Comments on: Fannie, Freddie, Ginnie now account for 130% of mortgage lending in U.S. http://curiouscapitalist.blogs.time.com/2008/07/14/fannie_freddie_ginnie_now_acco/ Commentary on the economy, the markets, and business Sat, 28 Nov 2009 19:11:37 +0000 http://wordpress.com/ hourly 1 By: Gary Rupp http://curiouscapitalist.blogs.time.com/2008/07/14/fannie_freddie_ginnie_now_acco/comment-page-1/#comment-10051 Gary Rupp Mon, 14 Jul 2008 21:15:39 +0000 http://curiouscapitalist.blogs.time.com/2008/07/14/fannie_freddie_ginnie_now_acco/#comment-10051 In my opinion, we're not yet having the right conversation. The owners of mortgage-backed securities, many of them foreigners, are holding essentially worthless mortgage securities - e.g. their actual market worth is now estimated to be almost 10 times less than their face value! There are some analysts and reporters who are concerned that the owners of the mortgage-backed securities will sue the U.S. banks that issued them, demonstrating in the process that there was obvious fraud in the origination process, in order to force the banks to buy back their now worthless mortgage securities at face value. There is not, of course, enough captial available to buy back the loans... which would lead to failures across all our largest banks... and ultimate need for a "massive taxpayer-funded bailouts of Fannie and Freddie, and even FDIC". (See article in The San Francisco Chronicle in December 2007, by attorney Sean Olender and "Web of Debt" articles by Ellen Brown, JD.) The fraud that has occured goes well beyond the loan originators, and leads all the way to the leading investment bankers. Loans have been bundled into securitized mortgage debt that has become so complex that ownership of the underlying security is lost. Without a legal owner, there is no one to go after for foreclose. Precedent was set by Federal District Judge Christopher Boyko who ruleed in October 2007 that Deutsche Bank did not have standing to foreclose on 14 mortgage loans held in trust for a pool of mortgage-backed securities holders. As Ms. Brown says: "If large numbers of defaulting homeowners were to contest their foreclosures on the ground that the plaintiffs lacked standing to sue, trillions of dollars in mortgage-backed securities (MBS) could be at risk. Irate securities holders might then respond with litigation that could indeed threaten the existence of the banking Goliaths." At some point in time, one would think that even the likes of Treasury Secretary Henry Paulson, himself, would need to account for his actions. After all, he was head of Goldman Sachs during the heyday of toxic subprime paper-writing from 2004 to 2006. - Gary In my opinion, we're not yet having the right conversation. The owners of mortgage-backed securities, many of them foreigners, are holding essentially worthless mortgage securities - e.g. their actual market worth is now estimated to be almost 10 times less than their face value!

There are some analysts and reporters who are concerned that the owners of the mortgage-backed securities will sue the U.S. banks that issued them, demonstrating in the process that there was obvious fraud in the origination process, in order to force the banks to buy back their now worthless mortgage securities at face value.

There is not, of course, enough captial available to buy back the loans... which would lead to failures across all our largest banks... and ultimate need for a "massive taxpayer-funded bailouts of Fannie and Freddie, and even FDIC". (See article in The San Francisco Chronicle in December 2007, by attorney Sean Olender and "Web of Debt" articles by Ellen Brown, JD.)

The fraud that has occured goes well beyond the loan originators, and leads all the way to the leading investment bankers. Loans have been bundled into securitized mortgage debt that has become so complex that ownership of the underlying security is lost. Without a legal owner, there is no one to go after for foreclose.

Precedent was set by Federal District Judge Christopher Boyko who ruleed in October 2007 that Deutsche Bank did not have standing to foreclose on 14 mortgage loans held in trust for a pool of mortgage-backed securities holders. As Ms. Brown says: "If large numbers of defaulting homeowners were to contest their foreclosures on the ground that the plaintiffs lacked standing to sue, trillions of dollars in mortgage-backed securities (MBS) could be at risk. Irate securities holders might then respond with litigation that could indeed threaten the existence of the banking Goliaths."

At some point in time, one would think that even the likes of Treasury Secretary Henry Paulson, himself, would need to account for his actions. After all, he was head of Goldman Sachs during the heyday of toxic subprime paper-writing from 2004 to 2006.

- Gary

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