Mortgages Loan Payments
HARVARD JOHN M. OLIN CENTER FOR LAW, ECONOMICS, AND BUSINESS LEGAL AND ECONOMIC ISSUES IN LITIGATION ARISING FROM THE 2007-2008 CREDIT CRISIS Jennifer E. Bethel Allen Ferrell Gang Hu October 23, 2008 Discussion Paper 02/2008 Revised 10/2008 Harvard Law School Cambridge, MA 02138 This paper can be downloaded without charge from: The Harvard John M. Olin Discussion Paper Series: http://www.law.harvard.edu/programs/olin_center/ The Social Science Research Network Electronic Paper Collection: http://papers.ssrn.com/ This paper is also a discussion paper of the John M. Olin Center’s Program on Corporate Governance. LEGAL AND ECONOMIC ISSUES IN LITIGATION ARISING FROM THE 2007-2008 CREDIT CRISIS Jennifer E. Bethel* Allen Ferrell** Gang Hu*** ABSTRACT This paper explores the economic and legal causes and consequences of the 2007-2008 credit crisis. We provide basic descriptive statistics and institutional details on the mortgage origination process, mortgage-backed securities (MBS), and collateralized debt obligations (CDOs). We examine a number of aspects of these markets, including the identity of MBS and CDO sponsors, CDO trustees, CDO liquidations, MBS insured and registered amounts, the evolution of MBS tranche structure over time, mortgage originations, underwriting quality of mortgage originations, and writedowns of the commercial and investment banks. In light of this discussion, the paper then addresses questions as to whether these difficulties might have been foreseen, and some of the main legal issues that will play an important role in the extensive litigation (summarized in the paper) that is underway, including the Rule 10b-5 class actions that have already been filed against the banks, pending ERISA litigation, the causes-of-action available to MBS and CDO purchasers, and litigation against the rating agencies.
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