Friday, November 19, 2010

The three monkeys of mortgage bonds

"Have you forgotten about the mortgage-bond scandal yet? I’m sure a lot of bankers are hoping that you have. But Adam Levitin hasn’t, and his written testimony today to the House Financial Services Committee is well worth reading in full. He concludes:

The foreclosure process is beset with problems ranging from procedural defects that can be readily cured to outright fraud to the potential failure of the entire private label mortgage securitization system…

In the worst case scenario, there is systemic risk, as there could be a complete failure of loan transfers in private-label securitization deals in recent years, resulting in trillions of dollars of rescission claims against major financial institutions. This would trigger a wholesale financial crisis…"

at http://blogs.reuters.com/felix-salmon/2010/11/18/the-three-monkeys-of-mortgage-bonds/

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