Fascinating piece from the Wall Street Journal. For the quick and dirty version check out the slideshow of the story or the video below.

There’s a zillion similar stories of gross incompetence in the mortgage industry all the way from Main Street to Wall Street and the Journal did an entertaining job of bringing this one to life for us.

I prefer, however, their stories about how far home prices have fallen in Arizona because those stories make my phone ring with out-of-state inquiries about Arizona real estate.


When Wells Fargo sold Ms. Halterman’s loan to London-based HSBC, it got bundled with 4,050 other mortgages and used as collateral for a security issued in July 2007. More than 85% of the mortgages were, like Ms. Halterman’s, “subprime” loans to borrowers with blemished credit, according to Tom Atteberry of First Pacific Advisors LLC, a Los Angeles investment-management company.

Credit-ratings firms Standard & Poor’s and Moody’s Investors Service gave the new security their top “triple-A” ratings, which suggested investors were extremely likely to get their money back plus interest. S&P declined to explain its assessment. A Moody’s spokesman didn’t respond to requests for comment.

(Incredulous emphasis mine.)

Ms. Halterman says she wishes she had never taken out the first home-equity loan. “I felt like I needed it,” she says. “In retrospect, I needed my a — kicked.”

Mr. Rybicki gave up his mortgage-banking license in September. He now works for a venture-capital firm.

Added: Another comment on the story.