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Congressional Oversight Committee Report Confirms what we have been saying about the Mortgage Crisis

The Congressional Oversight Committee has released a report today on the mortgage crisis and the systemic risk posed by foreclosure fraud.

And it’s a doozy.

it is possible that “robo-signing” may have concealed deeper problems in the mortgage market that could potentially threaten financial stability and undermine foreclosure prevention efforts.


The risk stems from the possibility that the rapid growth of mortgage securitization in recent years may have outpaced the ability of the legal and financial system to track mortgage loan ownership. In essence, banks may be unable to prove that they own the mortgage loans they claim to own.

In an introduction to that report
by Sen.Ted Kaufman , who replaced Liz Warren as Chairman of the Committee, he outlines what we here at the Lake have been talking about for over a year,, that the failure of the banks to properly document mortgage transactions has created a situation where it is hard, if not impossible to tell who owns what.

I ask you, if the banks created this problem by their own failure to to timely record and maintain proper records, who should bear the loss from that failure? The homeowners?, the local communities? or the MOTU who made this mess? . . .

This is not the fault of homeowners. Homeowners had no role in keeping bank records. The deadbeat debtors argument won’t get the banksters out of this one. This is a problem solely of the banksters making.

You can read the entire report here.

I suspect I will have a lot more to say once I’ve had a chance to really dive into this report, but for now I leave you with this:

If document irregularities prove to be pervasive and, more importantly, throw into question ownership of not only foreclosed properties but also pooled mortgages, the result could be significant harm to financial stability — the very stability TARP was designed to protect.

In the worst case scenario, a clear chain of title — an essential element of a functioning housing market — may be difficult to establish for mortgage loans that were pooled and securitized. Rating agencies are already cautious in their outlook for the banking sector, and further blows could have a significant effect. The implications could also be dire taxpayer recovery of their TARP investments.

Treasury still has $66.8 billion invested in the banking sector generally, and as the Panel discussed in its July report, “Small Banks in the Capital Purchase Program,” the prospects for repayment from smaller banks are still uncertain and dependent, in great part, on a sector healthy enough to attract private investment.

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Cynthia Kouril

Cynthia Kouril

Cynthia Kouril is a former Special Assistant United States Attorney in the Southern District of New York under several different U.S. Attorneys, former counsel to the Inspector General for the N.Y.C. Department of Environmental Protection where she investigated threats to the New York City water supply and other environmental crimes, as well as public corruption and fraud against the government, former Examining Attorney at the N.Y.C. Department of Investigation and former Capital Construction Counsel at New York City Parks and Recreation.
She is now in private practice with a colleague whom she met while at the USA Attorney's Office. Ms. Kouril is a member of the Steering Committee, National Committeewoman and Regional Coordinator for the New York Democratic Lawyers Council, a member of the Program Committee of the Federal Bar Council and a member of the Election Law Committee at the Association of the Bar of the City of New York. She is active in several other Bar Associations.
Most important of all, she is a soccer mom.