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Wall Street role in mortgage meltdown probed

At the height of the real estate boom, I know that somehow is going to burst. Many people I know who do not have the financial capability to pay a mortgage was able to buy a house. In less than a year, they were able to refinance. From the proceeds of the loan and debt restructuring, they paid some of their credit card bills. After the money dried up, they were faced with the problem where to get the money for the amortization which had already gone up.

Is this the reason why probe is conducted by the regulators? Read the excerpt and read the entire news here.

BOSTON - Regulators are trying to punish Wall Street for mortgage finance practices that expanded home ownership and spread risk among a host of new players — but also may have duped borrowers and investors who supplied cash to fuel a housing boom that's turned bust.

A handful of state securities regulators and a couple foreclosure-blighted cities have fired the opening shots with lawsuits trying to prove that investment banks and big lenders are guilty of more than just bad business decisions and failing to foresee looming mortgage troubles. Some regulators say greed and fraud underlie much of the subprime mortgage mess that has spread across the broader housing market, triggering a spike in foreclosures.

Aside from the civil cases, the FBI is looking at possible criminal action, focusing on what Wall Street firms knew about the risks of mortgage securities backed by subprime loans, and whether they hid risks from investors.

Labels: Real Estate

posted by cathy at 1:58 AM