I've been tracking this charlie-foxtrot for at least two years. It is every bit as bad as 60 Minutes says, and actually worse.

Long story short, here's what will likely happen: The American taxpayer and property owner will be screwed by the large banks with the assistance of the United States Congress. Why?

Because most people don't know how any of this works. The level of detail, legal issue and mathematics involved makes their eyes roll back in their heads and they start twitching. Go ahead, ask people what a REMIC is, and then ask about the tax law governing a REMIC's formation. Ask people why the securitization via a REMIC is what made this a double-deep hole in the ground. Do people understand PSA's? (Pooling and servicing agreements) when they send in their mortgage check every month? Probably not. Do people understand that if enough people stop paying their mortgages, that the PSA's allow for a put-back onto the originating bank? No.

To not put too fine a point on it, Mr. and Mrs. Public are simply too stupid to understand what is going on here. This is a labyrinth of bank sleight-of-hand, Internal Revenue Code, securitization and state-by-state real estate law that simply exceeds most people's ability to understand it. It certainly exceeded the mental capacity of those who created MERS, which is why the bankers are now being hoist upon their own petards.

If it exceeds the capacity of the typical man on the street who isn't a felonious SOB, then it certainly exceeds the capacity of Congress to understand it, even if they were predisposed to the The Right Thing. Sadly, Congress is not, and where real estate & banking are concerned, they're so corrupt you dare not leave a Congressman in a room alone with either your wife or your dog. This will mean that the bankers will get what they want for a relatively small investment in the form of campaign donations - mere millions of dollars when hundreds of billions are at stake.

Congress will do nothing because they'll hear nothing from the US public. Why? Because among the politically motivated, people break down into three camps on this issue:

1. "I was victimized by a bank... oh, and I should get a house for free. Sure, I haven't paid my mortgage in two years, but I was a victim I tell you, a victim of the Big Bad Bankers."

Lots of loopy-left Democrats fall into this bucket, especially those who buy or peddle the line that minorities are too stupid to understand a legal contract put in front of them.

2. "I don't want to see any damn deadbeats getting any free house. Foreclose on their ass!  Who cares if the paperwork is faulty?! Rule of law, my ass! The only thing I care about is that those damn deadbeats do not get a free house!"

Lots of Republicans or conservatives fall into this bucket.

3. "What? Huh? Shut up with this nonsense. Tell me what's on American Idol tonight!" 


How does this end up? With another bailout for the bankers, most likely via Fannie/Freddie. Fannie and Freddie will be told to buy up compromised paper that has imperfect collateral, and they'll see it blow up, and they'll put it back onto the bankers for political show at, oh, $0.10/dollar, whereas a put-back from a private-sector bank would demand a putback at face. 

Now, here's what I'll say to those who would invest in foreclosed properties: Do your own title search. If you need one, hire a real estate law firm. Do NOT rely upon title insurance to protect you. If the title isn't quiet when you're buying the place, then you're looking at investing a bunch of money to quiet the title so you really have control over the property.