The Subprime Debacle: Act 2

[Sam Spade]

This week's newsletter at this link.  The last half of it is particularly informative.

http://www.frontlinethoughts.com/gateway.asp

You have to enter your e-mail to get the full letter, but I've been following Mauldin for a while (as so has Beet) and his weekly e-letter is always worth the read, especially since it's free.

Ritholtz is right, btw - the chain of title issues can be fixed.  But more likely than not this fix blows up the big banks - Karl Denninger has pointed out why on his site.

Just FYI, I have already heard in the lawyer community in the past couple of weeks plenty of whispering about bringing these types of suits whole hog - they didn't care so long as the sole reward was that the displaced owner got back his home, which meant they would get nothing, but now that the potential for other damages arises, ears start pricking up.... 

[Mr.Phips]

Is this the "sh**t hitting the fan" that you were alluding to for much of 2009?

[Sam Spade]

Is this the "sh**t hitting the fan" that you were alluding to for much of 2009?

Probably - it explains a lot about why things blew up in the first place, but more importantly why it's taken so long (and will continue to take more time - "sh**t hitting the fan" is not happening yet, at all) for the whole edifice to fall apart.  Even though so many loans were/are delinquent, the MBS holders continued to receive cash flow and did not blow apart as the actual numbers suggested they would - those types of discrepancies are rarely based on "luck".  It also dates all the fraud back to the mid-1990s or so, when MERS and hardcore securitization of mortgages begins in real earnestness.