Turn On The Lights, Watch The Roaches Scatter, Part 46

Just as the banks are under legal assault on multiple fronts in Foreclosuregate, they are fighting back on these multiple fronts as well.  The latest airstrike on behalf of the banks is coming from Helicopter Ben as the Fed wants to change the Truth in Lending Act to require homeowners stuck in a predatory home loan to have to pay off the entire balance of the loan before they can get out of it, rather than being able to refinance what's left to pay on more favorable terms.  The "rescission clause" which allows homeowners to challenge predatory loans is under attack.

Critics say the proposed change by the Fed would render the rescission clause useless. The Fed proposal would require homeowners who seek a loan rescission through the courts, to pay off the entire loan balance before the lender cancels the lien.

"This, of course, would be almost impossible for most consumers to do because they can't come up with the money until they get out of the loan. And they can't get out of the loan until the lien is released," said Barry Zigas, director of housing and credit policy at the Consumer Federation of America. "None of us are quite sure what purpose is being served by this proposal or what prompted it."

The answer to that is simple, actually.  Given the sheer number of foreclosures out there of questionable legal status (perhaps millions), this move is directly designed to make it impossible to get out of a squirrely mortgage loan and to make it much easier to foreclose.  Banks after all are going to need all the provable assets they can get here as the MERS lawsuits pile up.  Making it much easier to foreclose on a bogus or predatory loan strongly favors the banks, and the Fed is choosing to do this now because they know exactly how ugly Foreclosuregate is going to be for the banks.

If in the end all the foreclosures go through and there's no way to redress or challenge the bank's mortgage rights, the banks win.  This is being set up now to give the banks that win later as the legal proceedings grind on in the meantime.  The plan clearly indicates the Fed believes that some sort of congressional or executive action will absolve MERS and the banks of all liability by retroactively making their fake paperwork into legal magic.  This Fed action would be the other half of the process, allowing the banks a speedy mechanism to then foreclose on those homes without being able to be slowed down by homeowners (correctly) claiming the loans were predatory.

This one's crafty as all hell.  Keep an eye on this.