I do not believe in the criminal aspect of this mortgage toxicity madness. Countrywide Chief Angelo Mozzarella brags of underwriting an FHA loan better then anyone and he can.
However, the securities were structured to appear to have all the fat cut out of them.
Rating agencies could provide the highest possible rating to a class of securities now in spite of the looming risks. Problem is that a senior class of stock (or debt CDO) was now the senior piece of the senior piece of a senior piece. Cut the M&Ms into 5ths and the value of the bunch is still the sum. Not a crime. But the illusion of maintaining a pool under 80% CLTV while selling off the toxic piece of the 80-20…(2nd’s) could be highly negligent.
Employing a strategy like the advent of over collateralizing issuance’s whereby the Lenders residual income would be further drawn out to sustain the “real’ anticipated losses from the seconds…that would be a misdemeanor.
But if the Depositor (Lender) was then dumping junk, hard money loans to meet yield and generate fees while knowing the loan had no chance to repay and figuring their residual piece was worthless.
That is the Alcatraz piece of the puzzle. Does my mind wonder? Not really …I just listened to a lot of investment bankers who were frustrated with the structuring and who felt the same way! Fact!