Mortgage-backed securities are often called “toxic debt assets” and they have wreaked havoc on the American public. From highly sophisticated day-traders to completely naïve investors, everyone has felt the devastating effects of mortgage-backed securities fraud.
Economists say that mortgage-backed securities caused our current economic crisis. Therefore, even non-investors have suffered from these toxic debt assets. If you believe that your financial damages were caused by mortgage-backed securities, fight to get your money back!
How Mortgage-Backed Securities Happened
It all started with mortgages, lots, and lots of mortgages. In and around 2002 to 2007, big banks were issuing unprecedented numbers of mortgage loans to American homebuyers. Not only that but immediately after issuing these loans, banks were selling the debt to other financial institutions.
Selling off the debt caused the following to happen:
- It allowed the lending banks to refill their coffers with a fresh supply of cash to make even more loans.
- It no longer mattered to the original lending bank if the borrowers actually paid back the loan. Another institution now owned the debt, so it wasn’t their problem anymore.
- Lending banks stopped caring about the credit-worthiness of the people they loaned money to. They started making very risky loans to people who didn’t have the ability to pay them back.
Soon, financial services companies like Lehman Brothers and Bear Stearns were buying up the ‘bad debt,’ leaving these banks with a lot of risky mortgage loans on their hands. In an effort to make the bad debt ‘disappear,’ Lehman Brothers, Bear Stearns, and other financial companies started repackaging it into what they called ‘mortgage-backed securities,’ then reselling the debt to the American public.
Financial services companies were doing everything they could to convince consumers that mortgage backed securities were safe and conservative. But this was a very big lie. They only wanted the American people to take these toxic assets off their hands.
A Deeper Layer of Complexity
To further hide the risks of mortgage-backed securities, financial institutions began to repackage shares of mortgage-backed securities into the second kind of investment called CDOs (Collateralized Debt Obligations). They also buried them inside bond funds, mutual funds, and other securities bundles.
It became impossible for investors to know what they were getting into when buying mortgage-backed securities or CDOs directly. And many investors had no idea these toxic assets were embedded inside their ultra-conservative bond funds and mutual funds. Even rating agencies were confused and started giving super safe ratings to investments that secretly contained mortgage-backed securities.
As 2007 approached, financial services companies like Lehman Brothers saw that the economic collapse was imminent and began selling this toxic debt to the American public more aggressively. As a result, millions of conservative investors unknowingly bought it up.
In the end, the owners of mortgage-backed securities and investments that contained these toxic debt assets lost big. Now, it’s clear that the biggest banks and brokerage firms on Wall Street purposefully constructed this massive conspiracy to fraudulently dump all this toxic debt onto the American people.
Do you suspect that you’ve been the victim of mortgage-backed securities fraud?
Know Your Rights
In most states, the Uniform Securities Act of 1956 protects victims of mortgage-backed securities fraud and gives them a way to fight to get their money back. Section 410 of the Uniform Securities Act holds a person or brokerage firm accountable who:
“Offers or sells a security by means of any untrue statement of a material fact or any omission to state a material fact…(the buyer not knowing of the untruth or omission)…and in the exercise of reasonable care could not have known, of the untruth or omission…”
Under Section 410, anyone guilty of breaking this law:
“…is liable to the person buying the security from him, who may sue…to recover the consideration paid for the security, together with interest…costs, and reasonable attorneys’ fees, less the amount of any income received on the security, upon the tender of the security and any income received on it, or for damages if he no longer owns the security…
Federal laws also protect victims of investment fraud. One of the most important ones, Section 10(b), Rule 10b-5 of the Securities Exchange Act of 1934, says this:
“It shall be unlawful for any person, directly or indirectly…
…(a) To employ any device, scheme, or artifice to defraud, (b) To make any untrue statement of a material fact…or (c) To engage in any act, practice, or course of business which operates or would operate as a fraud or deceit upon any person,
in connection with the purchase or sale of any security.”
(A) … No member may omit any material fact…if the omission…would cause the communications to be misleading.
(B) No member may make any false, exaggerated, unwarranted or misleading statement or claim in any communication with the public. No member may publish, circulate or distribute any public communication that the member knows or has reason to know contains any untrue statement of a material fact or is otherwise false or misleading.
Try and Get Your Money Back
Financial damages can be economically crippling but realizing you were lied to by someone you thought you could trust can be emotionally overwhelming. If you have fallen victim to this kind of fraud, it’s important to remember this is not your fault!
If you suffered investment declines because your brokerage firm hid facts from you about mortgage-backed securities, you deserve compensation for your damages.
Pursuing a stock fraud claim will teach Wall Street brokerage firms that it is unacceptable to prey upon innocent consumers. Your claim may even prevent others from suffering as you have by forcing Wall Street brokerage firms to conduct business with honesty and integrity.
You may be eligible to receive compensation regardless of whether you sold or continue to hold the securities at issue. Contact us today to set up a free consultation. We will listen to your story, answer any questions you may have and discuss your legal rights and options.