What Lurks in Bonds Tied to Subprime Autos Anyone’s Guess
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The U.S. housing crisis laid bare an epidemic of fraud and sloppy paperwork on loans made to home buyers with spotty credit. For those who bought bonds backed by the mortgages, it fueled at least $250 billion of losses.
Six years later, investors are snapping up a new crop of subprime bonds, this one backed by auto loans. Ratings companies are awarding top grades to the securities, and buyers have almost no way to determine the accuracy of the information they get about them. Now, the market’s drawing scrutiny as the U.S. Justice Department probes underwriting and disclosure practices and the U.S. Securities and Exchange Commission seeks to ensure investors get adequate information.