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Strategies & Market Trends : Mish's Global Economic Trend Analysis -- Ignore unavailable to you. Want to Upgrade?

To: John Metcalf who wrote (102398)	9/23/2009 1:14:28 AM
From: Hawkmoon	Read Replies (1) \| Respond to of 116555

But where are the statesmen who can step up and develop an equitable solution that all parties can live with? Agreed. But in this case, it will probably force certain interests who felt they might benefit from forcing foreclosures (possibly via CDS on the CDOs?) to reconsider the firmness of their position. I think it really calls into the question the legal rights of the CDO entities into which these mortgages were packaged. Because isn't a CDO essentially an equity that derives its value based upon the cash flow from the loans that were originated? People pay their mortgage to the bank that originated it (then sold it to the IB that packaged it into the CDO), then that payment is forwarded to the appropriate traunch holders in the CDO, right? So which traunch of the CDO owns which mortgage loan, or do they own it at all? What COULD be the result is that the legal status of CDOs might come into question and all the loans that were sold would have to be put back on the books of the banks that originated them. But then again.. the monoline insurers own the voting rights on these CDOs (as part of their insurance obligation). This is going to become a legal morass, indeed... And is this case gets cited in subsequent foreclosure filings as a defense, it's going to get really interesting from the banks perspective. They may become VERY READY to play "Let's make a deal" with the borrowers. Hawk