Janet Tavakoli, founder and president of Tavakoli Structured Finance, a Chicago-based consulting firm, said that for much of the past decade, when banks were creating mortgage-backed securities as fast as possible, there was little time to check all the documents and make sure the paperwork was in order.
But now, when judges, lawyers... are demanding proper paperwork before foreclosures can proceed, the banks' paperwork problems have been laid bare, she said.She adds in her email:
The result: "Banks are vulnerable to lawsuits from investors in the [securitization] trusts," Tavakoli said.
Referring to the federal government's $700 billion Troubled Assets Relief Program for banks, she added, "This problem could cost the banks significantly more money, which could mean TARP II."
The SEC is a failed regulator. This step is not optional when securities are created and underwritten, and underwriters should be held accountable. This was far from the only problem with the securitization process. It was a massive, widespread, interconnected Ponzi scheme with various types of concurrent fraud. So far our regulators, court system, and Congress have failed in their duties.