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August 21, 2007 at 10:04 AM in reply to: How do MBS/CDO holders get paid when ARMs are involved? #78830August 21, 2007 at 10:04 AM in reply to: How do MBS/CDO holders get paid when ARMs are involved? #78851
bsrsharma
ParticipantTheBreeze,
I think you will find the posts at
http://calculatedrisk.blogspot.com/2007/07/compleat-ubernerd.html
pretty informative. The brief story is, there is no simple relationship between Joe’s mortgage and the CDO/CMO held by a fund. The mortgage is sliced into “Tranches” and reassembled with similar and dissimilar debt intruments. It is these new synthetic securities that are bought by the funds. As you can see, the risk computation on these synthetic securities is very complicated, and hence it is done based on computer simulations of various combinations of price appreciation, interest rate increases and (debt) default rates and other probabilities. The problem in the CDO industry now is that these models have been found to be incorrect and were based on a shallow horizon of past few years with increasing home prices, low interest rates and low defaults. Once those conditions are reversed, the models are collapsing and are basically telling that these CDOs are not valuable. That is the root cause of the whole mess now. In the absence of securitization and resultant market for them, there is no secondary market. Without secondary market, the only mortgages are those sellable to GSEs (Fannie/Freddie/Ginnie etc.,).
So, the final answer to your original question is that there is no direct correspodence between the interest rate the borrower pays at any time and what the CDO holder gets because they get decoupled during the securitization process. It is like your cow may eat some spoiled grain but you will still get drinkable milk. But that model fails if the cow dies due to food poisoning. We are seeing a lot of cows sick or dying because the dairy farmers got greedy and started to think cows can convert any thrash into milk and started feeding them more thrash and less grain. That is now causing a rise in milk prices.
Participantmuggle, at least in our case, in defense of our realtor, I should say the current events are well outside of their sphere of even imagination, let alone experience. Most have not seen a truly severe downturn in home prices and that too combined with sudden vanishing of mortgage availability. Most of them are going to get dejected and depressed at both not getting offers and more importantly, not being able to convert even a fraction of the offers to sales due to credit crunch. There will be much exodus from the RE profession.
Participantmuggle, at least in our case, in defense of our realtor, I should say the current events are well outside of their sphere of even imagination, let alone experience. Most have not seen a truly severe downturn in home prices and that too combined with sudden vanishing of mortgage availability. Most of them are going to get dejected and depressed at both not getting offers and more importantly, not being able to convert even a fraction of the offers to sales due to credit crunch. There will be much exodus from the RE profession.
Participantmuggle, at least in our case, in defense of our realtor, I should say the current events are well outside of their sphere of even imagination, let alone experience. Most have not seen a truly severe downturn in home prices and that too combined with sudden vanishing of mortgage availability. Most of them are going to get dejected and depressed at both not getting offers and more importantly, not being able to convert even a fraction of the offers to sales due to credit crunch. There will be much exodus from the RE profession.
ParticipantTHE RUN UPON THE BANKERS[1]
By Jonathan SwiftThe bold encroachers on the deep
Gain by degrees huge tracts of land,
Till Neptune, with one general sweep,
Turns all again to barren strand.The multitude’s capricious pranks
Are said to represent the seas,
Breaking the bankers and the banks,
Resume their own whene’er they please.Money, the life-blood of the nation,
Corrupts and stagnates in the veins,
Unless a proper circulation
Its motion and its heat maintains.Because ’tis lordly not to pay,
Quakers and aldermen in state,
Like peers, have levees every day
Of duns attending at their gate.We want our money on the nail;
The banker’s ruin’d if he pays:
They seem to act an ancient tale;
The birds are met to strip the jays.“Riches,” the wisest monarch sings,
“Make pinions for themselves to fly;”[2]
They fly like bats on parchment wings,
And geese their silver plumes supply.No money left for squandering heirs!
Bills turn the lenders into debtors:
The wish of Nero[3] now is theirs,
“That they had never known their letters.”Conceive the works of midnight hags,
Tormenting fools behind their backs:
Thus bankers, o’er their bills and bags,
Sit squeezing images of wax.Conceive the whole enchantment broke;
The witches left in open air,
With power no more than other folk,
Exposed with all their magic ware.So powerful are a banker’s bills,
Where creditors demand their due;
They break up counters, doors, and tills,
And leave the empty chests in view.Thus when an earthquake lets in light
Upon the god of gold and hell,
Unable to endure the sight,
He hides within his darkest cell.As when a conjurer takes a lease
From Satan for a term of years,
The tenant’s in a dismal case,
Whene’er the bloody bond appears.A baited banker thus desponds,
From his own hand foresees his fall,
They have his soul, who have his bonds;
‘Tis like the writing on the wall.[4]How will the caitiff wretch be scared,
When first he finds himself awake
At the last trumpet, unprepared,
And all his grand account to make!For in that universal call,
Few bankers will to heaven be mounters;
They’ll cry, “Ye shops, upon us fall!
Conceal and cover us, ye counters!”When other hands the scales shall hold,
And they, in men’s and angels’ sight
Produced with all their bills and gold,
“Weigh’d in the balance and found light!”[Footnote 1: This poem was printed some years ago, and it should seem, by the late failure of two bankers, to be somewhat prophetic. It was therefore thought fit to be reprinted.–_Dublin Edition_, 1734.]
[Footnote 2: Solomon, Proverbs, ch. xxiii, v. 5.]
[Footnote 3: Who, in his early days of empire, having to sign the sentence of a condemned criminal, exclaimed: “Quam vellem nescire litteras!” Suetonius, 10; and Seneca, “De Clementia,”, cited by Montaigne, “De l’inconstance de nos actions.”–_W. E. B._]
[Footnote 4: Daniel, ch. v, verses 25, 26, 27, 28.–_W. E. B._]
ParticipantTHE RUN UPON THE BANKERS[1]
By Jonathan SwiftThe bold encroachers on the deep
Gain by degrees huge tracts of land,
Till Neptune, with one general sweep,
Turns all again to barren strand.The multitude’s capricious pranks
Are said to represent the seas,
Breaking the bankers and the banks,
Resume their own whene’er they please.Money, the life-blood of the nation,
Corrupts and stagnates in the veins,
Unless a proper circulation
Its motion and its heat maintains.Because ’tis lordly not to pay,
Quakers and aldermen in state,
Like peers, have levees every day
Of duns attending at their gate.We want our money on the nail;
The banker’s ruin’d if he pays:
They seem to act an ancient tale;
The birds are met to strip the jays.“Riches,” the wisest monarch sings,
“Make pinions for themselves to fly;”[2]
They fly like bats on parchment wings,
And geese their silver plumes supply.No money left for squandering heirs!
Bills turn the lenders into debtors:
The wish of Nero[3] now is theirs,
“That they had never known their letters.”Conceive the works of midnight hags,
Tormenting fools behind their backs:
Thus bankers, o’er their bills and bags,
Sit squeezing images of wax.Conceive the whole enchantment broke;
The witches left in open air,
With power no more than other folk,
Exposed with all their magic ware.So powerful are a banker’s bills,
Where creditors demand their due;
They break up counters, doors, and tills,
And leave the empty chests in view.Thus when an earthquake lets in light
Upon the god of gold and hell,
Unable to endure the sight,
He hides within his darkest cell.As when a conjurer takes a lease
From Satan for a term of years,
The tenant’s in a dismal case,
Whene’er the bloody bond appears.A baited banker thus desponds,
From his own hand foresees his fall,
They have his soul, who have his bonds;
‘Tis like the writing on the wall.[4]How will the caitiff wretch be scared,
When first he finds himself awake
At the last trumpet, unprepared,
And all his grand account to make!For in that universal call,
Few bankers will to heaven be mounters;
They’ll cry, “Ye shops, upon us fall!
Conceal and cover us, ye counters!”When other hands the scales shall hold,
And they, in men’s and angels’ sight
Produced with all their bills and gold,
“Weigh’d in the balance and found light!”[Footnote 1: This poem was printed some years ago, and it should seem, by the late failure of two bankers, to be somewhat prophetic. It was therefore thought fit to be reprinted.–_Dublin Edition_, 1734.]
[Footnote 2: Solomon, Proverbs, ch. xxiii, v. 5.]
[Footnote 3: Who, in his early days of empire, having to sign the sentence of a condemned criminal, exclaimed: “Quam vellem nescire litteras!” Suetonius, 10; and Seneca, “De Clementia,”, cited by Montaigne, “De l’inconstance de nos actions.”–_W. E. B._]
[Footnote 4: Daniel, ch. v, verses 25, 26, 27, 28.–_W. E. B._]
ParticipantTHE RUN UPON THE BANKERS[1]
By Jonathan SwiftThe bold encroachers on the deep
Gain by degrees huge tracts of land,
Till Neptune, with one general sweep,
Turns all again to barren strand.The multitude’s capricious pranks
Are said to represent the seas,
Breaking the bankers and the banks,
Resume their own whene’er they please.Money, the life-blood of the nation,
Corrupts and stagnates in the veins,
Unless a proper circulation
Its motion and its heat maintains.Because ’tis lordly not to pay,
Quakers and aldermen in state,
Like peers, have levees every day
Of duns attending at their gate.We want our money on the nail;
The banker’s ruin’d if he pays:
They seem to act an ancient tale;
The birds are met to strip the jays.“Riches,” the wisest monarch sings,
“Make pinions for themselves to fly;”[2]
They fly like bats on parchment wings,
And geese their silver plumes supply.No money left for squandering heirs!
Bills turn the lenders into debtors:
The wish of Nero[3] now is theirs,
“That they had never known their letters.”Conceive the works of midnight hags,
Tormenting fools behind their backs:
Thus bankers, o’er their bills and bags,
Sit squeezing images of wax.Conceive the whole enchantment broke;
The witches left in open air,
With power no more than other folk,
Exposed with all their magic ware.So powerful are a banker’s bills,
Where creditors demand their due;
They break up counters, doors, and tills,
And leave the empty chests in view.Thus when an earthquake lets in light
Upon the god of gold and hell,
Unable to endure the sight,
He hides within his darkest cell.As when a conjurer takes a lease
From Satan for a term of years,
The tenant’s in a dismal case,
Whene’er the bloody bond appears.A baited banker thus desponds,
From his own hand foresees his fall,
They have his soul, who have his bonds;
‘Tis like the writing on the wall.[4]How will the caitiff wretch be scared,
When first he finds himself awake
At the last trumpet, unprepared,
And all his grand account to make!For in that universal call,
Few bankers will to heaven be mounters;
They’ll cry, “Ye shops, upon us fall!
Conceal and cover us, ye counters!”When other hands the scales shall hold,
And they, in men’s and angels’ sight
Produced with all their bills and gold,
“Weigh’d in the balance and found light!”[Footnote 1: This poem was printed some years ago, and it should seem, by the late failure of two bankers, to be somewhat prophetic. It was therefore thought fit to be reprinted.–_Dublin Edition_, 1734.]
[Footnote 2: Solomon, Proverbs, ch. xxiii, v. 5.]
[Footnote 3: Who, in his early days of empire, having to sign the sentence of a condemned criminal, exclaimed: “Quam vellem nescire litteras!” Suetonius, 10; and Seneca, “De Clementia,”, cited by Montaigne, “De l’inconstance de nos actions.”–_W. E. B._]
[Footnote 4: Daniel, ch. v, verses 25, 26, 27, 28.–_W. E. B._]
Participantrube, that reads like our experience selling our house in late ’05-early ’06 period. Only, we saw the writing on the wall and reduced the price to let it go. (Though, I still think the dilly-dallying on the price cost us may be 20 -30K).
Participantrube, that reads like our experience selling our house in late ’05-early ’06 period. Only, we saw the writing on the wall and reduced the price to let it go. (Though, I still think the dilly-dallying on the price cost us may be 20 -30K).
Participantrube, that reads like our experience selling our house in late ’05-early ’06 period. Only, we saw the writing on the wall and reduced the price to let it go. (Though, I still think the dilly-dallying on the price cost us may be 20 -30K).
Participant$699k, to re-submit at $680k, that they will take it
So, as a seller's agent, he himself doesn't take his price seriously – Or thinks 19K is funny money?
Participant$699k, to re-submit at $680k, that they will take it
So, as a seller's agent, he himself doesn't take his price seriously – Or thinks 19K is funny money?
Participant$699k, to re-submit at $680k, that they will take it
So, as a seller's agent, he himself doesn't take his price seriously – Or thinks 19K is funny money?
ParticipantKeep an eye, you may get it for half of your original offer.
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