Chase’s putback nightmare
What would it mean to Chase if it were forced to take back $65 billion in securitized mortgages that it sold between 2005 and 2007? This is one of the nightmare scenarios hanging over the bank, according to The Economist:
Worse, investors in mortgage-backed securities (MBSs) are trying to make the banks that underwrote the deals buy them back at par. They have to do this if they breached assurances about the quality of the mortgages in the pool. So shoddily were these securities cobbled together in 2005-07 that analysts at Compass Point Research & Trading, a broker, reckon loan “putbacks” could cause more than $130 billion in losses, almost half of them to be borne by JPMorgan Chase and Bank of America (BofA), whose purchase of Countrywide greatly increased its exposure.
