Originally Posted by onwebcam

You have it a bit wrong. In reality what happened is there was a false bubble created which drove the prices up way beyond affordability/actual value. As far as who owns the mortgages. The loans were bundled up to a dollar amount say $100 million and they are then sold to someone higher up the lending chain. If all of the paperwork was in order (which in most cases it is not) then obviously those higher up the food chain hold position on the home which is considered an asset of theirs and the "homeowner" is more or less a sophisticated lease to owner. So when the owner defaults it defaults back to first position lein holder on the deed.

The mortgage is just a debt the buyer agreed to not neccesarily the value of the home nor is it how much the bank has into it. In fact banks only have to hold 10% reserves so when they lend you 100,000 then they are only out $10,000 but in most cases not even that since they require you to put somewhere around that down. As far as the paperwork is concerned this is why many banks/investors are getting sued and losing many cases because they don't have original notes and just copies of it since it has changed hands so many times.

It gets a bit more complicated than that but a quick explaination. Simply put whoever is first position lein holder ont he deed is actual homeowner.