Legends and tales taking blame for housing downturn

Lou Barnes of Inman News wrote an excellent Mortgage market commentary article last Friday ( click here ) where he says:

"Everyone is trying to form a housing forecast: how long, how deep, how bad will the collateral damage be? That is, everyone except for those who participated in the Great Derivatized Mortgage Train Robbery, who are doing their level best to keep everyone confused."

Here are a few of the Legends and Tales that Lou discusses in his article:

• Legend Number One: Loosened standards in late 2005 and 2006 are responsible for the subprime damage, which will be limited to those loans.
• Legend Number Two: Fraud by Main Street lenders has been the main problem.
• Tales of The West Number One: Housing will bottom out when home sellers finally reduce their prices enough.
• Tales of The West Number Two: Workouts, or negotiated loan modifications, will control the foreclosures.

According to Mr Barnes: "S&P and Moody's are soon to be exposed in the worst systemic rating error ever. They are going to have to re-rate hundreds of billions of new-age mortgage paper, forcing institutions to acknowledge losses beyond estimation, and in doing so will admit their own fiduciary failure: fee for blindness."

Click here to read the full article