Friday, February 22, 2008

Credit crunch update...

Just a quick story that I think points out one emerging headache that was not well thought out on the downside by lenders eager to securitize mortgages.
Judges in at least five states have stopped foreclosure proceedings because the banks that pool mortgages into securities and the companies that collect monthly payments haven't been able to prove they own the mortgages. The confusion is another headache for U.S. Treasury Secretary Henry Paulson as he revises rules for packaging mortgages into securities.

``I think it's going to become pretty hairy,'' said Josh Rosner, managing director at the New York-based investment research firm Graham Fisher & Co. ``Regulators appear to have ignored this, given the size and scope of the problem.''

More than $2.1 trillion, or 19 percent, of outstanding mortgages have been bundled into securities by private banks, according to Inside Mortgage Finance, a Bethesda, Maryland-based industry newsletter. Those loans may be sold several times before they land in a security. Mortgage servicers, who collect monthly payments and distribute them to securities investors, can buy and sell the home loans many times. [More]
The fallout from this could likely affect the depth of the stack of paper you'll sign for your next loan. I've already gone from 3 to 8 pages for my operating loan. Who knows where we could be heading?

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