Zero Hedge 
Oct 5, 2010
The Massive Mortgage Mess as we affectionately call it seems to be getting new names with each passing day – the latest one is, quite appropriately, RoboSigning Scandal (funny how after the stock market, “robotic” technology will soon becoming equated with the biggest mortgage scam in history). During today’s Kudlow segment, CNBC’s Diana Ollick who is by and far the company’s best (and only) investigative reporter, confirms various so far unfounded rumors, that the government is planning to institute a 90 day foreclosure moratorium as it deals with the realization of just how big and pervasive the mortgage problem is, and even worse, will soon be. It is so bad that even a typically ebullient Larry Kudlow is forced to note that this is the “housing equivalent of the credit financial meltdown” and that “this is going to go on for ever.” The biggest issue that is now developing, as we noted last week, is the fact that title insurers (firms such as Fidelity National, First American, Stewart Info and Old Republic) are refusing to insure mortgages in foreclosure or otherwise, uncertain as to who actually owns the title. And for all those who believe this will merely keep prices artificially high, we have very bad news – the problem with the title insurers walking away on fears of lawsuits is that no lender will be willing to write a mortgage without title insurance, meaning that suddenly the up-front component of home purchases will either necessarily have to surge, or home prices will have to plunge by a like amount, as there is simply not enough equity (read money) to cover the resulting debt deficiency. Alas, this mess is just starting, and as people realize how bad it is, it very well may lead to a total collapse in the housing market.
For all those hoping on a quick resolution so that Americans can go back to watching Dancing with the Stars, you may wish to reconsider. Quote Kudlow: “We’re not talking just a few weeks, or a few months. This sounds like a long, drawn-out, bureaucratic, robotic process with lawyers, and oh my gosh.” Another implication: a veritable bonanza for both lawyers and defaulters, the former of whom will end up making billions in legal fees (collected from the same banks which are still sucking off the ridiculously low TLGP-funded, and thus taxpayer sponsored fees), while the latter will be able to live mortgage free for years, while continuing to buy useless trinkets instead of paying what is contractually their duty.
Another important topic discussed is the fact that due to decades of faulty securitizations, suddenly no bank knows who owns what. Courtesy of several trillion in now title-undefined mortgages, which in turn form the basis for thousands of CDOs, which in turn are split up into millions of tranches, and includes the complicity of Fannie, Freddie and private label, it is the banks and their clients that have shot themselves in the foot: as other have noted, very soon, the entire MBS process can and very may grind to a halt (if that happens, goodbye Pimco).
As mentioned earlier, Ollick confirms that according to rumors, the government is going to impose “some kind of 90 day foreclosure moratorium on the banks which would melt down the housing market.” In fact Congressman Merkley already indicated he is for a foreclosure moratorium.
At the end of the day: the one true loser, is the law-abiding, conscientious, tax and mortgage paying middle class American, who is now preparing for TARP 2 as the banks will all almost definitely need to run to the bailout through because of this catastrophe.
Must watch 10 minute explanation for anyone who is still confused by any aspect in this massive story.