Street Seeking to Get Handle on B&C Defaults

Wall Street wants to get its arms around rising subprime loan defaults as fast as possible so it can move forward with the least disruption to the markets, according to a loss mitigation firm hired to get a fix on polls of nonperforming mortgages.Jeffrey Taylor said clients that have hired his Orlando, Fla.-based firm, Digital Risk, "realize that they are a big part of the problem because they created the products" that have gotten many borrowers into financial difficulty. "They also realize that if they force lenders out of business [by requiring them to re-purchase delinquent loans], they have nothing," he added. "The message they want to convey to the investors who bought the bonds that are now being downgraded is that 'we know we erred, so here's the methodology we're going to use to project how new loans are going to perform during the next cycle'." Mr. Taylor would not reveal the name of Digital Risk's clients. But he said his firm has been hired to assess what went wrong with $30 billion worth of mortgage-backed securities. "Everything has happened so fast [our clients] don't have the infrastructure to wrap their hands around the problem," he said. "We're in a triage mode right now -- everybody is in a great panic."