Are banks greedy and selfish when they repo your car?

[halik]

Originally posted by: Thump553

Originally posted by: halik
Are you really still arguing with me (someone with finance and commercial RE background) just because Obama said hedge funds are bad?

When did Obama say hedge funds are bad?

Text

 

[halik]

Originally posted by: K1052

Originally posted by: halik

Originally posted by: K1052

Originally posted by: halik

Originally posted by: K1052

Originally posted by: halik

Originally posted by: K1052
We're not concerned with the entire commercial RE market in the whole country. We are concerned with these particular assets in their particular locations equipped to produce autos. Detroit (for example) has a vast tracts of industrial RE that the city would probably give you if you paid the tax liens.

I've got access to some Real Capital Analytics though work.
Here's $/sqft prices in detroit. Note that office space is up since mid-2007 and industrial is down some 30-35%. Still nowhere near 71% decline, which is why the creditors prefer the collateral.

office

industrial

One of my buddies works for a debt side hedge fund, I'll see if I can have him shoot me a graph of what Chrysler CDS were trading for the past couple months. That should put an end to all this conspiracy nonsense.

You yourself admitted personal knowledge that Ford, despite trying, has been unable to unload most of their plants. That's a clear concession that these assets are worth even less than the going average rates for their property category. So now we're going to dump a bunch more nearly identical assets into the same stagnant part of the market and pretend their values won't be affected?



Without knowing more specifics about the CDS transactions (who bought what, when, and for how much) it's going to be impossible to really get a handle on that situation until later. It definitely makes for a hell of a motivation though given the odds the bankruptcy court won't come back with a more favorable figure for the holdouts.

Yeah,
what I said implies that the market value of the plants was known in 2007 (ACH did manage to sell two or three and handed one back to ford) based on comps (ie precedent transaction).

In any case, both cerberus and debt side funds KNOW how to value collateral, they make living investing in secured debt.

When those bonds were revolved in 2007, the value of collateral was for all practical purposes equal the face value of the issue. Cerberus's incentive to do that is to minimize the interest they have to pay (the more collateral, the less interest needed), debt side funds' incentive is so they don't get burned in bankruptcy (aka make sure the collateral is worth what cerberus says its work...part of due diligence).

So it's totally impossible that the assets were overvalued at the peak of the lending orgy?

You've got the charts couple posts up, I don't see any crazy run up like in case-shiller indices.

Commercial real estate generally trends with the business cycle - good economy = lower unemployment = need for more office space = higher sq/ft prices. The "lending orgy" is far more relevant to residential properties, where everyone and their mom could get a 600K loan... it doesn't really make much sense to double your warehouse capacity (if you're utilizing only 50% of the current) just because chase bank will lend to you.

Are you really still arguing with me (someone with finance and commercial RE background) just because Obama said hedge funds are bad?

High valuations were in Cerberus' interest at the time and there were willing lenders so they loaded Chrysler up on debt not knowing the party would be over soon.

No, I actually have little love for either our previous or current president. I just don't' agree that 1) the 33 cent offer was totally unreasonable in the given circumstances 2) the motivations of the holdout funds are as simple as you represent 3) that killing Chrysler at this point and all the collateral damage is worth a few more potential cents on the dollar being paid to a group of minority creditors when there's a workable alternative on the table.

Right, at the same time the people buying their debt do due diligence to see whether the assets in collateral are actually worth what Cerberus says their worth. In the end the face value of the issue is collateralized by the same amount of assets, otherwise the issuer or the buyer would back out.


But the main point I want to get across is that it's IRRELEVANT whether you, I or Obama thinks that 33/29 cents on the dollar is a fair deal. The people whose opinion matters are the ones bearing the risk (aka debt holders); the market clearing price is determined by the people in the market, not outside. Had the 29/33 cent offer been a good deal, the debt holders would all jump on it w/o argument.

 

[Vic]

Green and selfishness have nothing to do with it. It's a fair exchange.

However, I have trouble feeling sorry for Chrysler and its investors.

 

[K1052]

Originally posted by: halik

Right, at the same time the people buying their debt do due diligence to see whether the assets in collateral are actually worth what Cerberus says their worth. In the end the face value of the issue is collateralized by the same amount of assets, otherwise the issuer or the buyer would back out.


But the main point I want to get across is that it's IRRELEVANT whether you, I or Obama thinks that 33/29 cents on the dollar is a fair deal. The people whose opinion matters are the ones bearing the risk (aka debt holders); the market clearing price is determined by the people in the market, not outside. Had the 29/33 cent offer been a good deal, the debt holders would all jump on it w/o argument.

If the lenders were looking at the assents on the assumption that they'd do nothing but increase in value they'd be less conservative. Of course nobody would ever make that mistake right?

The government and 70% of the secured creditors agree to the deal which likely be enough to force the deal through and bypass absolute priority. They have cash financing from the government, union concessions, and a buyer/operator waiting in the wings.

I think it highly unlikely that they're going to extract any more out of the court and they've managed to paint a huge bulls eye on their backs which Congress and the admin get to plink at. They've got the head of the SEC out there lobbying for broad oversight/regulatory powers and significant members of Congress nodding along.

 

[Blackjack200]

Originally posted by: halik

Originally posted by: Thump553

Originally posted by: halik
Are you really still arguing with me (someone with finance and commercial RE background) just because Obama said hedge funds are bad?

When did Obama say hedge funds are bad?

Text

those who held out for "an unjustified taxpayer-funded bailout" left bankruptcy at the last option to Chrysler.

Not "Hedge Funds are Bad".

These boards are as bad as they were during the campaigns.

 

[JeffreyLebowski]

Originally posted by: halik
I mean I'm making sacrifices in bankruptcy, shouldn't the banks do the same? Let me keep the car and just have me pay 30% of the value?

Yay populism!

It's ok, Obama will pay your car note, as well as your mortgage, but only if you're black and voted for him.

 

[piasabird]

Keep in mind that when the Bank seizes the Car or when you turn the car in willingly, the bank then sells the car at auction for whatever they can get. Then the person who borrowed the money is still responsible for paying the balance. No matter what the bank will try to recoup the loaned value.

 

[OVerLoRDI]

How about you only buy what you can afford.

 

[sapiens74]

whats funny is they will resell at a great loss before they negotiate a lower payment with you........

 

[Stuxnet]

Originally posted by: halik
I mean I'm making sacrifices in bankruptcy, shouldn't the banks do the same? Let me keep the car and just have me pay 30% of the value?

Yay populism!

It's not your car, it's theirs. Yay sense of entitlement and ignorance!

 

[Thump553]

Originally posted by: jbourne77

Originally posted by: halik
I mean I'm making sacrifices in bankruptcy, shouldn't the banks do the same? Let me keep the car and just have me pay 30% of the value?

Yay populism!

It's not your car, it's theirs. Yay sense of entitlement and ignorance!

Actually the ignorance is on your part. You own the car, the lender has a lien on it. Under bankruptcy law, if the value of the car is equal to $X and IF the bankrupt can come up $X in one lump sum, then the creditor has to release it's lien on the car-even if they are owed more than $X (the balance is an unsecured claim). Of course, that situation is extremely rare. The law doesn't allow the creditor to reposses the collateral just to be a prick/try to extort additional money.

And again I point that THIS IS NOT the fact sitation presented in the Chyrsler case and the OP initial statement is factually wrong. Apparently the OP is upset that the objecting creditors' claims are apparently only secured to 30% of the claim amount (if the gov't, Chrsyler & other 70% of secured creditors are to be believed-which is a matter of proof at this point). Holding your breath until your face turns red, or crying about unfairness, doesn't change what the facts are.

 

[Baltazar325]

Generally speaking if the car was purchased within 910 days of filing Bankruptcy (Ch13) The value of the car is deemed to be what you owe. If it's more than 910 days than the value is the fair market value and the difference between the FMV and what you owe becomes unsecured debt. Depending on the % of the 13 plan, that portion will be paid back the same amount as any other creditor.

I know that the OP was not really talking about this situation but that's some BK infor for you.

 

[Budmantom]

Originally posted by: halik
I mean I'm making sacrifices in bankruptcy, shouldn't the banks do the same? Let me keep the car and just have me pay 30% of the value?

Yay populism!

It sounds like you got a loan that you didn't fully understand, the banker was probably white and in an evil plot to make money off of you they want you to pay back all of their money plus interest, you probably didn't know that you were being conned into agreeing to pay all the money back. Sounds like the evil bank should write off your car and stop all those harassing phone calls.