News reports suggest that New York prosecutors are preparing fraud charges against a number of large investment banks for defrauding insurance companies with respect to mortgage loans. These allegations and many civil claims with precisely similar predicates illustrate one of the most important aspects of the subprime financial crisis, namely the construction and collapse of the non-bank financial sector. Thousands of trusts based on a variety of different assets were created to sell bonds to investors, and some of these trusts carried private mortgage insurance. Most of the trusts used to fuel the subprime debt debacle were filled with residential mortgage loans, but other types of loans and commercial paper also were used as collateral. Roughly a third of the US financial markets were financed by the non-bank sector, which has largely disappeared. Thus deflation abounds.
Putting “trust” back in American housing finance
Most Popular Articles
Latest Articles
Have higher mortgage rates already reversed housing demand?
The strong economic data we’ve seen in the past several weeks underscore why the 10-year yield and mortgage rates rose last week.
-
How to get (or renew) your NMLS license in 2024
-
Anywhere’s Sherry Chris talks brand building, crisis management with the ‘Real Estate Insiders’
-
FHA commissioner, HUD counseling head on serving seniors with reverse mortgages
-
Shareholders sue eXp over alleged mishandling of sexual assault cases
-
Jobs report sends mortgage rates higher