dcxavier

Five Stocks to Own Now that the Dow Has Bottomed

MER sold securitized tranches at an average of 22 cents on the dollar, not mortgages. Depending on seniority of the tranches, some are worth full value, others may be worthless. This article contains a decent description of the securitization process. MER obviously held a big slug of junior tranches.

www.moodys.com.br/bras...

Mortgage Resets: Subprime May Be Ending, Option ARMs Have Just Begun

WM did a ton of seconds over their own Option ARM's. What's bad is that they generally didn't get rid of them by securitization, there are about $40B true seconds sitting on their books.

Mortgage Resets: Subprime May Be Ending, Option ARMs Have Just Begun

Where you're going to see the huge losses isn't in the Option ARM's, but in the second mortgages that were also part of the financing. Many of these loans were financed 80% primary, 20% second. The second loses 100% of its value before the primary Option ARM loses one penny. The WM 8-K page 15 from two days ago stated that there were larger writeoffs from HELOC than subprime, and HELOC writeoffs seem to be growing exponentially over the last few quarters.