The collateral behind them ranges from safe, government-backed mortgages to risky subprime debt.
The fund collaborated with the Russian government and Fannie Mae to structure a law establishing private-property underpinnings for asset-backed mortgages.
Branch manager Rodney Lewis says two factors are bringing home buyers back to the market: historically low interest rates, around 6 percent for a 30-year loan, and higher limits on government-backed mortgages, which makes banks more likely to lend.
Yields on supersafe Fannie Maes or AAA-rated bonds backed by mortgages on commercial buildings are 6.2%, and junk backed by commercial mortgages can pay more than twice that.
When many borrowers were unable to pay their mortgages, the securities backed by the mortgages quickly lost value.
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Writing down taxpayer-backed first mortgages without extinguishing bank-owned seconds is both politically dicey and an inversion of property rights.
The move is likely to generate criticism from investors who own securities backed by mortgages that could be affected by the settlement.
Some are looking at the way banks packaged and sold securities that were backed by mortgages, others are looking at how defaulting homeowners were denied loan modifications and some regulators are investigating whether homeowners were forced out of the their homes improperly by so-called robo-signers.
With the majority of CDOs being backed by mortgages, the principal-only tranche has a known future cash flow, but at a variable rate of return, while the interest-only tranche has both an unknown cash flow and an unknown rate of return on that cash flow.
Fear is also carving out opportunity in securities backed up by mortgages on commercial real estate.
The two funds had a high level of exposure to bonds backed by subprime mortgages.
Foreclosures on mortgages backed by Fannie Mae and Freddie Mac increased 21% in June from May.
Up until last year, investors around the world couldn't get enough securities backed by American mortgages.
But in recent years the bond insurers started to guarantee complex securities backed by home mortgages.
Lehman Brothers has tried unsuccessfully to sell a pile of iffy securities backed by commercial mortgages all summer.
Murin, the former president of Ginnie Mae, a government-owned corporation that guarantees payments on mortgages backed by federal agencies.
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The group said it had continued to adopt a "prudent approach" to lending, with all residential mortgages backed by savers' deposits.
Ms. JAMIE PETERS (Equity Analyst, Morningstar): A lot of their write-downs at Citigroup and the others have talked about are actually write-down on very complicated securities backed by subprime mortgages.
How could men and women paid fortunes for their judgment have continued, as late as 2008, to package, repackage, and sell billions of dollars in bonds backed by subprime mortgages?
The financial industry lobby worked aggressively to make sure the plan included indemnification for them so investors of bonds backed by these mortgages won't sue them after lenders change the terms of the loans.
Similarly, near-money is created when one party creates a derivative and sells it to another, often with little if anything in reserve, as we've seen with the collapsing collateralized debt obligations backed by subprime mortgages.
Freddie Mac ( FRE - news - people ), one of the largest providers of funding for U.S. housing, is set to break ground on its first bond backed by commercial mortgages, according to Thomson Reuters.
Included were a vastly beefed up Community Reinvestment Act, actual or threatened discrimination suits by Justice and HUD to enforce regulatory requirements, and regulatory mandates on Fannie Mae and Freddie Mac to finance trillions in mortgage securities backed by subprime mortgages.
FORBES: President Obama Offers A Repeat Of His Same Failed Policies
The government, as owner of mortgages and mortgage backed securities, will be allowed to make loan modifications by lowering principal and interest rates on mortgages, or extending the life of the mortgage.
At the core of the market mess are securities that were backed by extremely risky mortgages.
The only reason it did was because of mortgages being backed by the Federal Govt.
CDOs have helped fuel the boom in housing and are backed by junk bonds, leveraged loans, asset-backed securities (like mortgages), credit default swaps--and who knows what else.
And third, every securitization was certified by a Trustee who claimed to have all relevant documents, including the wet ink notes, related to the mortgages that backed up the securities.
FORBES: Attorney General Eric Schneiderman Goes After Bank Fraud
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