Chunky

Moody's Makes a Bad Situation Worse

Although I totally agree with what structured analysts of Moody's done for their bonus, I think Tom's logic is intentionally misguiding.

For already delinquent pool of 115B why do you think they come back paying the mortgage? Most, if not all, of 30 days delinquent pool will just move into 60 days delinquent pool. This will repeat until all of them move into REO. This pool will create 67B loss (115B x 90% x 65%). With 24B loss, this will form 91B. For 132B loss, current pool of 336B needs to generate less than 20% of delinquent portion at 65% severity.