Case study: Tracking toxic assets

When homeowners can't make their mortgage payments, whoever is holding their loan takes a loss. So what's happening now to those controversial mortgage-backed securities made up of home loans that are worth far less than originally paid?

That's what two NPR reporters wanted to know, so they took the unusual step of using their own money to buy a share of a "toxic asset." Originally valued at more than $75,000 at the height of the housing boom, their slice of the bond cost just $1,000. The broker who sold it to them compared the bond to a cow with an injured leg: cheap, but possibly still capable of producing a calf or two.

In a story on Morning Edition, reporters Chana Joffe-Walt and David Kestenbaum describe their purchase as "our encyclopedia of the financial crisis."

Our toxic asset has 2,000 mortgages, many of them in hard-hit states like California, Arizona and Florida. A lot of the people in our bond are really struggling. Almost half are behind on their mortgage payments, and 15 percent of the homes are already in foreclosure.

When the homes in their bond portfolio are sold for a loss, the value of the bond shrinks. Eventually, it will disappear. But until it does, the reporters/bond-holders will be paid interest when people pay their mortgages.

Will the NPR reporters take a loss or make their initial investment back? Could they possibly make a profit? If they do, they've made it clear that the money will go to charity. Either way, they're tracking their toxic asset with a very cool interactive map and timeline. And they're trying to learn more about the stories behind the numbers, asking anyone who bought a home in 2005 in Sarasota, Fla., ZIP code 34232 to get in touch with them.  

Comments

Add Comment