Scrutinizer

Report from the Real Estate Front: Appraiser Calls Increasing; Banks Worry About Losses

I'm curious about how CRE loans are registered. Is it similar to residential mortgages using MERS?

If so, what potential issues exist for CMBS (and RMBS) given the recent Kansas Supreme Court ruling related to MERS having no standing as a party to the foreclosure process?

www.msfraud.org/Kansas...

iamfacingforeclosure.c.../

Seems to me that if this issue gains legal traction, there will be trillions of dollars worth of mortgage loans (residential and commercial) that will require legal resolutions by the courts, not the markets.

Scrutinizer

Moody's Makes a Bad Situation Worse

Tom.. you're right on the money with your comments on the arbitrary (and inane) analytical models being used by the Rating Agencies.

For them to make irresponsible statements like these is tantamount to yelling fire in a crowded theater....

.....A theater crowded with people who paid extortionary ticket prices (mortgages) who were reassured by these "fire marshal" that there was plenty of room and no one was in any danger.

And although the spark that set that tinder box on fire was set by FASB 157, the flames were fanned by the blustering shouts of "Fire!!" from these rating agencies.

And in the middle of this are the monolines, who set their premiums according to these fraudulent credit ratings, provided by Moody's and S&P. As a monoline insurer, you don't argue with the credit agencies with regard to ratings, even if you think the risks are greater than the models they are assigning.

Had these instruments been properly rated in the first place, the higher premiums the monolines would have charged would have served as the canary in the coal mine, as well as providing that additional capital that so many people seem to believe is so necessary to increasing reserves.

Tom.. Get yourself an agent and get on Bloomberg, FoxBusiness.. CNN, CNBS... anything. Get out there and tell this story my friend!!!

Hell.. meet me at the SEC building in DC and we can both protest that the SEC take action against the "priesthood" at Moodys/S&P. And at the same time we can call for them to suspend FASB 157.

Take care!!

Scrutinizer

Will TARP Cover Both Ambac and MBIA?

That's how I understand it.. Which is why I've been so bullish on the Monolines, and especially those exposed to the CDO/MBS markets.

The Banks have to obtain the voting rights to sell them off.

So the logic should follow that they need to either settle with the Monolines, or find a way to buy their CDS's out and have total control over the process.

I hope Tom can address this, either in a future article, or as an additional comment here.

Will TARP Cover Both Ambac and MBIA?

Wait.. As I've understood it, the banks are the ones selling the impaired assets to the Government, not the Monolines. What I've understood is that the banks require the voting rights held by those Monolines like ABK and MBI, in order to consumate those sales.

Additionally, given that MBI has alledged fraud on the part of BAC (as currently owner of Countrywide Financial), it would stand to reason that any punitive financial costs should be born by the banks, not the insurers.
>>There are conflicting interests for different holders, about whether to liquidate a CDO, whether some holders get paid before others even if there is no liquidation, and numerous variations on those themes.

This "tranche warfare" is set to get ever messier, because not only are holders of CDOs involved, holders of insurance contracts on payments of the CDOs also have rights to determine what happens to the CDOs.

The billions of dollars worth of hedges that banks bought on the CDOs they held on their books from bond insurers like Ambac and MBIA often involved handing over the voting rights on the CDO.

With hindsight, this was an extremely unwise move. An estimated $100bn of such CDSs on CDOs were written by bond insurers. The underlying CDOs are essentially worthless without these rights. The rights which allow holders to decide whether or not a structure is liquidated is what will determine whether it has any value at all.<<

us.ft.com/ftgateway/su...

What am I missing here?

Restoring Credibility to Ambac and MBIA

Folks.. The only way out of this mortgage mess is for the banks to take their medicine for buying Mortgage Insurance based upon fraudulent lending practices.

The MI's are the victims here. They were deluded into believing the credit ratings that Moody's and S&P placed on those CDOs and Mortgage Backed Securities, and the banks are culpable for their liar loans and loose lending practices.

The first step in ANY mortgage industry recovery is to resolve the status of Mortgage Insurers. And given the potential litigation the insurers could resort to over the lending practices by the banks, both sides have every incentive to work out a deal.

Btw.. astonished this article didn't mention RDN, with a Book value of $30/share and $1 Billion in cash. This company strikes me as one of the most conservative of the MIs and they are acknowledged as having some of the least exposure to sub-prime and Alt-A risks.

Scrutinizer

Restoring Credibility to Ambac and MBIA

Whoa!! No mention of RDN with a book value of $30/share and $1 Billion in cash?

seekingalpha.com/artic...

Time for folks to review the CC Transcript via your website

Scrutinizer