Last week, amidst all the Middle East and Japan/China turmoil, the Fed quietly launched the anticipated sequel to QE2. So if continued/unlimited QE to the tune of $40 billion/month isn’t the definition of insanity from the Main Street’s perspective, maybe there are some subtle aspects that weigh heavily in favor of the Bankers and their Wall Street buds. On its face, the Fed’s move was supportive of risk assets/securities in general but that move is also going to undermine the value of the $. And maybe the only thing that will be eased, is the spoils on their way to the victor. To implement this latest round, the Fed is printing money, debasing the $ and devaluing the debt, rather than restructuring it. This was immediately, and predictably, followed by another US debt downgrade by Egan-Jones.

So the Fed is purchasing residential mortgage-backed securities (RMBS) at the monthly rate cited above. Let’s look at this from the Fed’s/Wall Street's perspective. RMBS are pass-through securities, meaning that they pass through payments from debtor/borrower to investors with the private lenders deducting a service fee from the payments. Once these underlying mortgage payments are in arrears, the securities that contain them are going to be sucked up by the Fed and paid for with the Fed notes that stream off the printing presses. The Fed then becomes the “bona fide purchaser” (BFP) of the assets. A BFP buys these securities and the mortgages bundled therein without notice of another’s claim to the asset and without actual or constructive notice of any defects in or infirmities, claims, or equities against the seller’s title. Generally, a BFP is not affected by the transferor’s/seller’s fraud against a third party and has a superior right to the transferred property as against the transferor’s creditor to the extent of the cash the BFP paid. So the Fed’s purchase cures all the shady financial/foreclosure bullshizl that preceded the Fed’s purchase. Sweet.

Some CnP statistics:

1,512,084 Foreclosure Homes @ $189,103 Average Foreclosure Sales Price = $286 billion

1 in every 681 homes went into foreclosure in August 2012

Link

In reference to Genesis 47 with the Fed acting as Joseph, maybe there is nothing new under the sun…. If the domestic economy/$ continue in their present trajectory, what will happen to the foreclosure rate? At $40 billion/month, how long will it be before the Fed is the landlord of a significant domestic real estate inventory?.......


Fed up?