Banks mark up their junk paper to full value.
Don't disagree.. But let's remember the "match" that finally set this sub-prime "tinder" on fire.. FASB 157 (mark to market accounting change) that became effective in November, 2007:
en.wikipedia.org
I guess, since so many mortgage notes, previously marked to model, had been securitized it made sense to apply the same rules to MBS as they did to equities.
However, I personally believe it was an intentional attempt to change the rules and pop the mortgage bubble (regardless of whether it was deserved or not). And then the accountants went "Holy Sheepsh*t Batman!!" and realized the beast they had unleashed threatened to consume the entire financial market, so they "revised" it with FASB 157-4, which eased market to market requirements.
Btw, that was in March, 2009, which coincided with the market bottom.. Co-incidence?
However, now with this MERS and Foreclosure Fraud fiasco, I think we're on the verge of financial crisis Pt. Deux.
I have no doubt that foreclosure fraud has been rampant on the part of the banks. And since the very concept of MERS seems to skirt existing foreclosure law, it's quite possible that millions of defaulting home owners are going to become squatters.
In fact, I was just talking with one such fellow this evening over a beer. He bought a home near San Fran back in 2005 for $925K and he figures it's lost nearly 40% of its value. Couldn't get any satisfaction on a loan modification from his bank so he's currently in strategic default.
Hawk |
