Humpty Dumpty sat on the wall.
Humpty Dumpty had a great fall.
All the king’s horses and all the king’s men.
Couldn’t put Humpty Dumpty back together again.

Most Americans, including some lawyers and even judges don’t understand what happened. Yes, it is complex and confusing. But at the end it’s real simple.

In the old days, a bank would lend a homeowner money to buy a house.  The homeowner would sign a promissory note promising to pay the money back to the bank.  The homeowner also signed a mortgage, giving the bank the right to foreclose and take the house back if the homeowner did not pay back the money.

Mortgage Follows the Note

Lawyers and judges grew up with the legal doctrine that the “mortgage follows the Note.” Simply put, if the note was transferred from one bank to another the mortgage would follow the transfer.

But that was then, this is now.

At some point, the folks who brought you this mess  (i.e. overly ambitious bankers on Wall Street) had the “great idea” of slicing and dicing the interest of the Note and literally severing it from the Mortgage. Why this was done was actually for a matter of convenience, expediency, and, arguably, greed. Such motivations for now are secondary to the crisis we are experiencing.

Humpty Dumpty = Mortgage and the Note

But this is clear:  If you think of Humpty Dumpty as the Mortgage and Note, and you break it apart (as what occurred on Wall Street), when the Notes were broken into pieces and the mortgages were assigned to Mortgage Electronic Recording System (MERS), the fact is that it may well be nearly impossible to bring the mortgages and their corresponding Notes all back together again. Plain and simple!

Banks Under Siege

This is why the banks are now under siege. Banks are accused of fraud and perjury in trying to put the Note and mortgage back together. In fact, The New York Times is running Foreclosures Slow as Document Flaws Emerge today as its lead story. The Sun Sentinel quotes Nova law professor, Robert Jarvis (an old Bronx Science classmate of mine) who stated that this problem is now too large for the courts to handle and that the federal government or the banking industry itself will have to step in.

Following Chase’s Lead – Sun Sentinel Cover Story by Harriet Johnson Brackey

I spoke with Harriet about this yesterday and now it is today’s cover story.

Weston attorney Roy Oppenheim says the state Supreme Court’s decision to spend millions to speed up foreclosure cases is ultimately going to slow down the whole process.

“It’s going to backfire on everyone who thought they could ramrod these foreclosures through while denying people due process,” he said.

And it will!

Title Insurance Companies Stop Insuring

Adding insult to injury, some title underwriters are now not willing to insure any real property where GMAC foreclosed. That means if you recently purchased a home just pray you have title insurance because you have a huge claim looming. You will not be able to resell or refinance your property for a long time.

So… while some of us have warned for some time that many of the banks are really not “good” eggs,  Chicken Little has come home to roost.

“All the kings horses and all the kings men will not be able to put Humpty Dumpty back together again.”

Oppenheim continues to help Florida homeowners learn more about developing stories concerning bank fraud and will focus on this subject in his monthly foreclosure defense workshop on Wednesday October 6 at 6pm.