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Pimco sues Citibank over ‘defective’ mortgage securities

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Mortgage Professional America | 25 Nov 2015, 01:53 PM Agree 0
The multi-billion dollar suit is for mortgage securities impacted by the housing downturn
  • Sbharkness | | 25 Nov 2015, 05:20 PM Agree 0
    Of course they knew and there is a simply way to fix this but I doubt it will ever happen. When the seller of the mortgage securities is the one paying the rating agency for the rating it causes a huge conflict of interest. The rating agency wants to get the business for the next pool of mortgages but they know they won't unless they give the seller the rating that they wanted...It's only common sense. Would you buy a house or a car or anything when the seller paying for the appraisal (rating)? NO, you wouldn't. So why don't we just change the law so the buyer of the securities pays the rating agency for the rating? Very simple fix.....which is why I know it will never be implemented. Our government and more importantly the powers that control the money supply try to keep things as complicated as possible so that things are beyond the regular citizens ability to understand. Quite frankly that doesn't take much with a citizenry that's more worried about Kim Kardashian's back side and who's been pinching it than pay attention to anything of real substance.
  • | | 25 Nov 2015, 07:12 PM Agree 0
    If you dont qualify your borrower properly, which is what the liberals wanted, you get a pile of people with money to buy. Which in turn drives the price of the product (housing) up. Of course there were bad mortgages in the pool, but everyone should own their own home - right ? Good bankers will not make a bad mortgage if they can help it, unless the government powers that be tell them to, and guarantee them. When you have Acorn and other groups protesting in your lobby to make the bad mortgages that Frank and Dodd wanted, what the blazes are you going to do. Oh I know - sue the bank that made the bad mortgages, the mortgages the government told them to make.

    The world is upside down.
  • Investor | | 26 Nov 2015, 01:34 AM Agree 0
    I agree with Sharkness that common sense says checks and balances should dictate that the investor pay for the ratings so the ratings agencies are accountable to them, not the issuer. Be that as it may, it begs the question why aren't the investment bank/issuers that are being sued turning around and suing the ratings agencies for giving faulty opinions? Could it be because the ratings agencies would then spill the beans about the quid pro quo that was going on between them?

    Also, while it's true that liberals were all for making mortgages to less than qualified borrowers, the primary reason the banks were making no down, no doc, 110% mortgages was because they were making a ton of money selling the to Wall Street and securitizing them because there was no accountability. The banks saying they were primarily making those mortgages because of pressure by liberals was more a fig leaf for doing something they wanted to do anyway, at least as long as they could off load those mortgages to Wall Street. In fact the pressure from Wall Street for more mortgages to securitize was the primary driver that lead to making mortgages of lower and lower quality.
  • | | 26 Nov 2015, 09:27 AM Agree 0
    Well I really dont believe Citi would intentially do anything of that sort. It would be no benefit to them but only to collect payments. Its really not their problem people cant pay their bills. Thats my opinion.
  • WhimsicalAnarchist | | 26 Nov 2015, 12:05 PM Agree 0
    Liar Loans

    There's more than enough blame to go around.
    Solutions, however, are scarcer than hen's teeth.

    There largely seems to be agreement that, in an ideal world:
    Those "liar mortgages" would never have been made.
    The ratings on pools of "liar mortgages" would have been sub-junk.
    The feds would never have stepped in to rescue defaulters with HARPies (and thereby punish everyone who took a second job to avoid default.)

    But in this world, a lawsuit may be the only real way to ensure that future sellers will insist on valid ratings (appraisals), at least, as a defense against fraud charges.
    As loathe as we may be to rely on the courts to set business practices, the comment that ratings need to unbiased is very valid .
    Forcing Citibank to pay “reparations” now may be a means of achieving that.
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