It had believed that borrowers broadly could afford the loans. One loser in the deal, German bank IKB Deutsche Industriebank AG, saw most of its $150 million Abacus investment evaporate. Booket couldn’t make their monthly mortgage payments. Rather, he used Wall Street to help structure hugely lucrative side bets that homeowners such as Mr. Paulson placed on Abacus didn’t affect whether or not homeowners defaulted. Paulson didn’t have any direct involvement in the mortgages contained in the Goldman deal under scrutiny by the Securities and Exchange Commission. More than half of the 500,000 mortgages from 48 states contained in the Goldman deal-known as Abacus 2007-AC1-are now in default or foreclosed. Booket, who had refinanced his mortgage just months before the accident. “The man came up with a scheme to get rich, and he did it,” says Mr. In October 2008, he lost the house to foreclosure and plans to move out by next week. Booket got hit by a car while riding a motorcycle from a late-night party, was unable to find much work and couldn’t pay the bank. The hedge-fund manager invested heavily in a form of insurance that could yield huge gains if the borrowers grew unable to pay. His house was one of thousands that wound up in a pool of mortgages that were referenced in the so-called collateralized debt obligation, or CDO, which Goldman created for Mr. Booket, a 44-year-old heating and air-conditioning repairman, owed $300,000 on his three-bedroom home in Aberdeen Township. David Lau for The Wall Street JournalA $652,500 mortgage on this home in Middletown, N.J., was among the nearly 500,000 loans, spread across 48 states and the District of Columbia, on which investors in Abacus made their bets.
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