[asragov]

Sorry to doubt the story, but it sounds unlikely.

BofA like most banks funds its loans in a number of ways, including deposits (0% checking accounts), so the cost of funds should be less than Fed Funds.

In any event, even though BAC’s cost of funds is 3.76% (YTD to 9/30), if you include their operating costs, they won’t make much money at 5.00% fixed for 30 years.

To get an idea of other rates, the 30-year treasury today is at 4.48%, and the 30 year fixed jumbo at 6.58% (if you can get one).

Banks don’t like owning property, but they like subsidizing borrwers even less. If it’s not a loan that they can sell (securitization), which seems impossible at such below-market rates, it seems unlikely unless there are some other seriously mitigating factors (other property, collateral, etc.).

In the event that banks are actually doing this, then their profitability will be shot, and future in greater doubt than previously thought.

[asragov]

Sorry to doubt the story, but it sounds unlikely.

BofA like most banks funds its loans in a number of ways, including deposits (0% checking accounts), so the cost of funds should be less than Fed Funds.

In any event, even though BAC’s cost of funds is 3.76% (YTD to 9/30), if you include their operating costs, they won’t make much money at 5.00% fixed for 30 years.

To get an idea of other rates, the 30-year treasury today is at 4.48%, and the 30 year fixed jumbo at 6.58% (if you can get one).

Banks don’t like owning property, but they like subsidizing borrwers even less. If it’s not a loan that they can sell (securitization), which seems impossible at such below-market rates, it seems unlikely unless there are some other seriously mitigating factors (other property, collateral, etc.).

In the event that banks are actually doing this, then their profitability will be shot, and future in greater doubt than previously thought.

[asragov]

Sorry to doubt the story, but it sounds unlikely.

BofA like most banks funds its loans in a number of ways, including deposits (0% checking accounts), so the cost of funds should be less than Fed Funds.

In any event, even though BAC’s cost of funds is 3.76% (YTD to 9/30), if you include their operating costs, they won’t make much money at 5.00% fixed for 30 years.

To get an idea of other rates, the 30-year treasury today is at 4.48%, and the 30 year fixed jumbo at 6.58% (if you can get one).

Banks don’t like owning property, but they like subsidizing borrwers even less. If it’s not a loan that they can sell (securitization), which seems impossible at such below-market rates, it seems unlikely unless there are some other seriously mitigating factors (other property, collateral, etc.).

In the event that banks are actually doing this, then their profitability will be shot, and future in greater doubt than previously thought.

[asragov]

Sorry to doubt the story, but it sounds unlikely.

BofA like most banks funds its loans in a number of ways, including deposits (0% checking accounts), so the cost of funds should be less than Fed Funds.

In any event, even though BAC’s cost of funds is 3.76% (YTD to 9/30), if you include their operating costs, they won’t make much money at 5.00% fixed for 30 years.

To get an idea of other rates, the 30-year treasury today is at 4.48%, and the 30 year fixed jumbo at 6.58% (if you can get one).

Banks don’t like owning property, but they like subsidizing borrwers even less. If it’s not a loan that they can sell (securitization), which seems impossible at such below-market rates, it seems unlikely unless there are some other seriously mitigating factors (other property, collateral, etc.).

In the event that banks are actually doing this, then their profitability will be shot, and future in greater doubt than previously thought.

[asragov]

Sorry to doubt the story, but it sounds unlikely.

BofA like most banks funds its loans in a number of ways, including deposits (0% checking accounts), so the cost of funds should be less than Fed Funds.

In any event, even though BAC’s cost of funds is 3.76% (YTD to 9/30), if you include their operating costs, they won’t make much money at 5.00% fixed for 30 years.

To get an idea of other rates, the 30-year treasury today is at 4.48%, and the 30 year fixed jumbo at 6.58% (if you can get one).

Banks don’t like owning property, but they like subsidizing borrwers even less. If it’s not a loan that they can sell (securitization), which seems impossible at such below-market rates, it seems unlikely unless there are some other seriously mitigating factors (other property, collateral, etc.).

In the event that banks are actually doing this, then their profitability will be shot, and future in greater doubt than previously thought.

[asragov]

How long of a period are you looking at?

Here is a comparison of SPY (the S&P 500) and EEM (the Emerging Markets index) over the last five years:

http://finance.google.com/finance?chdnp=1&chdd=1&chds=1&chdv=1&chvs=maximized&chdeh=0&chfdeh=0&chdet=1194555600000&chddm=492660&cmpto=NYSE:EEM&q=AMEX:SPY

I would say that the difference is fairly dramatic.

Obviously, past performance is no indicator future results, and they both may go down. But historically, they are pretty different.

[asragov]

How long of a period are you looking at?

Here is a comparison of SPY (the S&P 500) and EEM (the Emerging Markets index) over the last five years:

http://finance.google.com/finance?chdnp=1&chdd=1&chds=1&chdv=1&chvs=maximized&chdeh=0&chfdeh=0&chdet=1194555600000&chddm=492660&cmpto=NYSE:EEM&q=AMEX:SPY

I would say that the difference is fairly dramatic.

Obviously, past performance is no indicator future results, and they both may go down. But historically, they are pretty different.

[asragov]

How long of a period are you looking at?

Here is a comparison of SPY (the S&P 500) and EEM (the Emerging Markets index) over the last five years:

http://finance.google.com/finance?chdnp=1&chdd=1&chds=1&chdv=1&chvs=maximized&chdeh=0&chfdeh=0&chdet=1194555600000&chddm=492660&cmpto=NYSE:EEM&q=AMEX:SPY

I would say that the difference is fairly dramatic.

Obviously, past performance is no indicator future results, and they both may go down. But historically, they are pretty different.

[asragov]

How long of a period are you looking at?

Here is a comparison of SPY (the S&P 500) and EEM (the Emerging Markets index) over the last five years:

http://finance.google.com/finance?chdnp=1&chdd=1&chds=1&chdv=1&chvs=maximized&chdeh=0&chfdeh=0&chdet=1194555600000&chddm=492660&cmpto=NYSE:EEM&q=AMEX:SPY

I would say that the difference is fairly dramatic.

Obviously, past performance is no indicator future results, and they both may go down. But historically, they are pretty different.

[asragov]

There is some good analysis over at Calculated Risk (“More Citi”):

http://calculatedrisk.blogspot.com/2007/11/more-citi.html

and the NY Times (“Bankers’ Lesson from Mortgage Mess”):

If you really want it from the primary source, you can listen to the conference call here:

http://biz.yahoo.com/cc/9/87359.html

There are some very unclear issues here:

– are the rating agencies marking down beyond what the underlying cash flows warrant?

– how does the valuation of the underlying collateral affect the valuation of the securities?

– how do you react to market behavior that is unprecedented?

– how effective are / would be hedges to this exposure?

I would open it up to discussion; my impression is that this is a company that is not being completely forthright about its risks. The questioners seemed to have better questions than the company had answers.

[asragov]

There is some good analysis over at Calculated Risk (“More Citi”):

http://calculatedrisk.blogspot.com/2007/11/more-citi.html

and the NY Times (“Bankers’ Lesson from Mortgage Mess”):

If you really want it from the primary source, you can listen to the conference call here:

http://biz.yahoo.com/cc/9/87359.html

There are some very unclear issues here:

– are the rating agencies marking down beyond what the underlying cash flows warrant?

– how does the valuation of the underlying collateral affect the valuation of the securities?

– how do you react to market behavior that is unprecedented?

– how effective are / would be hedges to this exposure?

I would open it up to discussion; my impression is that this is a company that is not being completely forthright about its risks. The questioners seemed to have better questions than the company had answers.

[asragov]

There is some good analysis over at Calculated Risk (“More Citi”):

http://calculatedrisk.blogspot.com/2007/11/more-citi.html

and the NY Times (“Bankers’ Lesson from Mortgage Mess”):

If you really want it from the primary source, you can listen to the conference call here:

http://biz.yahoo.com/cc/9/87359.html

There are some very unclear issues here:

– are the rating agencies marking down beyond what the underlying cash flows warrant?

– how does the valuation of the underlying collateral affect the valuation of the securities?

– how do you react to market behavior that is unprecedented?

– how effective are / would be hedges to this exposure?

I would open it up to discussion; my impression is that this is a company that is not being completely forthright about its risks. The questioners seemed to have better questions than the company had answers.

[asragov]

There is some good analysis over at Calculated Risk (“More Citi”):

http://calculatedrisk.blogspot.com/2007/11/more-citi.html

and the NY Times (“Bankers’ Lesson from Mortgage Mess”):

If you really want it from the primary source, you can listen to the conference call here:

http://biz.yahoo.com/cc/9/87359.html

There are some very unclear issues here:

– are the rating agencies marking down beyond what the underlying cash flows warrant?

– how does the valuation of the underlying collateral affect the valuation of the securities?

– how do you react to market behavior that is unprecedented?

– how effective are / would be hedges to this exposure?

I would open it up to discussion; my impression is that this is a company that is not being completely forthright about its risks. The questioners seemed to have better questions than the company had answers.

[asragov]

You can find the REO’s on their respective websites, but note that they are usually sold through realtors who specialize in this sort of thing:

http://bankofamerica.reo.com/search/

http://www.citimortgage.com/Mortgage/Oreo/SearchListing.do

http://mortgage.chase.com/pages/other/co_properties_landing.jsp

http://www.premierereo.com/reo/consumerSvlt/nav/ConsumerNavL1.jsp/requestPage/consumer/PropertySearch.jsp

http://www.us.hsbc.com/1/2/3/personal/home-loans/properties

Clearly banks are “managing” the process of getting these properties to market.

[asragov]

You can find the REO’s on their respective websites, but note that they are usually sold through realtors who specialize in this sort of thing:

http://bankofamerica.reo.com/search/

http://www.citimortgage.com/Mortgage/Oreo/SearchListing.do

http://mortgage.chase.com/pages/other/co_properties_landing.jsp

http://www.premierereo.com/reo/consumerSvlt/nav/ConsumerNavL1.jsp/requestPage/consumer/PropertySearch.jsp

http://www.us.hsbc.com/1/2/3/personal/home-loans/properties

Clearly banks are “managing” the process of getting these properties to market.

[Author]

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