Jimmy Lathrop

Has President Obama's Mortgage Modification Plan Failed?

The biggest problem with the mortgage modifications is that they shave off payments for a period of time and stick it on the end of the loan capitalized as extra principal or paid in a balloon note. This has the effect of driving the mortgage rates higher pushing the home deeper underwater. When the modification period ends, the borrower is right where they were in the beginning unless they manage to drastically increase their income to manage the original payment. Worse yet, this increases the true cost of borrowing and probably removes any equity which may be in the home by the end of the loan. Until serious efforts are made to reduce principal by federal subsidy guaranteed personally by the borrower and non-dischargeable in bankruptcy will any true progress be made in granting relief to homeowners.

What's Next for Fannie and Freddie?

Freddie paid back 1.1. billion dollars to the government this quarter, otherwise, they would have posted a profit. Put next to each other, Freddie loans default at a lower rate than Fannie loans and consequently, Freddie has had to post less capital reserves. I was disappointed the author did not distinguish between the two GSEs,

Why Panic Rarely Pays

The forced selling had nothing to do with bears going all in. It had to do with hedge funds, mutual funds and other financial institutions forced to sell all asset classes across the board to meet investor redemption calls. Some participants like charitable foundations or other long-term investment vehicles had to close out positions in order to maintain principal. Once the forced selling stopped, buyers came back into the market, but it had less to do with panic than pressure.

Big Banks in Trouble: Huge Mortgage Write-Downs Seem Inevitable

I'm reading all of these hardship vs. loser comments and I only want to mention one thing - if you bought your house for no money down with 106 percent financing and you have no skin in the game, and your mortgage resets to 75 percent of your gross income, are you a homeowner, or a person who put himself in the chains of slavery just to give a mortgage or real estate broker a commission?

Ten Year Yields Moving Up - Why the Bears Can't Be Right

ED, the triple dog dare threat was made painfully clear to the head of the Dallas Fed on his most recent trip to China when they repeatedly asked if the government intended to monetize the debt. That was their diplomatic way of saying, try it and we'll put our money somewhere else. I know, it sounds crazy, but it may actually give our leaders pause.

Ten Year Yields Moving Up - Why the Bears Can't Be Right

Your article is well-written and makes sense, but to pull an old canard from Frank Gorshin - riddle me this: If the Fed has allocated 300 bn to repurchase long-dated debt and they have bought 130 bn already, do you really think that 170 bn out of all of that outstanding long term debt is going to bring the yield curve down? Mr. Market can be quite irrational but to think the drop in the bucket is going to calm down the traders isn't particularly believable. Sometimes the answer is just staring you at the face - investors don't believe the US will be able to make good on the long term debt, or they believe, like Ben Stein, who is wrong often, that the US will substitute PIK for the long term notes when they become due. As long as politicians have short-term goals like getting reelected, and financial firms have short term goals like propping up share prices and ensuring bonuses for management, investors are waking up to the fact that the long term is the stretch from the end of Friday's trading to the open of market on Monday.

Fascinating interactive foreclosure map for New Yorkers. Besides highlighting the hardest-hit neighborhoods, it's also remarkable for the ominous lack of foreclosures in Manhattan, thus far.

It's not remarkable when you consider that over 75 of property in Manhattan is commercial and residential buildings with over six units require commercial loans. That data refers to delinquent residential mortgage loans for 1 to 4 family homes and anyone who owns a townhouse in lower Manhattan, liquidity is not an issue.

Why This Rally Is Unsustainable

I thought this was a very well-written and well-thought out article as opposed to the other 250-line jabberwocky posted by money managers looking to attract more hits to their websites. Thanks for contributing. I appreciate your article.

Even the 'Oracle of Omaha' Makes Mistakes

After reading the WB biography, the thing that struck me the most was his constant reiterating of the broken state of his insurance purchases. He kept referring to how he always had to pull the tow truck up to the ditch. Yet most of the cash from BRK.A comes from his insurance float from premiums. That set off an alarm in my head.

He was also very candid about fumbling around as an investor in Salomon Brothers and how it was out of his comfort zone. Most of the phantom profits in the 2002-2005 period came from the Housing Bubble that the financial institutions profited from. If his insurance companies wrote swaps on the S&P, those earning are not coming back.

The lower value of corporate bonds are also hurting the insurance companies book value. He has a lot of headwinds. The other companies require consumer consumption, like See's Candies and things that make stuff.

Sometimes in life its better to be lucky than right. And sometimes your luck runs out.

10 Dangerous Stocks to Avoid

This article would be more appropriately titled "10 Deep Recession M&A Takeover Targets"

Why We Still Need Securitization

The real problem with securitization involves the diffusion of ownership. Whereby you would once have a single lender own a loan creating a straight line between borrower and lender, this allowed a certain responsibility for underwriting the loan and keeping it in the bank portfolio. If market conditions change, there was the ease of flexibility by a short distance between the two parties.

In securitization of loans, there is a bank servicer who acts as trustee for the holders of various tranches or securities of these asset based pools. They have a fiduciary relationship with several shareholder classes, senior through junior, to manage the underlying assets and distribute the income through the trust documents.

The problems outlined in the lawsuit between Wilbur Ross' mortgage servicers and the hedge funds who own the shares show how the competing interests cause a dilemma for servicers to attempt workout or foreclose on properties without drawing a shareholder lawsuit. Furthermore, investors can hedge their positions in these off balance sheet vehicles by purchasing credit default swaps. Which means, if the underlying investments drop to 25 cents on the dollar and you are hedged to be paid beyond 25 cents on the dollar in case of failure, you are no longer interested in the underlying value of the security, only interested in the underlying creditworthiness of your CDS counterparty, which causes you to take out a CDS on your counterparty, and then another on the insurer, all the while trying to figure out where the premiums and the defaults begin and end.

The events of the past few years has shown that the personal nature of real property does not translate well into the yield or ROI in a RMBS. The market has been highly politicized. These are more than mere bets on a commodity or a business with a regular cash flow - they are assets which house families, senior citizens, children, and the facelessness of the industry which poured money into these trusts having them sell mortgages through unscrupulous lenders under the closed eyes of the state regulators has caused an erosion of the last 30 years of wealth. Curiously, the erosion dates back to the origin of securitization.

And on a more societal level, while Wall Street sees this market dislocation and bailout as a mere hiccup in inaccurate risk markets, in actuality, it has caused a severe dislocation in American society as fiduciary relationship between a bank and its community, which traditionally operated as a quasi-public service by distributing money into the economy through their state or federal charter.

The shadow banking system does not need to be revived. It needs to be banned. Until banks are obligated to lend as though they will keep loans on its balance sheets for 30 years, this careless financial engineering will continue to rip apart American society for the financial gain for a disproportionately small part of the populace.

Dow, Rohm Are Talking Again - Some Thoughts

Highwater, I understand it was many bonghits since you wrote your initial post, but your contention was that things were going to be a slam dunk but Dow got its extension and a caveat that they can back out if the Haas family gives them at least 2.5 billion dollars.

So using your Cheech and Chong logic, Dow showed up with a pile of cash in the courtroom and the Haas Family Trust opened their wallets and gave 2.5 billion to the company you want to short?

As I stated in my original post, all ironclad documents aside, everyone loses with a trial. Dow got a huge break and more cash - did your extensive M&A experience see that coming or was that just a hallucination huffing paint in the car wash bathroom?

Meanwhile, Dow gets a company with higher profit margins and lead position in markets it has been trying to break into for years. That's to the long term viability of the company as opposed to your day trading in your tighty whities modus operandi.

Dow, Rohm Are Talking Again - Some Thoughts

Highwater, it seems that not only can you not write, but you cannot read as well. I specifically addressed your responses. They are the sentences with the numbers written in front of them. Knock on your mother's bedroom door and ask her to explain my response if it is beyond your comprehension because I fear this board is above your pay grade.

Dow, Rohm Are Talking Again - Some Thoughts

Highwater, your virulent response to my defense of Todd's well-written and thoughtful piece suggests that either you increase or decrease your medication, depending on your doctor's observation. I am also struck by your juxtaposition of reference to Safire's deconstruction of inartful v. unartful and the always-brilliant laugh out loud acronym which is the hallmark of the thoughtful writer - excuse me, I meant to say, internet troll.

Let us take each of your points individually, shall we?

1. Although the bridge loan is a firm commitment, if the deal is broken, then there is no commitment. To put it in terms that you would understand, think of it as when you bought your trailer home - if the contract between KB and you had been broken, Indy Mac wouldn't have had to lent you the money.

2. As for the dividend, again, using terms you can understand, you can pay your court ordered restitution by using the money selling weapons you collect playing Worlds of Warcraft or you can put it on your credit card. But its all robbing Peter to pay Paul.

3. Last, but not least, if there was such ironclad certainty of the Chancellor meting out justice as you so confidently predict, why do we have appellate courts?

I appreciate your comments as to my livelihood and what I do for a living. Feel free to forward any suggestions as to what I could do to make my profession as noble as a fine gentleman such as yourself hides behind a pseudonym googling William Safire articles in your underwear eating Froot Loops. Or you can always call me on the telephone and tell me off to my face but everyone reading this knows you would never do that because you, sir, are a coward.


On Mar 08 03:31 PM HIGHWATER 888 wrote:

> Jimmy -
>
> IME the M&A business is not driven by either good manners or
> 'artful' grammar, so I'll let your witless opening salvo about 'insults'
> and 'artful' writing slide for the moment -- more on that later....
>
>
> However, before you take your Brooklyn Law School degree for another
> spin outside your client base of deadbeats, DUI's and divorcees,
> let me check your understanding of this transaction with a few observations:
>
>
> (1)The DOW bridge financing is under a "firm" commitment and the
> banks ("happy" or not) can't simply walk away from this loan. TARP
> has nothing to do with this transaction.
>
> (2)DOW has a 100+ year history of dividend payments and --with just
> a few quarterly exceptions-- has always paid those dividends out
> of NOI (or 'profits')with a ten year average on its coverage ratio
> well above 1.0; DOW restored this historical dividend coverage ratio
> for Q1 '09 with the recent dividend cut. The fact that DOW may use
> CP for corporate finance does not mean that the dividend is paid
> with borrowed money.
>
> (3)Neither contemplation of your hack legal platitudes nor the follies
> of the 'OJ' trial are likely to infulence the M&A lawyers and
> litigators involved in this matter. Moreover, The Deleware Chancery
> Court is not known to produce the type of 'Court TV Crapshoot' outcome
> that you seem to think of as a real risk.
>
> PS - In the future, before you flash your second rate education in
> writing, you might at least take the time to insult people 'artfully'
> with correct grammar: FYI, the correct english usage is 'unartful'
> not "INARTFUL"; for a remedial explination of the OED usage see:
> William Safire 'Inartful Dodger' (The New York Times, 1985).
>
> "The Park Slope Lawyer", indeed! LOL. LOL. LOL.
>
>
>
>

Bank of America: A Risky Bet That May Be Worth It - Barron's

it does NOT make a difference whether or not Lewis stays or Lewis goes.