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TALF Investors Pushing for a Better Deal

I am quite concerned about TALF's conspicuous lack of transparency. The public has no idea who is being invited to participate in the fund, how the fund is to be structured (how are profits split? how is profit defined? how are expenses defined? How are securities to be selected and priced? When does the fund cash-out?) and what the explicit terms of the financing are. Why aren't the deal docs, along with a list of the invited participants, a schedule of fund creations -or whatever they are calling each of these structures, on Treasury's website?

At the RTC, when we put together our public/private partnerships (before the internet existed) we advertised our intent to sell assets in the WSJ and NYT, deal docs were available in the RTC Library and prospectuses for the publicly offered bonds that were issued to fund the partnerships were available from the dealers, the SEC or the RTC.
I wonder what rationale Treasury is using to withhold this vital information from the public -if they are trying to preserve the prices of the assets (which would be a lame excuse by the way) they should inform the markets and the public and include whatever regulatory authority/exception they are relying on to legally withhold facts related to terms of a government enterprise that will dramatically impact the US taxpayer.
Also, at the RTC -no investor, board member. employee of a failed S&L could participate in the purchase of any assets we sold. That is how we resolved a conflicts problem that would have destroyed the RTC's credibility. I guess the TALF folks aren't too worried about such things,..

Delinquencies of Subprime RMBS Climb, But Jumbos Drop

This information would be more helpful if it included data on realized losses. Without such information, we have no idea how to judge the importance of a delinquency. Because servicers are required to advance p&i payments for any delinquent loan if they believe such advances will be recovered from the borrower, servicer advances for delinquent loans would also be crucial to determining whether a delinquency is an indicator of a potential realized loss. This information is available for any publicly offered mbs issue on the servicer's websites.

Case-Shiller: U.S. Home Prices Slide, But More Slowly

It would be helpful if this index would reveal the percentage of properties that are/were investment properties vs. those that are primary residences.

Alternative Bailout Plan: Good and Bad Ideas

Correction: Wachovia did not go under.
Also, the reason why Lehman and Wamu failed is because their lenders demanded more collateral for loans made to these two institutions for mbs or cds. These loans were called because the "value" of the collateral currently posted by Lehman and Wamu had declined -even though the payments on the mbs posted as collateral were current.

Alternative Bailout Plan: Good and Bad Ideas

The guaranty idea is superior to Paulson's Purchases for a myriad of reasons. I agree that it would a) cost much less -since the actual losses on such mbs will be much less than predicted. In fact, I have yet to read about realized losses i.e. foreclosure or short sale proceeds are not enough to pay off the original loan) associated with any investment grade bond.
b) it would be much easier to administer -GinnieMae, a division of HUD which currently guarantees certain mbs has the infrastructure to monitor and pay US government guarantees in the event of actual realized losses on mbs.
c) as guarantor, the US government would be in a position to offer individual borrowers relief, such as lowering interest rates, forgiving principal,etc. This would not be possible with Paulson's Purchase, as it is highly doubtful that all owners of a single mbs issue would agree to sell their bonds to the U.S. Treasury.
Note, I am not advocating that the U.S. Treasury offer borrowers relief, but a government guarantee as opposed to a government purchase gives us this option and therefore should appease those who think that victim borrowers are owed.

Anti-Foreclosure Measures and Lenders Rights - Housing Tracker

With respect to jingle mail -I have yet to see any hard numbers on this -the editor is in good company, since periodicals such as the WSJ and NYT have published front page articles about the "growing" number of borrowers who, due to negative equity, are mailing keys in lieu of their mortgage payments. Instead of referring to percentages, numbers, cities, MSAs, etc -all of the authors (including the author of this piece) mention "many", "several" "lots" -no information as to whether the borrower's properties are primary residences, second homes or investment properties, no information as to the actual implications of defaulting on a mortgage. Any journalist or analyst who fails to include this information is irresponsible -as these articles do not convey any reliable facts, they are not informative, but alarmist and misleading.

Fannie and Freddie Up Risk-Based Pricing

The author doesn't appear to understand Fannie and Freddie's business. Paying out claims on defaulted mortgages over time is not an option -no one purchasing Fannie mbs or Freddie PCs expects to wait 30 years to get a return of principal. If either GSE stopped paying the full amount of unpaid principal and interest upon a mortgage default, the market for GSE-guaranteed mortgage-backed securiites would disappear as quickly as the private market did. Those securities are priced based upon certain prepayment speeds -none of which assume that borrowers will keep the same mortgage (or house, for that matter)for thirty years. Investors expect to receive any principal and interest due at the time of default in one lumpsum so that the impact on the securities is that of a prepayment. Creating mortgage-backed securities with potential 30 year tails would definitely increase the GSE's capital, because there would be no demand for their guarantees.

A Beautiful Model for Loan Fraud

It is utterly ridiculous to insist that current conditions in the mortgage market are attributable to securitization. Before securitization, when mortgages were funded with bank deposits -it was nearly impossible to obtain one -since banks were, in essence funding long term assets (mortgages) with short term liabilities (deposits) they were extremely reluctant to originate mortgages. Banks and thrifts that were not so prudent ending up insolvent, due to their mismatched funding processes.
FanniMae and FreddieMac were created to provide mortgage lenders with an outlet for their mortgage production. Instead of retaining the assets on their books, they sold them to Fannie and Freddie -neither of which turned a profit (in fact Fannie was losing a million dollars a
day) who in turn, kept them on their respective balance sheet and subjecting them to the same loss-producing short term/long term mismatch.
It wasn't until both GSEs adopted securitization as a way to increase the liquidity and move the mortgages off their balance sheets, that mortgage credit became more easily available.
Granted, mortgage lenders, borrowers and investment bankers pushed the envelope and no doubt their aggressiveness contributed to the current mess we are all in -but don't blame securitization -blame something that has been around much,much longer -greed!

Media Coverage of the Mortgage Crisis

Don't know if I'm adding anything by commenting here.... but the story on last Sunday's 60 Minutes is a perfect illustration of the media's neglect to fully discuss the current market decline issues. Two borrowers purchases a home with a hybrid mortgage. The rate has changed and although the borrowers can afford to make their new payments, they informed the anchor that they do not intend to. All the advise they have been receiving is to "walk away" as it is stupid to waste money on a depreciating asset. The 60 minute report simply leaves it at that, failing to mention that there are serious consequences to defaulting on a mortgage. The borrowers won't be able to get another mortgage for over ten years, much less pass a credit review process to move into a rental property, this is in addition to the cost of moving. Had I not known better, my "take away" from the 60 minutes segment would be to "walk away" just like the couple interviewed. Why not? When there is apparently no downside.... according to 60 minutes.
The segment also featured Mr. Grant, publisher of Grant's Rate Observer. Instead of questioning Mr. Grant, the anchor permitted him to pontificate about "free money" being the cause of the "subprime mess". Clearly, Mr. Grant should stick to his bond portfolio and his newsletters. This money may have been easily available -but it was certainly not free. In fact, subprime rates were as high as five percentage points higher than prime rates .....
Is the press so biased on other matters...... am I simply noticing the irresponsible reporting on the mortgage market because this is my business? Is a free, unbiased press really just an American myth?

How Much Should The Fed Clean Up The Current Mess?

I respectfully disagree with the author. The S&L crisis was not caused by easy money or by gap lending(which, by the way is practiced by most large US banks and markets with undeveloped secondary markets, such as Europe. The primary cause of the S&L's insolvencies was the lifting of regulations which limited their lending to residential real estate. Once these regulations were lifted, the S&Ls rapidly filled their portfolios with raw land and commercial property development loans. When unemployment started to zoom, and Bank of New England failed, the Fed basically eliminated liquidity -at the worst possible time -by making banks afraid to originate any new loans, particularly mortgage loans.
This was in the days before hedges, CDS, real estate loan syndication and a liquid secondary mortgage market. Citibank stock was trading at US$6 a share and Bank of America should have failed, if it weren't for back-door government props.

Therefore, it hardly compares to today's subprime "crisis". Despite the recent numbers, unemployment is relatively low and the US secondary market has ballooned to $US 1 trillion. In addition, you can benefit from this collapse in values without having to get your hands dirty with real estate -by simply shorting the ABX index or buying a credit default swap. Nope -this is not 1989, 1994 or 1998 -it is 2007. The world has changed and so should our reactions.