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Whistleblower Speaks On Fraudclosure

whistle

...There is a lot of pressure to get the deals done in a timely manner so they don’t have time to check every asset. The most I’ve ever checked on a deal is 30%...

...I put together a large subprime deal where we said that the percentage of Stated income assets was 10%. Out of a pool of over 500 assets, we ran our due diligence and pulled a sample of 50 assets, we had over 25% of the assets come back as stated income. Well, we got another 50 assets and still came back with 22% stated. It was obvious to me and the underwriter that the stated income levels were higher than originally reported.

How did we handle this issue? We threw all the stated income assets out of the deal. In this case we threw out 22 assets and packaged the deal as 10%. In fact that is how we would typically handle issues where we had discrepancies. I told my boss on several occasions that it was a real fishy way of doing things, but as everyone was also doing it, my coworkers, the guys from Goldman, the agencies, I just kind of went along with it.

We securitized that deal and put 10% stated on the dealbook. S&P put their name on the package. Goldman underwrote that deal and sent it out to hedge funds and pension funds. What the hell? ...

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