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How the Banks Hid Bad Mortgages - NYTimes.com
The conventional wisdom has it that the Financial Crisis Inquiry Commission -- the bipartisan group of wise men and women charged with uncovering what caused our recent economic meltdown and telling us what should be done to prevent a recurrence -- is woefully out-of-touch and out-of-date. A Times article last month suggested that "an exodus of senior employees" from the commission and "internal disagreements" among those remaining could hamper efforts to produce a meaningful and useful report, which is due to be published in December.

But the conventional wisdom is often wrong, and this time will be no exception. I predict that not only will the commission's report -- and accompanying documents -- reveal numerous causes of the crisis that others have overlooked, but also that it will have a significant impact on the regulations that still must be written by the Securities and Exchange Commission and the Treasury as part of the implementation on the Dodd-Frank financial reform law. In fact, the inquiry commission may have already played an essential role in beginning to bring fraudsters to justice.



"Ce qui vient au monde pour ne rien troubler ne mérite ni égards ni patience." René Char
by Melanchthon on Fri Oct 15th, 2010 at 04:53:39 PM EST
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How the Banks Hid Bad Mortgages - NYTimes.com
Of the 911,039 mortgages Clayton examined for its Wall Street clients -- a sample of about 10 percent of the total mortgages that the banks intended to package into securities -- only 54 percent were found to meet the underwriting guidelines. Standards deteriorated over time, with only 47 percent of the mortgages Clayton examined meeting the guidelines by the second quarter of 2007.

So, did Wall Street throw all those mortgages back into the pond as being too risky for securities they were going to sell to clients? Of course not -- many were packaged right into their product...

In fact, the banks probably weren't disappointed at all by the shaky status of many of these loans: in part because they could use the information that some of the mortgages were rotten to get a discount from the mortgage originators on the price paid for the entire portfolio... But the amazing revelation of the Sacramento hearing was that the investment banks did not pass this very valuable information on to their customers.



"Ce qui vient au monde pour ne rien troubler ne mérite ni égards ni patience." René Char
by Melanchthon on Fri Oct 15th, 2010 at 04:57:45 PM EST
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Mortgage Damage Spreads - WSJ.com
In essence, fast-paced modern finance is colliding with the much slower machinery of the U.S. legal system. While finance aims for efficiency and maximized profits, the courts demand due process. And that's becoming a growing issue as lenders come under attack for taking short cuts to oust homeowners who haven't mailed in a mortgage check for months.
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The financial system and legal system have been on a collision course for some time in residential real estate. Both the lower standards for loans and the lax controls involving foreclosures were based on the premise that home prices would never fall, making it unlikely that many loans would go bad at once. Once that premise fell apart, the flaws in the system became obvious, and the long-term challenge now facing lenders is to rebuild the mortgage system on more solid footing.

Banks argue that these problems will be repaired swiftly, and they'll soon be running the foreclosure machinery at full speed again. But analysts say the problems could expand into a legal crisis if banks can't prove that they are following standard property-law procedures.



"Ce qui vient au monde pour ne rien troubler ne mérite ni égards ni patience." René Char
by Melanchthon on Sat Oct 16th, 2010 at 05:32:16 AM EST
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