Michael Collins

I wrote the story below in response to an outrageous trick Congress just tried to play on the public. As many of you know, the Senate passed 0/congress/bills/111/hr3808/text">HR 3808 The Interstate Recognition of Notarizations Act of 2010 unanimously on September 27. The bill was a carefully crafted, stealth "silver bullet" for the big banks to deal with their increasing legal problems with foreclosures. President Obama exercised a "pocket veto," which means he let it die after Congress adjourned. (Image)

While my story focused on the process and contempt shown to citizens by Congress in that process, I became aware of a much broader issue. We may well be on the verge of a real estate value meltdown as a result of very bad behavior, illegal in many cases, by the big banks combined with the legitimate push back of mortgage holders.

If banks can't foreclose and people can do a strategic default and walk away (0r live free in their residence), what will happen to real estate values?

The larger question emerged in reviewing bank bad behavior.

If there are fundamental flaws in many, maybe most mortgage, flaws of a serious legal nature, what if a strategic default movement spreads beyond just those facing foreclosure? That's where Armageddon comes in

The foreclosure fraud bombshell has hit the fan. Updating an earlier post, Bank of America has now halted foreclosures in 23 states:

Bank of America is joining JPMorgan Chase and GMAC is suspending foreclosure processes in 23 states that weren't reviewed properly.

A BoA exec admitted she signed up to 8,000 documents in a month and typically did not read them.

Connecticut has halted all foreclosures:

Connecticut Attorney General Richard Blumenthal on Friday ordered a moratorium on all foreclosures by all banks for 60 days--the most radical action taken by a state on issue of document irregularities.

California also expanded the moratorium on foreclosures it announced last week on Ally Financial foreclosures to include those by J.P. Morgan Chase.

Calling the companies' review of key foreclosure documents "a ruse," California Attorney General Jerry Brown (D) ordered J.P. Morgan to prove it is following the law before it continues foreclosures in the state.

Both J.P. Morgan Chase and Ally have frozen foreclosures in 23 states because some employees had signed off on foreclosure paperwork without properly reviewing the files.

Colorado and Illinois have stopped foreclosures by Ally and at least seven other states have launched probes into the issue. But Connecticut is the first to institute an industry-wide ban.

Things are going from bad to worse at the mortgage giant Fannie Mae. They posted an $18.9 Billion loss in Q3, forcing them to borrow another $15 Billion fro the taxpayer. That raises the bailout total to $60.9 Billion, and counting.