The Big Fail

Wonderful post by Adam Levitin at Credit Slips about the technical requirements of securitization and how the industry often failed in that process. At the end of the post he comments on how this effects homeowners.

Chain of title doesn’t affect whether homeowners are in default on their loans.  The loans’ validity is not in question because of chain of title. But chain of title does affect who has the right to foreclose. At the very least, if there is a chain of title problem, it means lots of foreclosures cannot properly proceed because of lack of standing. On the other hand, if the loans weren’t actually securitized, they are on banks’ books, which might, just might, facilitate workouts. More generally, if there is a widespread securitization fail, it means that there will have to be a legislative solution to the problem, which might facilitate real loan modifications.