Mortgage Servicing Fraud
occurs post loan origination when mortgage servicers use false statements and book-keeping entries, fabricated assignments, forged signatures and utter counterfeit intangible Notes to take a homeowner's property and equity.
Articles |The FORUM |Law Library |Videos | Fraudsters & Co. |File Complaints |How they STEAL |Search MSFraud |Contact Us

A New World Disorder for Debt Traders
System of Risk Dispersal
Proves to Be a Bit Erratic
August 10, 2007
Welcome to the new world of finance.

As tremors from the U.S. subprime-mortgage meltdown shake markets around the globe, investors are getting a lesson in how unexpected stresses could emerge in a global financial system that has changed significantly in the past few years.

Markets have taken on an increasingly important role since the financial crises of the 1980s and '90s. When banks make loans, they are now often bundled into securities that are sold in pieces to investors around the world, changing hands many times. It spreads risk, which policy makers believe keeps the overall financial system sound and stable.

But the downsides to this system could be serious. A financial architecture that dispersed risk also helped to create it. And when troubles emerge -- as they have in the U.S. housing market -- they can show up just about any place in the world and in ways nobody predicted.

Those troubles continued yesterday as rattled investors shied away from U.S. corporate debt, with some traders saying they had difficulty finding buyers. Both investment-grade and so-called junk bonds suffered: The spread between the returns on both types of bonds and that of U.S. Treasurys widened.

In the past few weeks, shaky mortgage loans to Americans have emerged in the portfolios of hedge funds, banks and investment vehicles in Australia, Germany, France, Singapore, Korea, China and elsewhere. Investors are also discovering that subprime loans were used as collateral for some short-term commercial loans that are part of a $2 trillion market that banks and investors turn to regularly for quick doses of cash when they need it.

The European Central Bank and Federal Reserve pumped liquidity into the system yesterday to hold down their target short-term interest rates, which had been disrupted by turmoil in the commercial-paper market.

Until a few weeks ago, many central bankers expressed confidence that subprime problems were contained.

"The downside of spreading the risk is that when the problems get big enough, it affects all markets regardless of the fundamentals," says Christopher Mayer, a real-estate expert and professor at Columbia University.

Back in the 1980s and '90s, when financial stress turned up in places like Mexico, Thailand or the U.S., the problems often resided close to home in banks. Now banks often sell their loans after making them. They end up in investments such as collateralized debt obligations or residential mortgage-backed securities and sold to investors around the world. In the process, it might have made investors and lenders complacent about monitoring borrowers to make sure they could pay off their loans or were using borrowed money wisely.

"We've created these new instruments, and people with a wink and a nod claimed that these were just as safe as traditional safe assets," says Christian Stracke, a bond analyst at research firm CreditSights.

Mr. Stracke points to the commercial paper issued by IKB Deutsche Industriebank AG, which German bank officials had to bail out after its investment arm's holdings went bad. Commercial paper is normally considered a very safe investment, but in this case the bank used the paper to buy a host of credit instruments, including some backed by dicey subprime mortgages.

Another problem: The same framework that disperses risk to different corners of the globe can also spread fear in times of uncertainty.

"Credit went belly up, so people got nervous," says Tim Krochuk, managing director of GRT Capital Partners, a Boston investment manager. As a result, investors began looking to pull money out of hedge funds with exposure to the sector. They pulled their money out of other places, too. "Because some of the exotic securities aren't really tradable now, people are getting liquidity by going to other markets" to sell assets and raise cash, he says.

One casualty is U.S. stocks. His firm's research shows that companies with deteriorating financial fundamentals have done significantly better than those with improving fundamentals during the past three weeks because hedge funds are unwinding their best bets. "Why would you buy a crummy stock and sell a good stock?" he asks. "Because you have to."

The value of debt derivatives and credit-default swaps world-wide is approaching $400 trillion, or seven times global gross domestic product, according to Andy Xie, a private consultant and the former Morgan Stanley chief economist in Hong Kong. These instruments can be used to hedge against other risky investments. Mr. Xie says in a recent report it might also have encouraged some traders to take even bigger risks.

In Japan last month, Nomura Holdings Inc. came under pressure for subprime holdings. It announced it had reduced its positions in U.S. subprime loans during the previous quarter to $589 million from $1.74 billion. Taiwan Life Insurance Co. said it booked a loss of 428 million New Taiwan dollars (US$13 million) in the first half related to its investment in a Bear Stearns Cos. hedge fund. Meanwhile, banks in Singapore, including Oversea-Chinese Banking Corp. and United Overseas Bank Ltd., have reported losses on collateralized debt obligations.

Other investors say the notion of diffusing risk will ultimately make the global economy stronger, but financial markets will experience severe growing pains. One of the biggest problems, suggests Mohamed El-Erian, head of Harvard Management Co., which invests the university's $29 billion endowment, is that Wall Street is cranking out new products faster than analysts or investors can understand or value them.

"In the short term," he says, "the systems weren't ready for these changes."

Credit-rating services have been struggling to determine the risk level of these new securities. Often they have erred by understating the risk and assigning what now looks like ratings that were too generous.

Banks have also confessed to failure at properly assessing the value of some of these new instruments. France's BNP Paribas SA became the latest victim when it said that the lack of liquidity in the asset-back security market "made it impossible to value certain assets fairly, regardless of their quality or credit rating." In cases like this, when banks are unable to value their holdings, investors can temporarily lose access to their capital.

--Jon E. Hilsenrath contributed to this article.

Treasurys Post Sharp Gains as Yield Curve Steepens

Treasury-bond prices gained sharply in most maturities, and the yield curve steepened to its highest since September 2005 as the market absorbed another dose of credit-related flight-to-quality buying.

The new benchmark 10-year Treasury note, sold Wednesday, gained 14/32 point, or $4.375 per $1,000 face value, to 99 23/32. Its yield stood at 4.788%. The two-year note, investors' haven amid distress, was up 10/32 to yield 4.478%. The difference between the two- and 10-year yields stood at 0.31 percentage point.

Amid the turmoil, new issuance dried up again after Wednesday's burst of activity.

--Laurence Norman, Deborah Lynn Blumberg and Cynthia Koons

Write to Joanna Slater at and Craig Karmin at
Quote 0 0

           Links PLEASE!!!
Quote 0 0
Nye Lavalle
If you want links, do your own work geez!
Quote 0 0

Careful Buddy, your true colors are showing...

You call yourself an advocate?
Sheesh, put the damned link up.
Last time I checked, WE WERE ALL in this trainwreck together.
Who do you think you are anyway?
This guy is getting on my LAST NERVE ALREADY.
Put the link up, period.

Quote 0 0
Thank You


Quote 0 0
There's a practical reason for posting links, even if they are from paid subscriptions.  Most libraries offer free access to these anyway.  I have great empathy for people like Still Fighting in Illinois, desparately seeking capable legal representation.  Been there, done that. 
Interviewing lawyers, showing them evidence and explaining to them what EMC was doing, they would look at me like I had 2 heads!
Only when I included MSF press articles going back to the 1980's did they begin to see widespread patterns of deceit and take me seriously, particularly when these came from accredited sources like WSJ, NYT's, WAPO, Union Leader, Business Week, Bloomberg, Forbes, Fortune etc.
Many victims fighting to save their homes from manufactured foreclosures do not have time to spend long hours searching cyberspace for case related material so information/experience sharing on this board is a big help.
Yes, we are "ALL in this trainwreck together".  Whether we can extricate ourselves from this tangled mess depends on communication, cooperation and consideration.  I am not writing this to incite a riot or to create discord. It is just a very practical matter.  This board has no room for disruptive self-aggrandizing arrogance.  Let that stay with the investment bankers and servicers where it belongs. 

Quote 0 0






Quote 0 0
Tell you what Ann.

I'll pay for your subscription to the Wall Street Journal.

Do you want the newspaper or the on line subscription?

Or you can subscribe and I'll send you the money right away.  Cash if you want or check.  Whatever.

I'm not broke and this costs me about what a bottle of cologne does.
It's not going to hurt me at all.

I'll do it this one time and then you'll have to do it if you want it again.

Then you can post stories anyway you want to and when  you do you'll be assuming the risk you take with your own actions.

Be sure to read the terms of service.

Let me know.


Quote 0 0
Nye Lavalle
Some of you losers need to get a life! Malcontents and ingrates sure don't help make those who want and are doing good feel good about what they do. If you have any negative comments about ANYONE, let alone me, who is trying to help. keep them to yourselves. The home you lose may be your own!
Quote 0 0
Nye, a simple link to your source, period.

Thanks Dee.
Links to articles are helpful.


Quote 0 0

The whole world is watching this forum team-mates we need to maintain our civility and credibility. We have all worked long and hard and the spotlight is on ms fraud and money laundering due to the sub-prime meltdown and the ability it has to throw the U.S. if not the whole world into a depression or at least a recession. This fraud and money laundering will cost hundreds of billions if not more to fix and poses a great threat to everyone, we need to focus on bringing the criminals to justice and making them pay instead of these absurd taxpayer and FED bailouts and cover-ups.
Quote 0 0

Speaking of Roland Arnall, I hear he and Bin Laden are vacationing on the french riviera.

Quote 0 0
They both gained enough fame and fortune from terrorizing U.S. citizens and Barrack Obama seems to be the only one trying to do any thing about both of them.

Perhaps they plan on watching a video together of mushroom clouds all over the U.S. funded with our stolen homes.
Quote 0 0
Write a reply...