Given everything we know about sloppy underwriting standards at the mortgage mills from the middle of this decade, it wouldn't surprise us at all to learn that a lot of crucial mortgage paperwork is just flat out missing.

This issue has been bubbling under the surface for awhile, as some homeowner advocates fight foreclosures on the grounds that the actual paperwork can't be produced.

How big is the problem? Bankruptcy lawyer R. Glen Ayers recently gave a speech saying 1/3rd of all mortgage backed securities may not be connected to a physical mortgage. Sure, they're producing cash flow now. They're connected to a household. But if there were ever need for a foreclosure, it could be much harder than current holders assume. Talk about toxic assets. (via New Geography)