Housing

Toxie Lives! (Maybe!)

Toxie's grave
Stephen Neary/Connie Li Chan/Robin Arnott

Toxie, Planet Money's pet toxic asset, died last year. But we learned today that she may rise from the grave.

And she could theoretically earn us $75,000 — which is astonishing, given that we bought her for only $1,000. If we do make a profit, all the money will go to charity.

Here's the story: Toxie was (is!) a mortgage-backed security — one of the complicated financial instruments that were the heart of the financial crisis. When we bought Toxie, we bought into a pool of thousands of mortgages around the United States.

This week, that particular pool became the subject of a lawsuit. (Here's the complaint; here's a WSJ story on the lawsuit.)

The complaint argues that the mortgages in the pool were a lot worse than they were supposed to be.

In a review of 786 mortgages, "an extraordinary sixty-six percent of the Loans breached one or more Mortgage Representations," the suit says.

One person who took out a mortgage claimed to earn $16,800 a month as a senior program administrator at a communications company. The lawsuit says documents show that the person actually was self-employed and had an income of $0.

Another borrower claimed to be a manager at a cell phone company. That person actually worked for a hotel company in housekeeping, according to a document cited by the lawsuit.

The loans were provided by Countrywide, which Bank of America bought in 2008. The lawsuit was filed by the trustee in charge of the mortgage pool. It asks Bank of America to buy back the mortgages at full value.

If that happened all the investors in the mortgage pool would receive the full face value of our toxic assets. In our case, that would be $75,000.

We'll keep you posted.

For More:

Here's a complete archive of our Toxie stories.

Here's a Reuters legal blog writing about the lawsuit.

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