The New Bail Out Package

[texaspackerbacker]

Tex with another strong showing in the Judeo portion of Judeo Christian.

??????????????????

You prove my point again.

Tyrone, WHAT are you trying to say? Are you implying the tired old stereotype of a conspiracy of Jewish bankers?

Is Barney Frank Jewish? If he is, I didn't even know that. His claim to fame is that he is a God damned FLAMING FAG--which despicable as it is, I suppose is irrelevant to this discussion.

If you've got something to say, spit it out!

He's mocking your inability to distinguish the Jewish holidays. Yom Kippur hasn't happened yet this year. Try another door.

OK, so it's Rosh Hashanah. Yom Kippur isn't until Oct. 9. I knew it sometime around now. Happy New Year to all the Jews out there.

Seriously, atheist scum leftists like Tyrone don't have any respect for Jews any more than they do for Christians. The trend in recent years is for Jews--traditionally a Dem/lib constituency--to know which side considers Israel a valuable ally and partner, and which side disrespects Israel--treating it as morally equivalent to our/their terrorist Muslim enemies. Consequently, an increasing portion of the Jewish population has voted for the pro-American candidates.

[bobblehead]

Both methods are wrong. A security should be revalued based on the percentage of default. If you have 100 securities and on average 7% of them go bust it should be revalued at 93% of NPV. Not 100% which is what we just changed to, and not 50% because nobody is buying them so the "value at market" is extremely low. The realized return will be 93% if it is held and THAT is the number they should be revalued at. The lesser of two evils right now with nobody wanting to buy mortgage backed securites (thus no market) is to drop it. Mark to market is wrong, but so is holding it on the books at full value. This is the best of my knowledge, but not my area of knowledge, so correct me if I'm wrong. I haven't read any detailed things about this.

[retailguy]

Tex, one more thing. You talk about the "fallacy" of mortgages being valued in "pools". Well mortgages are sold in pools so why shouldn't they be valued that way?

Yes, some mortgages are being unfairly devalued, but others, are being unfairly overvalued. If you look at the pool as a whole, the value is probably pretty close to correct. Just because a home doesn't foreclose, doesn't mean that there is no risk. The risk of default is there and it's REAL.

The point is not the "pool" it's the RISK. People finally see it exists. In the long run, that's a GOOD thing.

If it is an average value in the pool, where a bad one or two knock down the average, that's fine--that's mathematically sound. But to take the few rare exceptions, and pretend that's the norm--by artificially valuing on paper ALL the mortgages in the pool at the low value of the rotten ones, that's just wrong. How can you claim otherwise?

And yes, the risk of default is there and real. However, other than in a deflated real estate market, there is no stigma at all for mortgage holders to end up foreclosing and owning the property. And even in the down market that a few areas of the country are seeing these days, those foreclosed properties stiill have half, maybe 2/3, or whatever value.

THAT is why I claim that this whole mess is a contrived crisis. There just aren't that big a portion of all mortgages that are "bad"--defaulted, foreclosed, whatever, and even a large portion of those are secured by property as valuable as the face of the mortgage note--and even the ones that aren't are secured by properties that have some decent percentage of face value. Could you possibly disagree with that?

Tex, the whole premis of your argument is based on "one or two" mortgages in the pool are bad. This IS NOT accurate. One or two are currently in foreclosure. Many more homeowners are struggling, making late payments, have the home up for sale, or are over extended.

Your analysis ignores the risk of THOSE loans. Those loans SHOULD be devalued. I could make a case that EVERY SINGLE MORTGAGE, that has less than 20% equity in the secured asset is AT RISK and as such should be devalued over normal paper value. That encompasses MOST of the mortgages in the pool, not one or two.

Tex, you need to research and read about risk. You're "technically" accurate with regard to the "current" problem level, but you are not valuing these assets appropriately in your mind. You've left out some of the variables that determine worth, just as the Congress is doing.

[retailguy]

Both methods are wrong. A security should be revalued based on the percentage of default. If you have 100 securities and on average 7% of them go bust it should be revalued at 93% of NPV. Not 100% which is what we just changed to, and not 50% because nobody is buying them so the "value at market" is extremely low. The realized return will be 93% if it is held and THAT is the number they should be revalued at. The lesser of two evils right now with nobody wanting to buy mortgage backed securites (thus no market) is to drop it. Mark to market is wrong, but so is holding it on the books at full value. This is the best of my knowledge, but not my area of knowledge, so correct me if I'm wrong. I haven't read any detailed things about this.

Again, risk of failure is NOT the only risk. Risk of devaluation of the asset, risk of late payment, etc are part of the equation.

You cannot leave out the value of risk. You distort the picture. If an at risk homeowner doesn't fail, and somehow pulls up his bootstraps and makes the payment and pays off the home, then, at the end of the day, the paper was NOT worth the value of the loan. It was worth less, and there was a PREMIUM earned that compensates the lender for holding the additional risk over the identical loan held by his neighbor.

Valuing the mortgage at anything less than fair value distorts the picture.

[HowardRoark]

Both methods are wrong. A security should be revalued based on the percentage of default. If you have 100 securities and on average 7% of them go bust it should be revalued at 93% of NPV. Not 100% which is what we just changed to, and not 50% because nobody is buying them so the "value at market" is extremely low. The realized return will be 93% if it is held and THAT is the number they should be revalued at. The lesser of two evils right now with nobody wanting to buy mortgage backed securites (thus no market) is to drop it. Mark to market is wrong, but so is holding it on the books at full value. This is the best of my knowledge, but not my area of knowledge, so correct me if I'm wrong. I haven't read any detailed things about this.

Again, risk of failure is NOT the only risk. Risk of devaluation of the asset, risk of late payment, etc are part of the equation.

You cannot leave out the value of risk. You distort the picture. If an at risk homeowner doesn't fail, and somehow pulls up his bootstraps and makes the payment and pays off the home, then, at the end of the day, the paper was NOT worth the value of the loan. It was worth less, and there was a PREMIUM earned that compensates the lender for holding the additional risk over the identical loan held by his neighbor.

Valuing the mortgage at anything less than fair value distorts the picture.

Plus, the math on these things is such that they assume prepayment of mortgages...early payoffs. This is no longer going to happen for many reasons. The math is VERY complex in valuing these things.

[mraynrand]

Tex with another strong showing in the Judeo portion of Judeo Christian.

??????????????????

You prove my point again.

Tyrone, WHAT are you trying to say? Are you implying the tired old stereotype of a conspiracy of Jewish bankers?

Is Barney Frank Jewish? If he is, I didn't even know that. His claim to fame is that he is a God damned FLAMING FAG--which despicable as it is, I suppose is irrelevant to this discussion.

If you've got something to say, spit it out!

He's mocking your inability to distinguish the Jewish holidays. Yom Kippur hasn't happened yet this year. Try another door.

Yom Kippur, Kohlinar, what's the difference?

[bobblehead]

Both methods are wrong. A security should be revalued based on the percentage of default. If you have 100 securities and on average 7% of them go bust it should be revalued at 93% of NPV. Not 100% which is what we just changed to, and not 50% because nobody is buying them so the "value at market" is extremely low. The realized return will be 93% if it is held and THAT is the number they should be revalued at. The lesser of two evils right now with nobody wanting to buy mortgage backed securites (thus no market) is to drop it. Mark to market is wrong, but so is holding it on the books at full value. This is the best of my knowledge, but not my area of knowledge, so correct me if I'm wrong. I haven't read any detailed things about this.

Again, risk of failure is NOT the only risk. Risk of devaluation of the asset, risk of late payment, etc are part of the equation.

You cannot leave out the value of risk. You distort the picture. If an at risk homeowner doesn't fail, and somehow pulls up his bootstraps and makes the payment and pays off the home, then, at the end of the day, the paper was NOT worth the value of the loan. It was worth less, and there was a PREMIUM earned that compensates the lender for holding the additional risk over the identical loan held by his neighbor.

Valuing the mortgage at anything less than fair value distorts the picture.

Plus, the math on these things is such that they assume prepayment of mortgages...early payoffs. This is no longer going to happen for many reasons. The math is VERY complex in valuing these things.

Yes, I stated the current method is wrong as is the method we are moving too. Actuarial tables need to be consulted and used to determine the true NPV of a security. If you hold a loan and based on demographics it is 2% likely to be defaulted, will lose 1% of value to possible early payment, will gain 1% due to penalties...ect ect....you multiply it through for true net present value. If it sells on the open market for 80% of its value...so what if you are going to hold onto it?

[texaspackerbacker]

Tex, one more thing. You talk about the "fallacy" of mortgages being valued in "pools". Well mortgages are sold in pools so why shouldn't they be valued that way?

Yes, some mortgages are being unfairly devalued, but others, are being unfairly overvalued. If you look at the pool as a whole, the value is probably pretty close to correct. Just because a home doesn't foreclose, doesn't mean that there is no risk. The risk of default is there and it's REAL.

The point is not the "pool" it's the RISK. People finally see it exists. In the long run, that's a GOOD thing.

If it is an average value in the pool, where a bad one or two knock down the average, that's fine--that's mathematically sound. But to take the few rare exceptions, and pretend that's the norm--by artificially valuing on paper ALL the mortgages in the pool at the low value of the rotten ones, that's just wrong. How can you claim otherwise?

And yes, the risk of default is there and real. However, other than in a deflated real estate market, there is no stigma at all for mortgage holders to end up foreclosing and owning the property. And even in the down market that a few areas of the country are seeing these days, those foreclosed properties stiill have half, maybe 2/3, or whatever value.

THAT is why I claim that this whole mess is a contrived crisis. There just aren't that big a portion of all mortgages that are "bad"--defaulted, foreclosed, whatever, and even a large portion of those are secured by property as valuable as the face of the mortgage note--and even the ones that aren't are secured by properties that have some decent percentage of face value. Could you possibly disagree with that?

Tex, the whole premis of your argument is based on "one or two" mortgages in the pool are bad. This IS NOT accurate. One or two are currently in foreclosure. Many more homeowners are struggling, making late payments, have the home up for sale, or are over extended.

Your analysis ignores the risk of THOSE loans. Those loans SHOULD be devalued. I could make a case that EVERY SINGLE MORTGAGE, that has less than 20% equity in the secured asset is AT RISK and as such should be devalued over normal paper value. That encompasses MOST of the mortgages in the pool, not one or two.

Tex, you need to research and read about risk. You're "technically" accurate with regard to the "current" problem level, but you are not valuing these assets appropriately in your mind. You've left out some of the variables that determine worth, just as the Congress is doing.

What variables? What risk? What grounds for devaluing anything less than with 20% equity?

What is your basis for extrapolating that "many more" are struggling to make payments? The leftist news media?

There are foreclosures--property lost--taken by the mortgage holder. There are defaults--property past the point of no return, note accelerated, the only way it is not foreclosed is if paid off, which, of course hardly ever happens. And there are mortgages where the payers are behind on payments--it takes being a full seven months behind before foreclosure, 5 or 6 months behind before acceleration. Even if you define "struggling" as the last of the three categories--merely behind on payments, I very much doubt you reach a level of 1% of all mortgages. Do you disagree with that figure?

If payments are up to date on a mortgage, how can you or ANYBODY presume to assign any significant RISK factor--NEVER MIND the property value?

Also, do you realize that if there is 20% equity, there actually is NEGATIVE risk--if that concept even exists? What I mean is that if there is a foreclosure with 20% equity, the mortgage holder has a cushion of 20% more security than the amount owed--15%, 10%, 5% equity, whatever--all of those notes are actually secured by MORE value than the amount owed.

If you are presuming the existence of RISK despite the payments being up to date--extremely shaky logic there, even then the ONLY risk is when equity is negative--property value is LESS than the amount owed. I would suggest that the concept of risk is only valid when BOTH that is the case AND the mortgage is behind on payments. Do you disagree with THAT?

And even if you want to presume RISK in either one of these cases--behind on payments OR property value less than face value of mortgage note, those properties and hence, the mortgage notes they secure STILL have significant value--I would suggest, at very least, 50 or 60% of face value of the note. Go to the very worst area of California, Florida, etc. at the peak of the real estate bust, and properties were at least worth 50% of their historic high value. Do you somehow disagree with THAT?

So if this is not valuing properties--hence mortgage notes--hence clusters of mortgage notes--hence mortgage securities backed by those clusters--to your satisfaction, what subjective method--supported by what logic would YOU use to value them?

Again I say, something is wrong here. This crisis just has to be bogus--contrived by somebody for SOME motivation--financial, political, whatever.

[LL2]

Did anyone see O'Reilly last night where he totally ripped on Barney Frank. Barney Frank went on the show to tell about what the problem solver he was and has been in the Fannie Mae situation and what he has done to solve the problem. O'Reilly showed a clip from 1 yr ago where Barney Frank said Fannie Mae was sound and a good investment. Barney Frank then said how the situation is everybody else's fault and Bush's/Republicans fault. Then O'Reilly exposed his double standard, and that nothing is ever his fault. It was great and Frank is a typical liberal Democrat. Barney Frank presided over one of the biggest collapses in banking history!

[texaspackerbacker]

Did anyone see O'Reilly last night where he totally ripped on Barney Frank. Barney Frank went on the show to tell about what the problem solver he was and has been in the Fannie Mae situation and what he has done to solve the problem. O'Reilly showed a clip from 1 yr ago where Barney Frank said Fannie Mae was sound and a good investment. Barney Frank then said how the situation is everybody else's fault and Bush's/Republicans fault. Then O'Reilly exposed his double standard, and that nothing is ever his fault. It was great and Frank is a typical liberal Democrat. Barney Frank presided over one of the biggest collapses in banking history!

Good you didn't say O'Reilly tore him a new asshole. Barney Frank would have enjoyed that way too much.