Use DCF? Use DCF… yes, that’s a good idea but for the fact that… we don’t know yet what the CF (cash flow, that is) is going to be (although I’m sure BofA likes to pretend that they know).
You don’t know the exact cash flow on the loans, but you can bound them. You can’t predict the future 100%, but you can get an approximate idea, best worse case as well as probabilities of both.
What, I don’t know… but not nearly as much as it used to be because SFR servicing is a money losing business right now.
No its not, it is probably the only winning business right now. You have virtually no liability and you collect fees on the passthrough. If you are servicing SFR mortgages, you don’t necessarily own them.. they are likely securitized.
The MAC clause is invoked – if it’s invoked at all – AFTER the acquisition process has started, the transaction has been announced, and BEFORE the proposed closing date (because something “material” shows up after due diligence has been completed and the transaction has been announced).
My point exactly;
1) AFTER the acquisition process has started.
2) AFTER the transaction has been announced.
3) BEFORE the proposed closing date – for ‘material’ reasons.
You may have done ‘due diligence’ on bank transactions, but I can virtually guarantee you that a final audit is completed BEFORE the proposed closing date, and part of the reason for the final audit is make sure there are no ‘material’ reasons… and what was seen during the diligence phase was what is really behind the books.
If you think I am insinuating that Merrill Lynch mis-represented their books during the due-diligence phase, you are damn right! That is what defines a ‘material’ reason! The audit differs from the articles presented during due-diligence… there is a ‘material’ discrepancy. If what was presented during due diligence was the same as what the auditors came up with, then the material clause could not be invoked.
