First, I agree, this is very serious. It has the possibility of seriously hurting the housing market, which as we saw in the first section is already on the ropes. But at the end of the day, there is a cure. Someone borrowed money for a mortgage. Some entity is cashing a check if that person is paying. That entity should have the title until it is paid off. If someone is not making their mortgage payments, they should be removed from the house and it should be sold to the benefit of the ultimately correct and what everyone thought was the proper title holder.

If you took out a mortgage and now the title is in some doubt because the investment banks and mortgage banks and all the middle guys screwed up (big-time!) because they wanted to save some bucks and make some commissions, you did not win the lottery. That is not America as I know it. You can't pay the mortgage, I am sorry. But you do not get to keep the house. The people who (thought) they bought the mortgage in a fair deal need to end up with that mortgage.

If you pay your mortgage, you get to have the American Dream.

We CANNOT allow this debacle to continue. It will bring the system down. Who will want to buy a mortgage that is in a securitized package with no clear title? Who will get title insurance? Some judge somewhere is going to make a ruling that is going to petrify every title company, and the whole thing grinds to a halt.

This article today from Bloomberg carries some additional commentary. Here is a section:

Wells Fargo, which said it is proceeding with foreclosures, may have litigation and repurchase expenses of $15 billion over the next four years, according to Anthony Polini, a banking analyst at Raymond James & Associates Inc.

"Litigation expenses are going to be high," Polini said in a phone interview. "Foreclosures are a messy process and one that will provide a headwind to earnings, but it doesn't mean this recovery is postponed. It just means it happens at a slower pace."

Barbara Desoer, 57, head of home lending at Bank of America, said Oct. 15 that estimates of added costs from foreclosures have been "grossly distorted." The bank, the largest in the U.S. by assets, stands by the accuracy of its process, she said in an interview.

Mark C. Rodgers, a spokesman for Citigroup, said in an e- mailed statement last week that the bank has safeguards in place to prevent improper filings. Wells Fargo has enacted an additional review of pending foreclosures in 23 states to provide "further assurance" that information is correct, a spokeswoman, Vickee Adams, said last week.

Eoin Treacy's view The speed with which banks have foreclosed on family homes has been unseemly. In addition, the system where an impaired mortgage can sometimes be worth more to a bank following a foreclosure than if the borrower remained in their home and attempted to pay over a longer term is simply unjust. Therefore, when issues arise with 'chain of title' it is not surprising that many see this as a chance for regular people to make sure exploitative bankers finally get their comeuppance.

If the law has been broken, then those who are guilty should go to jail but that does not mean everyone should get a free house. Bank profits are coming in ahead of estimates and most express the view that litigation, while expensive, is likely to be manageable. However, we have heard such placations before only for them to be completely discredited. Greater clarity on how this issue is going to be addressed by various courts is required before investors can begin to have more faith in the sector generally.

The KBW Bank Index hit a medium-term peak in April and has since pulled back into the previous range to trade laterally above 40 for the last few months. A sustained move back above the 200-day MA, currently near 48 would be required to begin to suggest that demand is beginning to regain medium-term dominance.

The KBW Regional Banks Index also hit a medium-term peak in April and continues to exhibit a downward bias. It rallied reasonably well over the last 10 weeks but the six-month progression of lower rally highs remains intact and a sustained move above 50 is needed to indicate demand is returning to medium-term dominance.

Bank of America has been in a reasonably well defined downtrend since April and hit a new low last week. A sustained move above $14 is required to break the progression of lower highs and question the consistency of the six-month downtrend.

Wells Fargo had one of the better rallies from the March 2009 lows but lost momentum from June and failed to sustain the upward break in March 2010. It has since posted a progression of lower rally highs and encountered resistance on a number of occasions at the 200-day MA. It fell sharply last week to test the September low and a sustained move above $28 is now required to question scope for continued lower to lateral ranging.

JP Morgan has been ranging mostly below $40 since May and needs to sustain a move above that level, for more than a day or two, to indicate a return to demand dominance.

Citigroup has been ranging, with an upward bias, since May and has plotted a progression of higher lows since late August. It found support in the region of $4 today, following impressive earnings, and a sustained move below $3.85 would be required to question current scope for further higher to lateral ranging.

US Bancorp failed to sustain the break below $22 in August and has since rallied to range mostly above that level. A sustained move below $21.50 would be required to question current scope for continued higher to lateral ranging.