The hits just keep on coming in the subprime news. This Bloomberg article:
U.S. Stocks Decline; Wells Fargo, Fannie Mae, J.C. Penney Drop
contains the following paragraph:
The S&P 500 Financials Index of 93 companies also dropped after Deutsche Bank AG, Germany's biggest bank, lost an effort to foreclose on 14 properties because a federal judge in Cleveland found the bank hadn't proved that investors in the underlying mortgages actually owned them. The ruling, if adopted by other federal courts, may complicate efforts by investors in mortgage securities to foreclose on non-paying loans.
The tricky slicing and dicing of mortgages that goes on in modern asset backed finance definitely clouds the issue of who actually owns the mortages and can therefore foreclose on those that don't perform. I do not have legal training but this smells like a real tarbaby for the justice system and the institutions holding this paper.
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