The Wall Street Journal has a noteworthy investigation today, and one that I thought was worth flagging.
Essentially, it found the borrowers whose home mortgages were the underlying collateral in Goldman Sachs' Abacus 2007-AC1 CDO deal. That's the CDO that is now the subject of the SEC's civil-fraud charges against Goldman Sachs.
Finding these homeowners could not have been an easy process. The Journal looked through the Abacus pitchbook and found the 90 bonds that were in the portfolio. Then it matched them with "court records, foreclosure listings, title records, and loan servicing reports" to find the 500,000 mortgages that ultimately, hedge fund manager John Paulson bet against.
But he wasn't just betting against mortgages. He was betting specifically that those homeowners—or at least most of them—would not be able to pay their mortgages, resulting in losses significant enough to yield big profits through his credit default swap. And he turned out to be right. Many homeowners struggled to pay but couldn't. Paulson, as a result, made $1 billion off his bet against them.
The Journal found that of the 500,000 mortgages bundled and stuffed into that one CDO, more than half of them are "now in default or foreclosed." That's a lot of stories bundled into one complex, failed financial product.
rest at http://www.propublica.org/ion/blog/item/the-homeowners-whose-loss-was-paulsons-1-billion-in-gain#14804
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