Part 1 of a five-month McClatchy Newspapers investigation is certainly the must read Real Estate related article of the day/week.
How Goldman Sachs Secretly Bet on the Housing Crash
In 2006 and 2007, Goldman Sachs Group peddled more than $40 billion in securities backed by at least 200,000 risky home mortgages, but never told the buyers it was secretly betting that a sharp drop in U.S. housing prices would send the value of those securities plummeting.
Goldman’s sales and its clandestine wagers, completed at the brink of the housing market meltdown, enabled the nation’s premier investment bank to pass most of its potential losses to others before a flood of mortgage defaults staggered the U.S. and global economies.
Only later did investors discover that what Goldman had promoted as triple-A rated investments were closer to junk.
Part Two - Go After Homeowners to Collect
Since the economic collapse that swept millions of Americans out of their jobs and homes, Goldman Sachs has moved aggressively to recover losses. The firm is pursuing shaky borrowers into federal bankruptcy and state courts across the country and seeking to seize their homes. McClatchy examines one family’s multi-year attempt to get Goldman Sachs to admit that it had purchased their mortgages.
Certainly something very interesting is the amount of the claim that Goldman Sachs was going after:
In July, after U.S. Bankruptcy Judge Roger Efremsky of the Northern District of California threatened to impose “significant sanctions” if the firm failed to complete a promised settlement with the Beckers, Goldman dropped its claims for $626,000, far more than the couple’s original $356,000 in mortgages and $70,000 in missed payments. The firm gave the Beckers a new, 30-year mortgage at 5 percent interest.
Is my math a little off or was Goldman Sachs really adding another $200,000 in that claim?
Part Three – Secret offshore Meetings
Goldman Sachs and other Wall Street firms turned to secret Cayman Islands deals to draw overseas investors, including European banks and other foreign financial institutions, to invest hundreds of billions of dollars in securities tied to risky U.S. home loans. Unlike U.S. investors that lost money on the securities, however, these overseas institutions have fewer legal options.
Part Four – Associations with some
of the Biggest Junk Loan Originators
Goldman Sachs was among the last Wall Street giants to enter the lucrative world of subprime mortgages, but it didn’t take long before the elite investment house was cutting deals with high-flying firms whose lax standards would prove to be disastrous. Perhaps no lender was more emblematic of the subprime mortgage industry’s spectacular rise and fall than California’s New Century Financial.
Make sure you take a look at the pictures on the left hand side of the story with the classic captions such as:
Californians Irma Aninger and Melissa Toy, among risk analysts hired to review subprime mortgages before Goldman Sachs and other Wall Street firms bought them, said their supervisors routinely overrode their challenges to loans. Toy said she concluded that the reviews were mostly “for appearances,” because the Wall Street firms planned to repackage “bogus” loans swiftly and sell them as bonds, passing any future liabilities to the buyers. “There was nobody involved in this who didn’t know what was going on, no matter what they say,” she said. “We all knew.”
And…
“I don’t even know why I was there,” Aninger said, “because the stuff was gonna get pushed through anyway.”
Certainly interesting…. Contribute to home prices going up by providing junk loan originators with lax lending standards billions of dollars and then sell off the securities while betting on home values crashing.
Paul Francis, CRS
Prudential Americana Group – Realtors®
Las Vegas Real Estate – Summerlin Homes
702.592.3058
