Banks trying to Cut Deal with Regulators over Mortgage Bond Deals

Representing Investors Nationwide

Several major Wall Street banks are in preliminary discussions with securities regulators to put an end to a probe involving the sale of pools of mortgages and other loans called “collateralized debt obligations.” (CDOs) and “collateralized mortgage obligations (CMOs). These investment vehicles set the recent financial crisis in motion and almost collapsed the U.S. financial system.

The mortgages were pooled together and then sliced up into tranches for sale to various investors, often with a credit rating that did not adequately reflect the risk associated with the investment. Unfortunately, many of these CDO investments ended up in the hand of individual investors who were looking for conservative, income producing vehicles. When the real estate and credit markets collapsed, they discovered they were holding anything but a conservative investment.

Many of these investments were at the route of bond fund collapses such as the Regions Morgan Keegan (RMK) bond funds, the Oppenheimer Champion Fund, and the Evergreen Short-term Bond Fund. Also, investments in the debt securities of financial institutions such as Lehman Brothers Holdings, UBS Structured Notes, Fannie Mae, Freddie Mac and Bear Stearns collapsed from the weight of poorly performing sub prime mortgages.

If you lost money as a result of an investment in mortgage related investments, please contact our office for a free case evaluation.