. Kemp, ruling his mortgage company, now owned by Bank of America, had failed to deliver the note to the trustee. That could leave the trustee with no standing to take the property, and raises the question of whether other foreclosures could similarly be blocked.

Economics

General market participants believe the broader indexes will move higher given signs of slow but positive economic activity. Heavy stimulative Fed intervention has rarely failed to deliver gains in equities though the QE2 comes late into this particular bull phase. Bernanke has demonstrated his uneasiness with the current recovery and his promotion of QE2 is more of a pep rally where good intentions are cheers but the outcome is unknown.

What opportunities for growth remain to the nation are weighted by massive real estate equity losses carried by lender and borrower, though the latter has benefit of position and influence. Economic prosperity's only salvation seems to be funneling of all bailouts to large corporate entities where the leverage to squeeze the public is left intact.

International tensions created by North Korea put the markets on notice that few things are simple these days. Those relying on China to save the day are the same fools who believe in the emerging markets sure thing.

The only bulls who are truly happy these days are the gold nuts since every world event, according to them, is a reason to buy. Their investment is where dumb lives these days but we all know dumb moves around like a Carney.

U.S. nearing end of major Wall Street insider-trading probe

Federal prosecutors in New York are in the advanced stages of an extensive insider-trading investigation that could lead to criminal charges against Wall Street traders and executives, federal law enforcement officials said Saturday.

Authorities had been preparing to file charges in the probe within weeks, but that timetable could be accelerated after an article about the investigation appeared in the Wall Street Journal on Saturday......... From Washington Post

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US/China Market

Index markets trying to achieve a successful defense of the recent QE2. Rising dollar and interest rates since the Fed announcement may indicate a trading view QE2 will ultimately work in growing the economy. The question is whether markets got out in front of any good news and now must wander through a period of correction or something worse. The fact US/China relations are seemingly entering the line in the sand phase is part of a struggle which might be with the markets for years. China's entire political stability requires aggressive export policies. The US however must now balance economic and political redesigns as a part of demographic and new regulatory mandates. Any real clouding of potential growth as a result of trade battles would put a major dent in equity markets.

Bear Markets Begin Like This

Given the slapping Bernanke has received and the absolute conviction that QE2 is unnecessary and will deliver unprecedented runs in every speculative market, something is clear, when everyone is convinced the markets are going up, it will never happen. One thing for sure however, stimulus is over forever. Now with stimulus over, markets will swing without a net and will be left on their own, which will be interesting, especially after such huge spec runs as we have witnessed.

When you look at the QE2 event, it is nothing more than the backside of the intervention trade where the Fed knew at some point it would be required to soak up treasury supplies or the front end of intervention would be all for naught. The other implicit notion that the QE2 is an automatic on all specs rising may be a late call. Markets have a great tendency to front run implied future economic policies, thus setting early market responses for rallies or breaks. One could argue the greatest bullish scenario for rally took place from the March of 2009 until spring 2010. That would leave the runs in stock and commodities now in the price areas where all depends on the kindness of others, not on any economic justification.

This Bull Phase Getting Toppy

Getting a bit tired on this run?

Bernanke Looks Desperate

Looking over the vast data landscape which the Fed has access to, Chairman Bernanke clearly sees either a darker Bradburian threat as in something evil this way comes, or possibly, a milder threat to which the US economy, in his view, still cannot handle. What is considered timely analytical economic advice, as it is delivered daily and nightly over the TV and the Web, has for some time lamented about just how and when the economy might recover to old form. Stimulus, QE2, and none of the above have been debated endlessly while staring at the available data. But Bernanke has consistently been nervous, almost haunted by the prospects that relevant media advise types have continually missed the dark spot. After all, how relevant is bad advise.

Now maybe it is a case where the Chairman just does not want his picture appearing in history books under the heading, Just Like Hoover, but either way, he looks uncomfortable. Certainly the Fed's actions have increasingly gone from an image of Volcker like strength to a weaker Greenspan to Bernanke picture of weakness as every accommodation has been made to preserve stable equity market conditions supposedly to guarantee future economic strength. But what material difference will QE2 treasury purchases have on employment, consumption, and investments? Feeding the market's psyche and relying on the the greater fool theory to increase general economic health is putting yourself in the hands of equity players, almost two years off the bottom. Nice idea, bad timing. Something is just not right here and Bernanke appears desperate. Again.

Dow Jones Greenanke Boom Bust Event

Since the game of converting real estate wealth into cash is over, the idea of stimulating prices of various assets so they might be able to be converted to cash is now in play. The announcement by the Fed yesterday of its intention to purchase treasuries along the yield curve to inject further stimulus into the economy is explained as another way to drive down rates but is really aimed at the only play the Fed has left, pumping asset prices. As stated before in posts here at BaseOp2, the Fed is using the Dow Jones Industrial Index as one of their key guides to gauge economic stability. The problem of course is that this particular strategy has its limitations as far as direct economic stimulus and has and will become more of a generator of a speculative play for assets. A sort of Greenanke boom bust event. Let the race begin.


The great thing about real estate and a housing market boom is that it employs so many people and the resulting growth creates a wonderful cycle of lending and transacting. This direct impact on economic growth is without peer, but without it, what possibly can have the same impact. Well, nothing. Certainly not speculating on gold. But the choices are limited to the Fed and now they are forced to stimulate assets such as equities which makeup a dramatically smaller portion of American household wealth.

When one looks back at the great inflation battles of the past, it is interesting to see just how nervous the Fed is about the black hole deflationary possibilities facing the US and world economies. This is an indirect job stimulus plan by the Fed since the recent election has all but ended any future stimulus by the elected ones. But asset plays being stimulated by the Fed also reflect the an odd balancing act by market players since they know that plays such as these are always a kind of musical chair pump and dump opportunity game where timing is everything.

There is an old saying on the trading floor. You get one good look at a bad trade. Meaning, the market gives you one chance to get out of a bad trade. The Fed may be giving asset players that chance.

Election Will Change Nothing

Election, Fed, and unemployment numbers on Friday will draw attention from all participants as to where the markets will land on Friday's close, especially as an indicator to market direction for balance of the year. While there may be some folks believing Tuesday's results will have some structural market significance, they will be disappointed and the market knows better. This bull phase is part of a uniquely bizarre economic re balancing process stemming from the great financial crisis. One thing for certain, the payments in bailouts, interventions, and other more exotic methodologies needed to pump the system will end up being paid for by leveraging against the financial interests of the middle. Despite claims by political factions to the contrary, this election will resolve nothing that has not already been decided because the biggest part of the economic pie will be left with bad real estate, no return on savings rate, and with an unfair save top and let the bottom rot re financing which cannot wait.