Archive for November 22nd, 2010


Who Owns Blue’s Mortgage? Nobody Knows and BoA is Toasted

November 22, 2010

When mortgages are “securitized” by the banks that originate them (“sponsors”), such as Bank of America — whom we’re slowly learning, this weekend, due to developments in a New Jersey bankruptcy hearing last week, may have actually and completely fallen into the insolvency abyss — they’re subject to a “pooling and servicing agreement.” In lay-speak, these “pools” and/or “bundles of mortgages,” serve as the basis for what is known as “mortgage-backed securities,” or more correctly, “mortgage-backed securitizations” (i.e.: “MBS,” and/or “RMBS,” which are the initials for “residential mortgage-backed securitizations”). These MBS/RMBS are then sold off by special purpose vehicles/special purpose entities (“SPE’s,” “SPV’s”), licensed bond traders/trading firms, and investment trusts (entities that actually create the mortgage-backed securities and then sell them to others) to investors. (Diarist’s Note: This is the “Cliff Notes” version, and technically speaking, it’s not 100% accurate, since it’s considerably more complex than this.)

Even simpler – BoA sold phoney securtities and the buyers are due thier money back – which BoA has lost.