From the NYT:
A subprime deal came back to haunt Fabrice Tourre, a former Goldman Sachs trader, when a federal jury in Manhattan found him liable for civil securities fraud.
He is not the only one feeling the pain of a subprime transaction six years on.
Hundreds of thousands of subprime borrowers are still struggling. Some of their mortgages ended up in another Goldman deal that was done at the same time as Mr. Tourre was working on his own financial alchemy.
In February 2007, just before everything fell apart, Goldman Sachs bundled thousands of subprime mortgages from across the country and sold them to investors. This bond became toxic as soon as it was completed. The mortgages slid into default at a speed that was staggering even for that era.
This is the story of one of those bonds, GSAMP Trust 2007 NC1.
The name is the sort of gobbledygook that is common in the bond market, but it tells a story. The “GS” is derived from Goldman Sachs. The Wall Street firm didn’t actually make mortgages to subprime borrowers that were in the deal. Instead, Goldman bought them from a lender called New Century, the “NC” in the title.
It was New Century that lent to Wendy Fillmore, when she and her husband wanted to buy their house in Las Vegas in 2006. The home cost $276,000. New Century provided two loans, one for a $221,000 loan and a second mortgage for $53,000. Data for the Goldman deal shows that it contains the Fillmores’ larger loan.
“I was wondering how we managed to get approved for as much as we did,” she said.
A month before Ms. Fillmore got her mortgage, Daniel L. Sparks, Goldman’s head of mortgages, wrote in an e-mail that he was a “bit scared” of New Century and had reservations about Goldman taking more loans from the lender. The e-mail was contained in materials released by Congress as part of an investigation of Wall Street.
Ms. Fillmore is still in her Las Vegas home. She estimates that the market value of the house is around half the combined value of her two mortgages.
Three-fourths of the borrowers in the deal have fallen well behind on their payments at some point, according to a special analysis of the deal performed by the Federal Reserve Bank of Boston. Many of those people have lost their houses or will lose them. Nearly half the loans in the bond have been in foreclosure proceedings since it was issued, according to the Boston Fed.
One of Mr. Sparks’s former Goldman colleagues is Jonathan S. Sobel, who also left Goldman in 2008 and is also a defendant in the federal action. A year ago, Mr. Sobel and his wife acquired a duplex apartment at 740 Park Avenue, one of the city’s most coveted addresses, according to New York property records. They paid $19.3 million.
The question today is whether loans like the one made to Mr. Haynes should ever have been put in the Goldman bond. Critics say the banks did not properly portray the full risks of the loans bundled into bonds.
One-fourth of the loans in the Goldman bond have been modified, according to the Boston Fed’s analysis. Not all of those succeeded, though. Of the 9,393 loans originally in the deal, 14 percent have been modified and are still current on their payments.
Today, the borrowers whose loans were put in the Goldman bond say they have been chastened by their experiences with debt.
“If I could take everything back, I never would have got involved,” Mr. Haynes, the Brooklyn resident, said.