Asset Backed Securities, Collateralized Debt Obligations & Residential Mortgage Backed Securities
Almost every business magazine has run a headline that reads something like, “How Wall Street Destroyed the Economy.” No other instruments were more responsible for the myriad economic problems than asset backed securities and collateralized debt obligations.
These instruments are largely to blame for many of the investor losses. Zamansky & Associates handles many investor claims involving asset-backed securities, collateralized debt obligations, residential mortgage backed securities and frequently lend our expertise to media who are writing news articles about them
An asset-backed security is a type of debt security that is based on pools of assets, or collateralized by the cash flows from a specified pool of underlying assets. Collateralized debt obligations (CDOs) are a type of asset-backed security and structured credit product. CDOs are constructed from a portfolio of fixed-income assets. These assets are divided into different tranches: senior tranches (rated AAA), mezzanine tranches (AA to BB), and equity tranches (unrated).
A residential mortgage backed security (RMBS) is a structured financial product which is based on a pool of underlying residential mortgages.
Wall Street created these instruments originally to help finance the loans made to homeowners, but quickly learned they could use these instruments to goose their own earnings. Trillions of dollars worth of asset-backed securities and CDOs were underwritten, bought and sold since the late 1990s.
Many of these securities were tied to homeowners with risky profiles and subprime loans, however bond agencies failed to recognize the risk until it was too late. Unfortunately, many investors were unwittingly exposed to these risks through their fixed-income investments and funds, financial stock holders, real estate investments, auction rate securities portfolios and money market funds.
Zamansky & Associates represents investors with claims and losses due to inappropriate exposure to asset backed securities and collateralized debt obligations. Many of which had no idea they were invested in these securities and were told their investments were “safe” and “conservative.”
A financial adviser or broker has a fiduciary responsibility to only recommend investments that are suitable to their clients’ risk profiles. Asset backed securities and CDOs are entirely inappropriate for many of these investors and they are entitled to retribution through securities arbitration.