Foreclosure Freeze Dilemma

The people of the United States are pointing fingers at the banks for collusion and false foreclosures, but what is actually going on? First, the majority of the current foreclosures are not from the subprime mortgages; the subprime mortgages failed early on in the recession, and made their way through the system.  The current foreclosures are mostly from the fixed rate mortgages with principal reduction. 

The banks have halted the foreclosures because during the securitization and trading, they have lost track of who owns the rights to these mortgages.  And, according to the Washington Post, this is the primary issue in the current foreclosure freeze.  Every state has their own laws on trading mortgages, but the banks created the MERS system to bypass this issue. 

The financial intermediaries have created another complicated process that is leading the economy into more turmoil.  The issues with notaries and collusion are short term issues, but the lost paperwork and MERS system will cause the banks to be criticized by their primary investors, who provided funds for the securitized mortgages, but no longer own the rights to them.