>For the past few days, I have been posting links on the Fraudulent Foreclosures by banks. Just as we thought that was bad enough for America’s economy, here comes another bombshell – the Mortgage Loan Pools Fiasco.
As if the problems in foreclosures weren’t enough, another potential problem for the nation’s big banks is raising its head today and is the key reason that shares of banks such as Bank of America are down sharply and CDS’s (credit default swaps) for some banks are widening.
Reed Saxon / AP
A home is advertised for sale at a foreclosure auction in Pasadena, California.
The worry centers on the mortgage loan pools created by many of the big banks as they fed the seemingly endless desire for mortgage-backed securities and CDO’s (collateralized debt obligations) made from them.
It appears the mortgage content of many of those pools—created when the banks were dominating the mortgage securitization market in 2005, 2006 and 2007—may have been misrepresented. For example, an underwriter may have maintained that 80 percent of the mortgages in the pool were for primary residences when in fact far fewer were for that purpose. Or the underwriter stated that only 10 percent of the pool would be made of of “no-doc” loans—those that include less documentation about the borrower—when in fact the percentage was far higher.
That could be fraud, and if so, the creator of the mortgage pool could be liable. Given that the market for private label RMBS (residential mortgage-backed securities) was $1.5 trillion, the potential liability may be considerable. And while most of the originators of these mortgages are long gone, the securitizers are not.
Putting it in layman’s terms, the banks grouped many mortgages together and re-sold them to other financial institutions. The banks misled the buyers into thinking that the packaged mortgages were “safer” than it really was, by mis-representing that the percentage of “safe mortgagees” in the package were higher than it really was.
Now the buyers of the re-packaged mortgages are calling for their money back due to fraud and/or misrepresentation by the banks. This amount totals to about $1.5 trillion. This fraud is of a mammoth scale and is unprecedented.
What is happening to America?
More updates below.
Forget Foreclosures — David Faber Says Banks Face HUGE Liability For Fraud In ‘Mortgage Loan Pools’
David Faber: Look Out BAC & JPMorgan “Mortgage Put-Backs Don’t Require Fraud Just Inaccuracy”
