Forget Foreclosures -- David Faber Says Banks Face HUGE Liability For Fraud In 'Mortgage Loan Pools'
Oct 14, 2010 at 5:20 PM
DailyBail in banks, banks, david faber, foreclousre fraud, mortgage loan pools
CNBC Video: Faber from earlier today -- Watch this one -- Runs 2 minutes
This is NOT foreclosure fraud. The issue is loan putbacks at par -- MBS investors forcing the underwriters, the banks, to take back ownership of the underlying mortgage. Court cases as early as tomorrow will help determine the extent of the liability, but we're potentially talking about hundreds of billions out of total private label RMBS of $1.5 trillion.
Faber:
"...Those same banks may face a far higher liability from another issue involving mortgages the banks securitized and sold. Simply put the issue here is fraud. And whether the banks packaged and sold pools of mortgages that did NOT contain the various underwriting characteristics that were attested to when the mortgage securities were sold."
Besides underwriting fraud, Felix Salmonpoints out the huge liability for banks related to mortgage transfers:
You thought the foreclosure mess was bad? You’re right about that. But it gets so much worse once you start adding in a whole bunch of parallel messes in the world of mortgage bonds. For instance, as Tracy Alloway says, mortgage-bond documentation generally says that if more than a minuscule proportion of notes in a mortgage pool weren’t properly transferred, then the trustee for the bondholders can force the investment bank who put the deal together to repurchase the mortgages. And it’s looking very much as though none of the notes were properly transferred.