Financial Armageddon: "Unhappy buyers of subprime mortgages (CDO) ...
In "Investors Press Lenders on Bad Loans," the Wall Street Journal's Ruth Simon reports on the nascent beginnings of what is likely to be a increasingly nightmarish legal tsunami.
Buyers Seek to Force Repurchase by Banks; Potential Liability Could Reach Billions
Already burned by bad mortgages on their books, lenders now are feeling rising heat from loans they sold to investors.
Unhappy buyers of subprime mortgages, home-equity loans and other real-estate loans are trying to force banks and mortgage companies to repurchase a growing pile of troubled loans. The pressure is the result of provisions in many loan sales that require lenders to take back loans that default unusually fast or contained mistakes or fraud.
The potential liability from the growing number of disputed loans could reach billions of dollars, says Paul J. Miller Jr., an analyst with Friedman, Billings, Ramsey & Co. Some major lenders are setting aside large reserves to cover potential repurchases...."
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