Charles Hugh Smith has a great article entitled: "The Coming Collapse of the Real Estate Market" I havent seen it posted here yet. The entire article is here: <http://www.oftwominds.com/blog.html>
Here is the conclusion:
"There is a fundamental legal battle playing out between the property rights and rules of law embodied in state laws, and the Central State/Federal laws, which enable MERS to transfer ownership of mortgages as securities. You cannot have both systems at the same time; either transfers of mortgages and ownership and the procedure of taking real property (foreclosures) meet state laws or these laws have been rendered moot.
Either there is due process of law or you have a kleptocracy/"banana republic" oligarchy. At present, that is the decision we face as a nation. If the banking Elites and their partners in the Central State (Fed and Treasury) are allowed to "win" and gut the property laws of the states, then the U.S.A. will be revealed as a kleptocracy/"banana republic" oligarchy.
If state laws are upheld, then the "too big to fail" banks are insolvent and they will fail. Then the question of kleptocracy arises once again: will the banks be allowed to fail as per Classic Capitalism, that is, their owners and managers will have to absorb the losses of that bankruptcy/failure, or will the Central State use its powers to collect taxes and cover the private losses of the Bank/Financial Power Elites? Privatizing profits and socializing losses has been the entire game plan since the global house of cards collapsed in 2008.
It's decision time, citizens. Either the banks/Central State "win" and we are a kleptocracy/ "banana republic," or they lose and the U.S. mortgage/ banking sector implodes and is either formally socialized (i.e. owned lock, stock and barrel by the Central State) or rebuilt from scratch without big banks, Federal guarantees and the Fed's incestuous interventions. ("We create the credit that enables the mortgage, you issue the mortgage, and then we buy the mortgage.")
There is no "fix" or half-measure that can patch this over now."

Correct link: http://www.oftwominds.com/blogoct10/fore....

Wow...this is the personal conclusion Im presently coming too. The other addition I'd make is that as the rest of the world connects the dots..the Bond market decides another outcome of this which neither the states nor our Banana Republic leadership will have any ability to control.

Bond Market has proven itself either impotent or inable to 'forward think'.

This answer to the above question may be found in the treatment of GM bondholders, and numerous other LAWS DON'T GO ROUND HERE LAWDOG! type moments. Why mess with precedent?