Will Hedge Funds Drive More Mortgage Fraud Litigation Against Big Banks?
Market based solutions. For some, it’s mantra. It now appears possible that hedge funds and other market based forces may drive additional mortgage fraud litigation against big banks. According to the story, some hedge funds are buying up binds after investigating the underlying mortgages, and finding massive flaws in the loans. According to the article:
"Still, the hedge funds say that the numbers are on their side. They contend that the sheer awfulness of the mortgage loans in the bonds gives them a solid chance of victory. Fir Tree, for instance, says that it has been involved in a review of over 40,000 loans. It claims to have found that, in certain bonds, as many as 98 percent of the mortgages had flaws that should have kept them out of the deals.
Because of the deep dives into the loan data, some mortgage bond analysts think the hedge funds’ lawsuits could fare well. “We definitely do think there will be positive resolutions,” Mr. Nikodem, the Nomura analyst, said. “The payouts will likely be higher than for Gibbs & Bruns.”