During the mid-2000s, there was a housing boom in the United States, and mortgage lenders were eager to provide loans to people who could not afford them. This led to the proliferation of subprime mortgages, which were loans given to people with poor credit or low income and who were considered high-risk borrowers. To make these loans more attractive to investors, many mortgage lenders bundled them together and sold them as mortgage-backed securities to banks and other investors.
Foreign banks, including Deutsche Bank, UBS, and Credit Suisse, were among the major buyers of these mortgage-backed securities. These banks were able to purchase the securities through special investment vehicles, known as structured investment vehicles (SIVs), which allowed them to invest in subprime mortgages without having to hold them on their balance sheets.
However, many of these mortgage loans were fraudulent, with borrowers inflating their incomes or assets to qualify for loans they could not afford. Lenders were also engaging in fraudulent practices, such as falsifying loan documents or inflating home appraisals to increase the value of the properties. When the housing market crashed in 2008, many borrowers defaulted on their loans, and the value of the mortgage-backed securities plummeted, causing significant losses for the foreign banks that invested in them.
To mitigate their losses, these foreign banks foreclosed on homes and evicted homeowners, including Indigenous Americans, who had been victimized by fraudulent lending practices. In some cases, these foreclosures were carried out without proper documentation or legal authority, leading to allegations of foreclosure fraud.
The U.S. government’s response to this crisis was to provide bailout funds to many of the banks that had invested in these fraudulent mortgage-backed securities. The government also implemented new regulations and oversight of the mortgage industry to prevent similar abuses from happening in the future.
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