Mortgage Help Rip-Off

[Vic]

Originally posted by: techs

Originally posted by: Vic

Originally posted by: Lemon law
The Vic position is---And really, the "insufficient government regulations of markets" card doesn't fly here. First, it's just rhetoric for pushing through new legislation designed to close the barn door after the horse has already gotten out, which will only worse the problem. Second, requiring lenders by law to prove the type of income documentation in ALL cases, like you would support, unfairly harms self-employed borrowers who can't just provide a corporate paystub and VOE on demand. And third, the interest rates on the ARMs were never "kited." They are based on fixed margins and prominent market indexes, terms of which are fully disclosed as required by existing regulation going back more than 30 years. All these borrowers had to do was actually READ before they signed.

The point being, long before this crisis became a crisis, responsible people in the industry were begging for these regulations. So its hardly locking the barn door after the horses got out. All these lenders had to do is read between the lines to see this crisis was being made inevitable. As it is, most of the irresponsible lenders got in and out before the bottom dropped out. Blaming irresponsible buyers is only part of the problem. Sound regulation beforehand could have prevented much of the grief.

Blame the buyer is always the free market argument against sound regulation. Well, the free markets ain't working very well. Irresponsible lenders are also to blame. And its hurting everyone and effecting the economy. And if it cause layoffs, formerly responsible buyers will start to default also as they made a bet on a sounder economic future.

Could you possibly be anymore vague, anymore unknowledgeable about the industry, or possibly misinterpret my position any worse? Seriously. Your empty rhetoric and baseless accusations are not going to fly here.

Will you ever intelligently reply to an excellent post with anything more than "I know better" and just a blanket condemnation without ANY sort of reasoning?
I doubt it.

It wasn't an excellent post, except to people who think that blogs consist of the sum of all knowledge.

Keep in mind that it began when he made the patently false accusation that a lack of adequate regulation allows/allowed "greedy lenders" to "kite" (arbitrarily raise) the interest rates on ARMs. And that when I pointed out that that is factually false, he accused me of having a "blame the buyer" mentality and defending "irresponsible lenders" who somehow by his logic " got in and out before the bottom dropped out" by imploding last year Text.
And all this in a thread where the topic is about how major mortgage lenders are writing off billions in order to stem the tide of foreclosures.

Oh and BTW, his cry for new regulation has nothing whatsoever to do with ARMs, but with a multi-state agenda to cut the self-employed out of the market with new income documentation requirements beyond what most of those borrowers will be capable of providing.
So really, STFU when you have no clue what you're talking about.

 

[Vic]

Originally posted by: techs
No the time to act is when the situation has not been corrected.
Which is NOW.

You mean the time for you to kneejerk is now. :roll:

The "irresponsible" lending situation has already corrected itself, albeit too late. Don't believe me? Call around and try getting one of those loans now. Seriously, I dare you. The horse has already left the barn.

 

[imported_gardener]

By failing to foreclose, the banks put shareholders at increasing risk as each day passes.

The "irresponsible lending situation" [sic] will not be corrected until that happens, Vic.

 

[Slew Foot]

Reading more into the "plan" the more stupid I think it is. A 30 day window to refinance a 90day late mortgage? hah, if youre 90 days late on the mortgage, youre very likely to be in a shitty situation to begin with and not be able to refi anyway.


Here's a novel idea, let prices of homes fall to the point where you dont need some mystical loan product to be able to afford it. It wont affect people who bought before the bubble, as they bought their homes cheap, it wont really affect the majority of people who bought during the bubble and can keep up with the payments, and the people who lose their homes to foreclosure? They can buy it back in a few years at half cost.... and this time keep it.

 

[Vic]

Originally posted by: gardener
By failing to foreclose, the banks put shareholders at increasing risk as each day passes.

The "irresponsible lending situation" [sic] will not be corrected until that happens, Vic.

Yeah well, corporate shareholders are infamous for their shortsightedness. Hell, Wall Street is more responsible for this mess than the banks are. Take note who made, bought up, and is still holding most of the subprime paper.

 

[Corn]

Originally posted by: gardener
By failing to foreclose, the banks put shareholders at increasing risk as each day passes.

The "irresponsible lending situation" [sic] will not be corrected until that happens, Vic.

O for crying out loud. A mass of foreclosures flooding the market in a short time span only increases the losses incurred by the lender (and shareholders). Spreading out the cost of today's foreclosures over the period of possibly several years (including leveraging those future years depreciated dollar's) hardly puts shareholders at increased risk. :roll:

 

[Jhhnn]

Meh. It's just part of the "orderly unwinding" that lenders want to achieve. It softens the blow to them, spreads it out over time. It won't really change the ultimate outcome for many troubled borrowers. When their new rescue loan expires a few years from today, they'll still be screwed, because they paid too much and valuations will likely have fallen further in the meanwhile...

Some will be able to refinance thru a govt insured agency, like the FHA, which puts the risk off on the taxpayers instead of the lenders... some will get ahead at work and be able to sustain their obligations... the rest? figure it out...

Keeping people in their bubble-priced homes benefits the lenders more than anybody else. And Vic's right to some extent about re-regulation- it'll just make the situation worse if implemented now. The whole economy depends on the lending institutions, so they're basically holding us all hostage at the moment. Methods of preventing furure imbroglios need to be examined once the situation cools. If that turns into a bailout, and it may, then yeh, re-regulation will obviously be part of the equation. If de-regulation works as advertised, then we won't have to bail them out, right?

OTOH, if they teeter over the edge after new regulations, why, they'll just blame the regulations, right?

Anybody else notice the # of prime mortgages mentioned in the article? It's not just about subprime, at all....

 

[imported_gardener]

Originally posted by: Corn

Originally posted by: gardener
By failing to foreclose, the banks put shareholders at increasing risk as each day passes.

The "irresponsible lending situation" [sic] will not be corrected until that happens, Vic.

O for crying out loud. A mass of foreclosures flooding the market in a short time span only increases the losses incurred by the lender (and shareholders). Spreading out the cost of today's foreclosures over the period of possibly several years (including leveraging those future years depreciated dollar's) hardly puts shareholders at increased risk. :roll:

Why forestall foreclosure in an overbought market?

 

[dmcowen674]

Originally posted by: Jhhnn
Anybody else notice the # of prime mortgages mentioned in the article?

It's not just about subprime, at all....

Just another massive GOP cover up.

What was it 900+ times lied about WMD?

How many times will the "Sub Prime" lie be uttered by GOP supporters?

 

[Corn]

Originally posted by: gardener

Originally posted by: Corn

Originally posted by: gardener
By failing to foreclose, the banks put shareholders at increasing risk as each day passes.

The "irresponsible lending situation" [sic] will not be corrected until that happens, Vic.

O for crying out loud. A mass of foreclosures flooding the market in a short time span only increases the losses incurred by the lender (and shareholders). Spreading out the cost of today's foreclosures over the period of possibly several years (including leveraging those future years depreciated dollar's) hardly puts shareholders at increased risk. :roll:

Why forestall foreclosure in an overbought market?

I thought I just explained why.

 

[LegendKiller]

Ahh, armchair financial experts who read blogs and msnbc, thinking that after they do, they can handily and knowledgably assign blame with edict like power.


Who is to blame? All are to blame. Greedy borrowers, greedy lenders, greedy mortgage brokers, greedy assessors, greedy bankers, greedy investors.

Nobody is without blame.

I used to think that we should just take the pain and get it over with. However, the amount of turmoil that would cause is pretty massive and I didn't realize it until the last 6 months or so. Some will decry me as an insider protecting my own interests. However, I have seen what this stuff does to the financial markets and it isn't pretty. Taking some time to get a softer landing is certainly the better policy.

 

[Jhhnn]

From Gardener-

Why forestall foreclosure in an overbought market?

I suspect that it's like the LTCM situation in 1998- the lenders are horribly overextended. If forced to absorb the losses as they occur, they'll move from a liquidity crisis to a solvency crisis rather quickly. The whole thing is really huge, and our economy depends in no small way on banking and investing institutions, which simply can't be allowed to fail en masse. Consolidation of the industry into fewer and fewer entities over the last 20 years or so just makes the situation more dangerous...

That's just one outsider's opinion, of course. If it were all just business as usual, they'd toss the losers under the bus, drive on... except the bus seems to be stuck...

 

[LegendKiller]

Originally posted by: Jhhnn
From Gardener-

Why forestall foreclosure in an overbought market?

I suspect that it's like the LTCM situation in 1998- the lenders are horribly overextended. If forced to absorb the losses as they occur, they'll move from a liquidity crisis to a solvency crisis rather quickly. The whole thing is really huge, and our economy depends in no small way on banking and investing institutions, which simply can't be allowed to fail en masse. Consolidation of the industry into fewer and fewer entities over the last 20 years or so just makes the situation more dangerous...

That's just one outsider's opinion, of course. If it were all just business as usual, they'd toss the losers under the bus, drive on... except the bus seems to be stuck...

The "lenders" in a general sense is everybody. The problem right now is one of valuation. Because liquidity is so scarce for many of the worst subprime bonds, spreads, the interest rate charged, has gone up. Since the banks hold these for-sale, they must revalue them according to the new interest rates, which decrease their prices.

What's going on is a deleveraging on a global scale, which requires time. Who knows how long it will last, but it will take a while and will be painful. However, once it occurs the snap-back will be quick.

One thing to keep in mind is that since the losses on the subprime assets aren't actual principal losses , just mark to market losses, means that they will be revalued up eventually. That means that most, if not all, of the losses incurred because of the devaluation will be re-recognized and windfall profits will occur.

 

[1EZduzit]

Originally posted by: Corn

Originally posted by: gardener

Originally posted by: Corn

Originally posted by: gardener
By failing to foreclose, the banks put shareholders at increasing risk as each day passes.

The "irresponsible lending situation" [sic] will not be corrected until that happens, Vic.

O for crying out loud. A mass of foreclosures flooding the market in a short time span only increases the losses incurred by the lender (and shareholders). Spreading out the cost of today's foreclosures over the period of possibly several years (including leveraging those future years depreciated dollar's) hardly puts shareholders at increased risk. :roll:

Why forestall foreclosure in an overbought market?

I thought I just explained why.

The need to "spread it out" on their own dime. Someone's misfortune is sonebody else's opportunity, that's the way our "free markets" are supposed to work.

 

[theeedude]

It's like trying to stop the rain. As someone with high and stable income waiting for this market correction to happen before buying a house, these tricks by the government are simply delaying me moving into a house I can afford so that people who can't afford it can continue living there. Many responsible buyers will remain on the sidelines until this correction is allowed to happen. I am not dumb enough to buy a house whose value is being artificially supported through government intervention, knowing full well that this support will disappear as soon as the political season is over, and then I will be able to buy the same house for much less.

 

[Vic]

There is no government bailout here. The role of the government here has been to get the banks to the table to do something about the problem. That is it. The banks are taking their own losses.

 

[Corn]

Originally posted by: 1EZduzit

Originally posted by: Corn

Originally posted by: gardener

Originally posted by: Corn

Originally posted by: gardener
By failing to foreclose, the banks put shareholders at increasing risk as each day passes.

The "irresponsible lending situation" [sic] will not be corrected until that happens, Vic.

O for crying out loud. A mass of foreclosures flooding the market in a short time span only increases the losses incurred by the lender (and shareholders). Spreading out the cost of today's foreclosures over the period of possibly several years (including leveraging those future years depreciated dollar's) hardly puts shareholders at increased risk. :roll:

Why forestall foreclosure in an overbought market?

I thought I just explained why.

The need to "spread it out" on their own dime. Someone's misfortune is sonebody else's opportunity, that's the way our "free markets" are supposed to work.

What makes you think they are not spreading it out on their own dime? As previously discussed in this thread, there is no bail out.

 

[LegendKiller]

Originally posted by: 1EZduzit

Originally posted by: Corn

Originally posted by: gardener

Originally posted by: Corn

Originally posted by: gardener
By failing to foreclose, the banks put shareholders at increasing risk as each day passes.

The "irresponsible lending situation" [sic] will not be corrected until that happens, Vic.

O for crying out loud. A mass of foreclosures flooding the market in a short time span only increases the losses incurred by the lender (and shareholders). Spreading out the cost of today's foreclosures over the period of possibly several years (including leveraging those future years depreciated dollar's) hardly puts shareholders at increased risk. :roll:

Why forestall foreclosure in an overbought market?

I thought I just explained why.

The need to "spread it out" on their own dime. Someone's misfortune is sonebody else's opportunity, that's the way our "free markets" are supposed to work.

They are doing it. Are you blind to the $130bn in losses already taken by everybody? Get a clue.

 

[Jhhnn]

Nice bit of PR, Legend Killer. Some of what the banks claimed was worth a dollar won't sell for a dime today, and we both know it. That's particularly true of "seconds", the 20% portion of 80/20 short term financing. Can't give it away. So they're stuck holding it.

I'll agree that what we're seeing is deleveraging on a global scale, but I'm not so sure that the rebound will be quick, at all. It certainly hasn't been for Japanese real estate, nor do I see any reason for American real estate to behave much differently. This country has traditionally supported median home prices ~4X the median income, with appropriate regional adjustments. In the worst bubble markets, the median price rose to 8X or 9X the median income, which is simply unsupportable. Most homeowners, even in non-bubble areas, couldn't afford to buy the house they live in at today's prices, and many who bought or refinanced recently will discover that they can't afford it, either... I don't buy the whole "windfall profits on the rebound" scenario, at all, unless the median income increases radically and lending returns to the lax standards (standards? we call that standards?) of the last several years. Fat chance of either...

The whole scenario is basically a house of cards, with all the players depending on their ability to offload liability onto the next guy down the chain. When the pipeline locked up, and offloading stopped, the remaining liabilities are more than can be supported by the structure of the whole edifice, particularly if they come all at once...

The system has huge hidden liabilities, as well. When the investment bank creates a hedge fund, for example, loans it the money to begin operations in an attempt to attract investors, the operations of that fund move outside the purview of regulators. That fund can further leverage itself in any manner that investors can be induced to buy, except that other investors are often other investment banks... that's what happened with the Bear Stearns funds. When Merrill called their notes, the fund collapsed, and even though Merrill had originally planned to sell off the assets, they found out that they couldn't support the losses it would entail. Catch-22... Much the same can be said of the buyout of Countrywide, where BOA had to suck it up, buy the loser, because they couldn't allow the assets to be liquidated on the open market... it would have re-valued their securities at a truly dismal price, one that would ruin them and a lot of others...

 

[LegendKiller]

Originally posted by: Jhhnn
Nice bit of PR, Legend Killer. Some of what the banks claimed was worth a dollar won't sell for a dime today, and we both know it. That's particularly true of "seconds", the 20% portion of 80/20 short term financing. Can't give it away. So they're stuck holding it.

So what if they are stuck holding it? It's worth a lot more than a "dime", often times the unsellable assets are worth a lot more than that. In fact, the vast majority of it is worth par. However, due to liquidity, they have to be valued at a lot less. The basic fact is that most of it is still worth the principal value, even if they are marked at 50%, they will most likely see 80%+ income realization, so they'll have to revalue them up. It's not just seconds, but also sub tranches. Nice try at putting it all in one bucket though. I have studied bank balance sheets pretty well and I also know what the SIVs have been holding to a great extent. You're forgetting that I am trained to do this.

I'll agree that what we're seeing is deleveraging on a global scale, but I'm not so sure that the rebound will be quick, at all. It certainly hasn't been for Japanese real estate, nor do I see any reason for American real estate to behave much differently. This country has traditionally supported median home prices ~4X the median income, with appropriate regional adjustments. In the worst bubble markets, the median price rose to 8X or 9X the median income, which is simply unsupportable. Most homeowners, even in non-bubble areas, couldn't afford to buy the house they live in at today's prices, and many who bought or refinanced recently will discover that they can't afford it, either... I don't buy the whole "windfall profits on the rebound" scenario, at all, unless the median income increases radically and lending returns to the lax standards (standards? we call that standards?) of the last several years. Fat chance of either...

You don't quite understand how this works. If I hold an asset that is worth $100, but I can only get somebody *right now* to buy it for $50, I have to value it at $50 despite me holding it. That's called a "mark to market". The market is fucked up for a variety of reasons, namely liquidity, not credit. Since the assets are already illiquid *and* risk spreads are increasing, the "marks" hit these assets hard in revaluation of the residual cashflows on a PV basis. However, once risk-spreads come in and liquidity returns *and* marks become more reasonable, then those assets will be revalued up.

The $100 is based upon *actual* money expected to be received. The $50 is a fictional value of "what if" accounting that the FASB, SEC, and other regulatory bodies make companies conform to GAAP. The $50 doesn't mean that $100 won't be received in the end, because most likely it will. This is where you utterly fail in your knowledge. You somehow think that the $100 is "lost" and $50 is the new money. However, that's a flat-out lie. I could explain the complexity of the situation to you, but it'd fall on deaf ears. You think you know everything and no matter how much in depth knowledge I have, you'll never believe anything but cnn and blogs.

The whole scenario is basically a house of cards, with all the players depending on their ability to offload liability onto the next guy down the chain. When the pipeline locked up, and offloading stopped, the remaining liabilities are more than can be supported by the structure of the whole edifice, particularly if they come all at once...

The system has huge hidden liabilities, as well. When the investment bank creates a hedge fund, for example, loans it the money to begin operations in an attempt to attract investors, the operations of that fund move outside the purview of regulators. That fund can further leverage itself in any manner that investors can be induced to buy, except that other investors are often other investment banks... that's what happened with the Bear Stearns funds. When Merrill called their notes, the fund collapsed, and even though Merrill had originally planned to sell off the assets, they found out that they couldn't support the losses it would entail. Catch-22... Much the same can be said of the buyout of Countrywide, where BOA had to suck it up, buy the loser, because they couldn't allow the assets to be liquidated on the open market... it would have re-valued their securities at a truly dismal price, one that would ruin them and a lot of others...

Again, you are confusing things quite a bit. I am too tired and drugged up right now because my back is smashed. However, your doomsdaying and ignorance glosses over that the problem isn't as huge as you think and, in the future, will result in revaluation of the assets.

I don't deny banks are still in for some hurting. Nor do I deny that these guys took thinks way too far. My bank, luckily, stayed out of the frackas completely and that's why my job is safe (for now). However, to say things will not come back and these positions won't be revalued, is completely false and very misleading.

 

[1EZduzit]

Originally posted by: LegendKiller

Originally posted by: 1EZduzit

Originally posted by: Corn

Originally posted by: gardener

Originally posted by: Corn

Originally posted by: gardener
By failing to foreclose, the banks put shareholders at increasing risk as each day passes.

The "irresponsible lending situation" [sic] will not be corrected until that happens, Vic.

O for crying out loud. A mass of foreclosures flooding the market in a short time span only increases the losses incurred by the lender (and shareholders). Spreading out the cost of today's foreclosures over the period of possibly several years (including leveraging those future years depreciated dollar's) hardly puts shareholders at increased risk. :roll:

Why forestall foreclosure in an overbought market?

I thought I just explained why.

The need to "spread it out" on their own dime. Someone's misfortune is sonebody else's opportunity, that's the way our "free markets" are supposed to work.

They are doing it. Are you blind to the $130bn in losses already taken by everybody? Get a clue.

Well, then tell them to bend over and get ready to take the rest of their medicine insteasd of expecting the goverment to shoulder risky loans through FHASecure loans.

 

[smack Down]

Originally posted by: LegendKiller

Originally posted by: Jhhnn
Nice bit of PR, Legend Killer. Some of what the banks claimed was worth a dollar won't sell for a dime today, and we both know it. That's particularly true of "seconds", the 20% portion of 80/20 short term financing. Can't give it away. So they're stuck holding it.

So what if they are stuck holding it? It's worth a lot more than a "dime", often times the unsellable assets are worth a lot more than that. In fact, the vast majority of it is worth par. However, due to liquidity, they have to be valued at a lot less. The basic fact is that most of it is still worth the principal value, even if they are marked at 50%, they will most likely see 80%+ income realization, so they'll have to revalue them up. It's not just seconds, but also sub tranches. Nice try at putting it all in one bucket though. I have studied bank balance sheets pretty well and I also know what the SIVs have been holding to a great extent. You're forgetting that I am trained to do this.

I'll agree that what we're seeing is deleveraging on a global scale, but I'm not so sure that the rebound will be quick, at all. It certainly hasn't been for Japanese real estate, nor do I see any reason for American real estate to behave much differently. This country has traditionally supported median home prices ~4X the median income, with appropriate regional adjustments. In the worst bubble markets, the median price rose to 8X or 9X the median income, which is simply unsupportable. Most homeowners, even in non-bubble areas, couldn't afford to buy the house they live in at today's prices, and many who bought or refinanced recently will discover that they can't afford it, either... I don't buy the whole "windfall profits on the rebound" scenario, at all, unless the median income increases radically and lending returns to the lax standards (standards? we call that standards?) of the last several years. Fat chance of either...

You don't quite understand how this works. If I hold an asset that is worth $100, but I can only get somebody *right now* to buy it for $50, I have to value it at $50 despite me holding it. That's called a "mark to market". The market is fucked up for a variety of reasons, namely liquidity, not credit. Since the assets are already illiquid *and* risk spreads are increasing, the "marks" hit these assets hard in revaluation of the residual cashflows on a PV basis. However, once risk-spreads come in and liquidity returns *and* marks become more reasonable, then those assets will be revalued up.

The $100 is based upon *actual* money expected to be received. The $50 is a fictional value of "what if" accounting that the FASB, SEC, and other regulatory bodies make companies conform to GAAP. The $50 doesn't mean that $100 won't be received in the end, because most likely it will. This is where you utterly fail in your knowledge. You somehow think that the $100 is "lost" and $50 is the new money. However, that's a flat-out lie. I could explain the complexity of the situation to you, but it'd fall on deaf ears. You think you know everything and no matter how much in depth knowledge I have, you'll never believe anything but cnn and blogs.

No the 100 dollar is the fictional value. It is the what if everyone repaid the loan fictional value. The assets is really worth 50 dollars because that is all anyone with a sane mind would spend because that is all the is expected to get repaid.

 

[LegendKiller]

Originally posted by: smack Down

Originally posted by: LegendKiller

Originally posted by: Jhhnn
Nice bit of PR, Legend Killer. Some of what the banks claimed was worth a dollar won't sell for a dime today, and we both know it. That's particularly true of "seconds", the 20% portion of 80/20 short term financing. Can't give it away. So they're stuck holding it.

So what if they are stuck holding it? It's worth a lot more than a "dime", often times the unsellable assets are worth a lot more than that. In fact, the vast majority of it is worth par. However, due to liquidity, they have to be valued at a lot less. The basic fact is that most of it is still worth the principal value, even if they are marked at 50%, they will most likely see 80%+ income realization, so they'll have to revalue them up. It's not just seconds, but also sub tranches. Nice try at putting it all in one bucket though. I have studied bank balance sheets pretty well and I also know what the SIVs have been holding to a great extent. You're forgetting that I am trained to do this.

I'll agree that what we're seeing is deleveraging on a global scale, but I'm not so sure that the rebound will be quick, at all. It certainly hasn't been for Japanese real estate, nor do I see any reason for American real estate to behave much differently. This country has traditionally supported median home prices ~4X the median income, with appropriate regional adjustments. In the worst bubble markets, the median price rose to 8X or 9X the median income, which is simply unsupportable. Most homeowners, even in non-bubble areas, couldn't afford to buy the house they live in at today's prices, and many who bought or refinanced recently will discover that they can't afford it, either... I don't buy the whole "windfall profits on the rebound" scenario, at all, unless the median income increases radically and lending returns to the lax standards (standards? we call that standards?) of the last several years. Fat chance of either...

You don't quite understand how this works. If I hold an asset that is worth $100, but I can only get somebody *right now* to buy it for $50, I have to value it at $50 despite me holding it. That's called a "mark to market". The market is fucked up for a variety of reasons, namely liquidity, not credit. Since the assets are already illiquid *and* risk spreads are increasing, the "marks" hit these assets hard in revaluation of the residual cashflows on a PV basis. However, once risk-spreads come in and liquidity returns *and* marks become more reasonable, then those assets will be revalued up.

The $100 is based upon *actual* money expected to be received. The $50 is a fictional value of "what if" accounting that the FASB, SEC, and other regulatory bodies make companies conform to GAAP. The $50 doesn't mean that $100 won't be received in the end, because most likely it will. This is where you utterly fail in your knowledge. You somehow think that the $100 is "lost" and $50 is the new money. However, that's a flat-out lie. I could explain the complexity of the situation to you, but it'd fall on deaf ears. You think you know everything and no matter how much in depth knowledge I have, you'll never believe anything but cnn and blogs.

No the 100 dollar is the fictional value. It is the what if everyone repaid the loan fictional value. The assets is really worth 50 dollars because that is all anyone with a sane mind would spend because that is all the is expected to get repaid.

Says you. Is it only fictional when it's on a treadmill? You're the last person I'd go to for any finance, accounting, economic, life, or any other advice. Go back to your hole.

 

[smack Down]

Originally posted by: LegendKiller

Originally posted by: smack Down

Originally posted by: LegendKiller

Originally posted by: Jhhnn
Nice bit of PR, Legend Killer. Some of what the banks claimed was worth a dollar won't sell for a dime today, and we both know it. That's particularly true of "seconds", the 20% portion of 80/20 short term financing. Can't give it away. So they're stuck holding it.

So what if they are stuck holding it? It's worth a lot more than a "dime", often times the unsellable assets are worth a lot more than that. In fact, the vast majority of it is worth par. However, due to liquidity, they have to be valued at a lot less. The basic fact is that most of it is still worth the principal value, even if they are marked at 50%, they will most likely see 80%+ income realization, so they'll have to revalue them up. It's not just seconds, but also sub tranches. Nice try at putting it all in one bucket though. I have studied bank balance sheets pretty well and I also know what the SIVs have been holding to a great extent. You're forgetting that I am trained to do this.

I'll agree that what we're seeing is deleveraging on a global scale, but I'm not so sure that the rebound will be quick, at all. It certainly hasn't been for Japanese real estate, nor do I see any reason for American real estate to behave much differently. This country has traditionally supported median home prices ~4X the median income, with appropriate regional adjustments. In the worst bubble markets, the median price rose to 8X or 9X the median income, which is simply unsupportable. Most homeowners, even in non-bubble areas, couldn't afford to buy the house they live in at today's prices, and many who bought or refinanced recently will discover that they can't afford it, either... I don't buy the whole "windfall profits on the rebound" scenario, at all, unless the median income increases radically and lending returns to the lax standards (standards? we call that standards?) of the last several years. Fat chance of either...

You don't quite understand how this works. If I hold an asset that is worth $100, but I can only get somebody *right now* to buy it for $50, I have to value it at $50 despite me holding it. That's called a "mark to market". The market is fucked up for a variety of reasons, namely liquidity, not credit. Since the assets are already illiquid *and* risk spreads are increasing, the "marks" hit these assets hard in revaluation of the residual cashflows on a PV basis. However, once risk-spreads come in and liquidity returns *and* marks become more reasonable, then those assets will be revalued up.

The $100 is based upon *actual* money expected to be received. The $50 is a fictional value of "what if" accounting that the FASB, SEC, and other regulatory bodies make companies conform to GAAP. The $50 doesn't mean that $100 won't be received in the end, because most likely it will. This is where you utterly fail in your knowledge. You somehow think that the $100 is "lost" and $50 is the new money. However, that's a flat-out lie. I could explain the complexity of the situation to you, but it'd fall on deaf ears. You think you know everything and no matter how much in depth knowledge I have, you'll never believe anything but cnn and blogs.

No the 100 dollar is the fictional value. It is the what if everyone repaid the loan fictional value. The assets is really worth 50 dollars because that is all anyone with a sane mind would spend because that is all the is expected to get repaid.

Says you. Is it only fictional when it's on a treadmill? You're the last person I'd go to for any finance, accounting, economic, life, or any other advice. Go back to your hole.

Says every investor in the world. If they where worth more then 50 dollars some one would be willing to pay more then 50 dollars for them.

 

[LegendKiller]

Originally posted by: smack Down

Originally posted by: LegendKiller

Originally posted by: smack Down

Originally posted by: LegendKiller

Originally posted by: Jhhnn
Nice bit of PR, Legend Killer. Some of what the banks claimed was worth a dollar won't sell for a dime today, and we both know it. That's particularly true of "seconds", the 20% portion of 80/20 short term financing. Can't give it away. So they're stuck holding it.

So what if they are stuck holding it? It's worth a lot more than a "dime", often times the unsellable assets are worth a lot more than that. In fact, the vast majority of it is worth par. However, due to liquidity, they have to be valued at a lot less. The basic fact is that most of it is still worth the principal value, even if they are marked at 50%, they will most likely see 80%+ income realization, so they'll have to revalue them up. It's not just seconds, but also sub tranches. Nice try at putting it all in one bucket though. I have studied bank balance sheets pretty well and I also know what the SIVs have been holding to a great extent. You're forgetting that I am trained to do this.

I'll agree that what we're seeing is deleveraging on a global scale, but I'm not so sure that the rebound will be quick, at all. It certainly hasn't been for Japanese real estate, nor do I see any reason for American real estate to behave much differently. This country has traditionally supported median home prices ~4X the median income, with appropriate regional adjustments. In the worst bubble markets, the median price rose to 8X or 9X the median income, which is simply unsupportable. Most homeowners, even in non-bubble areas, couldn't afford to buy the house they live in at today's prices, and many who bought or refinanced recently will discover that they can't afford it, either... I don't buy the whole "windfall profits on the rebound" scenario, at all, unless the median income increases radically and lending returns to the lax standards (standards? we call that standards?) of the last several years. Fat chance of either...

You don't quite understand how this works. If I hold an asset that is worth $100, but I can only get somebody *right now* to buy it for $50, I have to value it at $50 despite me holding it. That's called a "mark to market". The market is fucked up for a variety of reasons, namely liquidity, not credit. Since the assets are already illiquid *and* risk spreads are increasing, the "marks" hit these assets hard in revaluation of the residual cashflows on a PV basis. However, once risk-spreads come in and liquidity returns *and* marks become more reasonable, then those assets will be revalued up.

The $100 is based upon *actual* money expected to be received. The $50 is a fictional value of "what if" accounting that the FASB, SEC, and other regulatory bodies make companies conform to GAAP. The $50 doesn't mean that $100 won't be received in the end, because most likely it will. This is where you utterly fail in your knowledge. You somehow think that the $100 is "lost" and $50 is the new money. However, that's a flat-out lie. I could explain the complexity of the situation to you, but it'd fall on deaf ears. You think you know everything and no matter how much in depth knowledge I have, you'll never believe anything but cnn and blogs.

No the 100 dollar is the fictional value. It is the what if everyone repaid the loan fictional value. The assets is really worth 50 dollars because that is all anyone with a sane mind would spend because that is all the is expected to get repaid.

Says you. Is it only fictional when it's on a treadmill? You're the last person I'd go to for any finance, accounting, economic, life, or any other advice. Go back to your hole.

Says every investor in the world. If they where worth more then 50 dollars some one would be willing to pay more then 50 dollars for them.

And this is where you are wrong. Everybody knows they are worth more. Nobody wants to give up cash. Those that do demand a premium, a reduction below par, for the liquidity. That is the only reason why they are valued below par. Everybody knows that eventually they will recognize near 100% of par value.

Why do you think there's a ton of mortgage vulture funds opening up? Why do you think that some banks are doing *more* business, not less, in this area? I work in this area and I am going gangbusters to get deals closed because I am getting massive deals, spreads have ballooned and I am going to have a banner year.

If you have dry powder and you know what you are doing, you're making a shit-ton of money in this environment, because people are paying up for liquidity and you can demand anything for it. You, as a smart investor, know that the bonds are worth a hell of a lot more than you are paying, but you're demanding less because you have cash.

Only people like you think otherwise.


Last week there was a 10-year AAA credit card master-trust bond that priced at 115bps over swaps. That's absolutely stupid, 12 months ago it was 10bps over swaps. A AAA credit card bond would require 35-40% consumer defaults to even recognize $1 of loss. If there are 40% consumer credit losses the world is about to end. However, to get the deal done, they had to pay up for liquidity.

If I had a securities arbitrage conduit I would have bought that whole issue, $2bn in bonds, held them for maybe 2 years until spreads came back into normal ranges, say 20bps. That means that I would have made $2bn * 8 years * 95bps = $152MM off of the revaluation.

Of course, you know bond math and can follow that, right?

It appears you know as much about finance as you do about physics, nothing.