It turns out that because of the mortgages being sold and sliced and sold, the ownership of the original mortgage is often in doubt. It took Mamie Ruth Palmer in Atlanta, Georgia to bust this one open, in a court case that has just ended a six year saga.
Her bank tried to foreclose on her, but couldn’t prove that they actually owned the mortgage. The bank ended up in the humiliating situation of losing on pretty much all fronts:
Last month she received a settlement from the Bank of New York, the trustee for a vast pool of mortgages that included hers. Under the terms of the deal, the bank reduced Ms. Palmer’s loan balance to $59,000 from about $100,000 and has agreed to accept the proceeds of a reverse mortgage in full satisfaction of her obligation.
The practice of reselling mortgages is perhaps the most insidious part of this debt crisis, because, when the dominoes started to fall, no one knew where they would end up because of the byzantine resale of debt. But few anticipated that injury would be added to insult for the lenders when the ownership of the debt came into question.