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dodgy mortgages


Aaron
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Morning. Thought i'd post this for anyone who's interested as we've been chatting about dodgy mortgages recently (It's about loads of insurance companyies, etc, suing Bank of America et al). This shows why i think it is not particularly constructive to blame the financial situation on joe public. I think the bit i highlighted in red is talking baout the fradulent CDOs i mentioned another time:

 

The benchmark for documented mortgage originators' lies is getting higher and higher. First it was the Allstate lawsuit, finding massive fraud in most Countrywide/Bank of America loans, then it was quantified at 70% after Wells Fargo sued JPM's EMC division, now it is all the way up to 91% after a just released lawsuit by the bulk of the world's biggest insurance companies has been made public, in a fresh lawsuit again Bank of America/Countrywide over "Massive mortgage fraud."


To wit, from the lawsuit: "In carrying out its review of the approximately 19,000 Countrywide loan files, MBIA found that 91% of the defaulted or delinquent loans in those securitizations contained material deviations from Countrywide’s underwriting guidelines. MBIA’s report showed that the loan applications frequently “(i) lack key documentation, such as verification of borrower assets or income; (ii) include an invalid or incomplete appraisal; (iii) demonstrate fraud by the borrower on the face of the application; or (iv) reflect that any of borrower income, FICO score, debt, DTI [debt-to-income,] or CLTV [combined loan-to-value] ratios, fails to meet stated Countrywide guidelines (without any permissible exception)." The plaintiff counsel is Bernstein Litowitz, which was made famous from the WorldCom litigation. We doubt they will settle for a few measily pennies on the dollar. As for the list of litigants, it is a veritable who's who of the insurance industry: Dexia Holdings, FSA Asset Management, New York Life iInsurance Company, The Mainstay Funds, Teachers Insurance & Annuity, TIAA-CREF Life Insurance, and College Retirement Equities Fund.


And here is why even the recent recent hike to BofA's Representation legal reserve, which Zero Hedge predicted in October, will be woefully insufficient to cover the tens of billions in incremental damages, monetary and punitive.


The Offering Documents for the Certificates at issue, which were relied upon by Plaintiffs, represented, among other things, that (i) the loans packaged into the Certificates were underwritten pursuant to the Countrywide Defendants’ specific loan origination guidelines; (ii) Countrywide Home (defined below) evaluated the prospective borrowers’ credit standing and repayment ability prior to approving any loan; (iii) when the Countrywide Defendants’ made an exception to the stated underwriting guidelines, they did so on “a case-by-case basis” and only if “compensating factors” justifying the exception were present; (iv) almost every mortgaged property received an independent appraisal which conformed to acceptable standards and formed the basis of its loan-to-value (“LTV”) ratio, an important metric to MBS investors; (v) the loans selected for securitization were chosen “in a manner [not] intended to affect the interests of the certificateholders adversely”; (vi) the “AAA” or other investment-grade ratings assigned to the Certificates were accurate reflections of the Certificates’ credit quality; and (vii) the Certificates’ issuing trusts possessed good title to the underlying mortgage loans. Each of these material representations was false when made, and Defendants knew or recklessly disregarded the falsity of these representations. Plaintiffs relied on the misrepresentations andsuffered losses as a result.

 

The summary is from a post in Zero Hedge.

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From what I can tell, Assuming the recipient of the credit is referred to as the Certificate;


It's saying that it's the Bank's fault for issuing mortgages to those who were obviously not able to repay? Or have I completely misread it? :D

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From what I can tell, Assuming the recipient of the credit is referred to as the Certificate;


It's saying that it's the Bank's fault for issuing mortgages to those who were obviously not able to repay? Or have I completely misread it? :D

 

Yes (although i assume the certificate is the piece of paper representing a package of mortgage debt which was sold to a third party). But they sold lots of really bad mortgages, not conforming to any of their guidlines, and then repackaged those liabilities and sold them on to some other sucker with a tripple A rating (i.e. safe). This is why it all fell apart - because institutions had mountains of dangerous debt without realising. There is a place for risky debt. The yeilds are higher for the greater risk. But they took on too much risk knowing that they could hide it and sell it on to someone else.


It's like buying a car from an auction. It might be good or it might be crappy. But what they did is buy a billion old cars at auction, gave them a respray and sold them in big batches to someone else as 'nearly new'. Then 800 million of those billion 'nearly new' cars broke down and had to be scrapped.

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This episode of the Keiser Report I just watched has a good insight into one of the many reasons that banks have no concerns about lending unrepayable loans. They continue to acrue "phantom" interest and profits from mortgages that aren't being repaid and use that to fund their bonuses etc. When the government bails them out, rather than the money re-liquidizing the markets, it covers the missing "phantom" capital they used to pay the bonuses and dividends.


It's in the second part of the show where Max is interviewing the black chap from BoomBustBlog.


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This episode of the Keiser Report I just watched has a good insight into one of the many reasons that banks have no concerns about lending unrepayable loans. They continue to acrue "phantom" interest and profits from mortgages that aren't being repaid and use that to fund their bonuses etc. When the government bails them out, rather than the money re-liquidizing the markets, it covers the missing "phantom" capital they used to pay the bonuses and dividends.


It's in the second part of the show where Max is interviewing the black chap from BoomBustBlog.


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This is exactly what I said in the other thread when I explained it as the bank lending fake/monopoly money, it obviously turned bad so the government bail them out with real money leaving them and their banker staff rich while everyone else pays for their fraud.


I wonder if there is a way of taking said bankers/banks to court for charges of fraud etc.


Using your example, if it was a car company doing it they'd get screwed, sentenced and sent down.

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This episode of the Keiser Report I just watched has a good insight into one of the many reasons that banks have no concerns about lending unrepayable loans. They continue to acrue "phantom" interest and profits from mortgages that aren't being repaid and use that to fund their bonuses etc. When the government bails them out, rather than the money re-liquidizing the markets, it covers the missing "phantom" capital they used to pay the bonuses and dividends.


It's in the second part of the show where Max is interviewing the black chap from BoomBustBlog.


">

 

This is exactly what I said in the other thread when I explained it as the bank lending fake/monopoly money, it obviously turned bad so the government bail them out with real money leaving them and their banker staff rich while everyone else pays for their fraud.


I wonder if there is a way of taking said bankers/banks to court for charges of fraud etc.


Using your example, if it was a car company doing it they'd get screwed, sentenced and sent down.

 


When they do get prosecuted, which is all just for show, they are fined 500 million dollars for the fraud that netted them 2 billion. They just go away and think how to not get caught next time.


It all needs regulating but the governments are just puppets and the banking cartels pull the strings. It might sound like a crazy conspiracy theory or whatever, but if people pull their head's out of the sand and research they'll find it to be true. Don't get your news from the beeb!

I heard someone else say today that Obama will be recorded as the worst president in history, and I agree. As for our own lot I can't tell if their in on it or just incompetent!


Where is the logic in allowing a nation's supply of currency to be entirely controlled by a private entity?

"What's that mr prime minister? You want to regulate us? Then we won't make as much profit and wont be able to lend (stop money supply from shrinking) and your economy will collapse!"

"Oh... ok Mr Bank man. We'll just borrow some more money to help you out and by the time it all collapses again i'll be retired and just as tanned as Tony sipping cocktails in his blood-money funded mansion chatting about the good old days"

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