Very few people understand the Derivative Markets and the Community Reinvestment Act.
An ACORN attorney sued a Chicago Bank for not implementing the CRA and won by design.
This forced banks like WaMu to make loans to unqualified borrowers.
Therefore RMBS/CMBS were created to sell the mortgages into the market as securities, which took the loans off the books of the bank, and the securities were insured against losses from derivatives like CDS/CMO.
Therefore no loss to the RMBS/CMBS investors, or the banks that invested in the offering
The Banks bought one another’s offering to remain in the cash flow.
Security investors topically received three payments; Two interest payments and one performance payment at the end of the year. Topical performance payments were ~$230 for P’s.
WMIIC, It gets better; WMIIC invested in the offerings and passed on the cash flow to WMBfsb. That’s why WMBfsb had $40 Billion after the ‘run on the bank’.
The Derivative contract writer’s still needs to cover the Trusts losses.
Putback’s; The Securities were overfunded by a factor of two(2) as proven by the WMB Notes and Preferred Funding. Therefore the defaulting loan is replaced from within the Trusts and not the offering banks.
According to the FDIC “WMB Securitized $2 Trillion in RMBS of which $500 Billion was sold to F&F”.
WMI/WMB never offered $2 Trillion in securities. Proof that the securities are overfunded.
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