Sad tale of a Merrill Lynch securitization

The New York Times offers an arresting story about an emblematic Merrill Lynch securitization in 2006. The securitized securities were so-called piggyback loans--that is, second mortgages usually for about 20 percent of the value of a home. Borrowers used piggybacks to get away with putting no money down. Did you hear me? NO MONEY DOWN. Just like the commercials scream. Almost all had loans for the remaining 80 percent. The originator was the infamous, now defunct Ownit Mortgage Solutions, in California. The Times notes that the piggyback loan borrowers were quick to default, which rippled through the CDOs that invested in the securities, which hit the investors, including mutual funds, that bought the CDOs. Moody's eventually got around to downgrading the securities from Aaa to Baa2. What a time it was. Merrill Lynch, of course, wasn't alone in packaging and selling such stuff.

For more:
- here's the New York Times article

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