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Mark Alexander is an insurance professional who began managing personal and family investments in late 2007 due to the shortage of in-depth analysis performed by traditional mutual funds and high fees charged by hedge funds.
  • Have Moody’s and S&P (and Fitch) Seen the Light (Part 2)?
    The original idea for this article, when it was conceived around the beginning of August, was to highlight a number of cases where S&P’s ratings for residential mortgage-backed securities remained completely unrealistic, and make a side comment about financial guarantor ratings. In August, S&P downgraded some of the securities, so the order was reversed and financial guarantor ratings were discussed first (in Part 1 http://seekingalpha.com/article/165236-have-moodys-and-s-p-seen-the-light-part-1). By October 1, S&P had slashed the ratings of all but one of the securities to be discussed (and many others like them) to deep junk.

    The downgrades reveal just how far off the previous ratings were. They also make the ratings of financial guarantors like FSA, Assured Guaranty Corp. and MBIA Insurance Corp. seem outright bizarre and incongruous in relation to the RMBS ratings. FSA, Assured, and MBIA have direct (RMBS) and indirect (CDO) exposure to multiple securities from each of the pools discussed below, as well as many others that were downgraded along with them. Financial guarantor ratings will be revisited briefly after discussing the RMBS ratings.

    RMBS RATINGS

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    Tags: MBI, AGO, MHP
    Oct 21 09:51 pm | Link | Comment!
  • Have Moody’s and S&P Seen the Light (Part 1)?
    Moody’s and Standard and Poor’s (S&P), the nation’s largest Nationally Recognized Statistical Rating Organizations, have faced a barrage of recent criticism over their ratings of structured finance assets. Continued criticism over past rating mishaps and reduced structured finance revenues are likely to pose the most significant challenges over the next year. However, it is interesting to consider whether the recent criticism has motivated Moody’s and S&P to provide competent and honest ratings. This will be done in two separate articles focused on two areas that have revealed major problems – ratings for residential mortgage backed securities (RMBS) and financial guarantors.

    This article (Part 1) deals with financial guarantor ratings, which remain more troublesome than RMBS ratings. It suggests that Moody’s recent ratings are not as unrealistic as Standard and Poor’s ratings, some of which appear to be based on incompetence, fraud, or some combination of the two.

    The table below outlines current ratings for three financial guarantors, Financial Security Assurance (FSA), Assured Guaranty Corporation (AG Corp.), and MBIA Insurance Corporation (MBIA Corp.). FSA was purchased on July 1 of this year by Assured Guaranty Ltd., AG Corp’s parent. The Moody’s ratings for FSA and AG Corp. are under review for possible downgrade.
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    Oct 06 03:13 pm | Link | Comment!
  • Private Label RMBS: Opportunity of a Lifetime?

    With recent prices for typical senior private label residential mortgage backed securities (subprime, Alt-A, and prime jumbo) now 25%-40% higher than two months ago, it would be a stretch to call them an opportunity of a lifetime. They are not even the opportunity of the past two months. Nevertheless, even with the increases, the prices of many of these securities remain at levels that should generate annualized returns in the 20%-25%+ range so long as we do not see another much more severe leg to the recent recession.  Class A-2D of GSAMP 2006-HE5 (one of the securities referenced in Markit's ABX 07-1 AAA index), for which Reuters has provided recent price quotes in the ballpark of 20 cents on the dollar, provides an example.

    There are differences between GSAMP 2006-HE5 and other subprime pools, but the risk-reward trade-offs on these securities are more similar than different.  Therefore, examining a single security from this pool provides useful insights into the return potential for other subprime securities, and to a lesser extent, Alt-A and prime jumbo securities.

    As of August 2009, the outstanding principal balance of the mortgages in GSAMP 2006-HE5 was $482 million, 46.5% of the original principal balance when the deal was originated in 2006. The other 53.5% has been repaid or charged off. Of the remaining mortgages, $252 million, or 52% of the outstanding balance, is at least one payment past due, is in the process of foreclosure or bankruptcy, or has been foreclosed.

    GSAMP 2006-HE5 is divided into two groups. Losses on either group can erode the subordinate M-1 through M-5 certificates (losses have already wiped out the M-6 and junior certificates). Principal and interest payments on the Group 2 certificates (including A-2D) depend on underlying principal and interest payments on the Group 2 loans.
     
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    Tags: PMT, IVR
    Aug 29 04:38 pm | Link | Comment!
  • MBIA: A Low Down Dirty Shame

    For those willing to look deeper than company press releases, publicly available information suggests that investors should avoid MBIA like a plague. As important as it is for investors to analyze MBIA’s current economic position, however, the more important MBIA story lies in the lapses by those responsible for safeguarding policyholders of MBIA Insurance Corporation, MBIA’s principal insurance subsidiary until February of this year when its assets were stripped. Parts 1 and 2 of this discussion focus on issues that should concern MBIA investors. Part 3 raises questions about what appear to be disturbing oversight failures.

     
    PART 1: MAJOR RISKS
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    Tags: MBI
    May 13 12:15 am | Link | Comment!
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