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RE: Mortgage renegotiation - so angry! - 10/15/2008 11:32:06 AM
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coco101032003
Posts: 13
Joined: 10/1/2008
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quote:
Well, no one is getting bailed out yet, except for the wall street bunch. But I guarantee you if the government does end up renegotiating mortages for people those people will end up paying for it on the other end when they sell. They'll most likely have to give a good portion of their profit to the government, should there be a profit. You know the government isn't going to give with one hand without taking it back with the other.
Yep you are right. I was reading the bill they passed called the rescue housing bill and it said that the penalties were that they will get a certain percentage back when the house sells. For example, If you were to receive help from this bill and sell your house in a year then they would take 90% of what you get from the sell. Then if you were to sell it in 2 years they will get 80% and so on. In ten years of living there you wouldnt have to pay anything back but things happen and what if you have to move.... I mean what if? Anything could happen in ten years and you might have to move. But they are atleast setting a penalty so that people will have to give something back if the house sells. The only back up plan they have is that they WILL make taxpayers You and I pay for this by raising taxes if they dont end up getting enough back.
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RE: Mortgage renegotiation - so angry! - 10/15/2008 12:11:10 PM
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relady
Posts: 1279
Joined: 4/11/2005
From: Greater St. Louis Metro
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quote:
The only back up plan they have is that they WILL make taxpayers You and I pay for this by raising taxes if they dont end up getting enough back. I do believe that the government will make its money back on this. Of course, it's not a sure thing, but if they can renegotiate some of these loans and keep people paying instead of foreclosing that will be good. The housing market WILL turn positive again, we just don't know exactly when. I tend to lean toward believing that the govt (taxpayers) are going to end up making some money on this this one. The people who will pay are going to be the ones who renegotiate and then sell their homes earlier than the 10-15 year window for not having to give any back to the govt. Which really, is probably as it should be. Nothing is free, especially when it comes from the government.
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RE: Mortgage renegotiation - so angry! - 10/15/2008 12:23:07 PM
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GroupW
Posts: 2911
Joined: 11/16/2007
From: Up in the hills of Colorado (very BIG hills...)
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quote:
ORIGINAL: relady
I do believe that the government will make its money back on this. Of course, it's not a sure thing, but if they can renegotiate some of these loans and keep people paying instead of foreclosing that will be good. The housing market WILL turn positive again, we just don't know exactly when. I tend to lean toward believing that the govt (taxpayers) are going to end up making some money on this this one.
relady-
You're probably right. At least that's what the smart money is saying right now. A favorite analyst of mine, who's really very excellent, figures that it's possible for the government to pay above-market prices for assets and still get a return on their $700 billion that's north of 10%. If they did nothing but buy the most secure slices of commercial mortgage backed securities they would get 10% minimum today and likely up to 18% and take very little risk to do so. (I do CMBS for a living, so I figure I'm as close to an expert on this as you're going to get.)
BT
_____________________________
“For every problem, there is a solution that is simple, elegant and wrong.” -H.L. Mencken
"Most people would rather die than think; in fact, they do so." -Bertrand Russell
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RE: Mortgage renegotiation - so angry! - 10/15/2008 12:41:57 PM
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IMA_CHRISTIAN
Posts: 1661
Joined: 1/23/2006
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some years ago, I was looking for a house. This was in the 1980's. I do know for a fact that if all i could afford was a $100,000 house, the realtor/mortgage broker told me, hey if you can afford a $100,000 house, which would give you a $1,000 monthly mortgage, look what you can do if you just pay A LITTLE BIT MORE mortgage of $1,100 a month,and now you can afford a $150,000 house (i just used random numbers to make a point).
Then there were realtors telling me just in the last couple of years I could get a $0 money down mortgage.
then there was the mortgage i hear where you pay INTEREST ONLY for the first few years.
all these creative mortgages got a lot of people in trouble when they listened to them.
What the realtors/mortgage people SHOULD HAVE SAID WAS -
You can afford a $100,000 house, but if you buy a $90,000 house, look at all the extra money you will have.
but no, people on HGTV when they go looking for a house have a beautiful house, but NO, they have to have GRANITE COUNTERTOPS,, instead of the very nice corian countertops. They HAVE TO HAVE an OFFICE, they HAVE TO HAVE wood floors, they HAVE TO HAVE A 3 CAR GARAGE!! the carport just wont do.
so you see how these greedy situations can put hungry buyers into a situation where they now want to covet a new house with more than they need and can afford to pay?
by the way, Im a renter, I wonder if Im in a good place now, with house market going haywire.
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RE: Mortgage renegotiation - so angry! - 10/15/2008 12:55:24 PM
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Random
Posts: 1039
Joined: 4/18/2005
From: Zipperhead
Status: offline
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quote:
ORIGINAL: GroupW
If they did nothing but buy the most secure slices of commercial mortgage backed securities they would get 10% minimum today and likely up to 18% and take very little risk to do so.
But those aren't the ones that are causing the problems. For this plan to work they have to buy up the ones that aren't secure, which are by definition more risky.
_____________________________
"That which has always been accepted by everyone, everywhere, is almost certain to be false." -- Valery
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RE: Mortgage renegotiation - so angry! - 10/15/2008 1:07:47 PM
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GroupW
Posts: 2911
Joined: 11/16/2007
From: Up in the hills of Colorado (very BIG hills...)
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quote:
ORIGINAL: Random
quote:
ORIGINAL: GroupW
If they did nothing but buy the most secure slices of commercial mortgage backed securities they would get 10% minimum today and likely up to 18% and take very little risk to do so.
But those aren't the ones that are causing the problems. For this plan to work they have to buy up the ones that aren't secure, which are by definition more risky.
Actually, they are causing a fair amount of the problems. My former employer for example has taken some pretty large hits on it's available for sale portfolio which is composed primarily of CMBS. Prices on AAA CMBS for example are all the way down to the 65 cents on the dollar range for assets that are fundamentally sound at any rational level of expected default speeds.
CMBS is somewhere around an $800 billion market in the US alone. 85% of that or so is AAA rated stuff, most of it held domestically by US financial firms in portfolios subject to market to market. In rough terms, that's somewhere around $240 billion of mark to market losses in the US, just on the AAA portion.
From RMBS to CMBS to credit cards and auto paper - at this point, any structure finance product is part of the overall problem.
Actually, for this to work, you get the biggest immediate bang for the buck if you focus on the less risky portions of the balance sheets. Those are the asset classes that it's easiest to restore some degree of liquidity for. It's also for most financial firms the larger portion of the balance sheet outside their whole loan portfolios. They are the assets who's prices adjust most rapidly to improved liquidity. It's likely where you'll see the Treasury spending a significant amount of time and money.
It's the segment of the market where risk is most seriously impacting liquidity and pricing.
It's also the segment of the market that the private equity firms have amassed a lot of dry powder to exploit the mispricing. It's possible that the treasury could lever their $700 billion into something much bigger by convincing the private equity firms to get off their backsides and start investing some cash.
_____________________________
“For every problem, there is a solution that is simple, elegant and wrong.” -H.L. Mencken
"Most people would rather die than think; in fact, they do so." -Bertrand Russell
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RE: Mortgage renegotiation - so angry! - 10/15/2008 1:15:32 PM
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GroupW
Posts: 2911
Joined: 11/16/2007
From: Up in the hills of Colorado (very BIG hills...)
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quote:
ORIGINAL: Random
quote:
ORIGINAL: GroupW
If they did nothing but buy the most secure slices of commercial mortgage backed securities they would get 10% minimum today and likely up to 18% and take very little risk to do so.
But those aren't the ones that are causing the problems. For this plan to work they have to buy up the ones that aren't secure, which are by definition more risky.
FYI - the Treasury would have even more leeway to price to a higher net yield on some of the riskier asset classes. Loss-adjusted yields on some of these classes can approach 25 to even 50%.
On nearly any scenario, the treasury could choose to operate this at a profit if they chose to. It's not unprecedented. The 1932 Reconstruction Finance Corp took a similar strategy and about broke even despite the fact that profit wasn't as much of a concern.
_____________________________
“For every problem, there is a solution that is simple, elegant and wrong.” -H.L. Mencken
"Most people would rather die than think; in fact, they do so." -Bertrand Russell
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RE: Mortgage renegotiation - so angry! - 10/15/2008 1:26:00 PM
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Random
Posts: 1039
Joined: 4/18/2005
From: Zipperhead
Status: offline
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quote:
ORIGINAL: GroupW
FYI - the Treasury would have even more leeway to price to a higher net yield on some of the riskier asset classes.
Price to yield and actual realized yield are two different things though. They can price to yield at that level because they are more risky, which means the actual yield could be dramatically different.
_____________________________
"That which has always been accepted by everyone, everywhere, is almost certain to be false." -- Valery
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RE: Mortgage renegotiation - so angry! - 10/21/2008 12:39:33 PM
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IMA_CHRISTIAN
Posts: 1661
Joined: 1/23/2006
Status: offline
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I heard why they want to bail out the mortgages.. if im remembering right it was mccain that said that they need to buy up these mortgages so that the house next door to you will not be abandoned. Which made sense.
do you think he had a good point?
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RE: Mortgage renegotiation - so angry! - 10/22/2008 2:19:05 PM
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GroupW
Posts: 2911
Joined: 11/16/2007
From: Up in the hills of Colorado (very BIG hills...)
Status: offline
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quote:
ORIGINAL: Random
quote:
ORIGINAL: GroupW
FYI - the Treasury would have even more leeway to price to a higher net yield on some of the riskier asset classes.
Price to yield and actual realized yield are two different things though. They can price to yield at that level because they are more risky, which means the actual yield could be dramatically different.
I understand that. Keep in mind, though, that I deal in this stuff for a living. The prices that some of these securities are trading at are so low that the treasury can pay above market prices and still have a very attractive realized net yield after losses. Here's one example - I bought a bond about 6 months ago that was backed by very secure commercial mortgage backed securities. Our modeling indicated a 0.1% chance of taking a loss on that bond. We bought it at 25 cents on the dollar - roughly a 25% net yield. Even on a worst case 100% default scenario, the bond did no worse than break even.
On a bond like that, the government could step in at 50 cents on the dollar and still do just fine.
Second example - front pay CDO bond off of prime MBS collateral that traded 2 months ago. The bond could see 60% defaults with a 60% loss rate on the underlying collateral and still provide a 50% return. There's room in that bond to price over market and still get a good return.
_____________________________
“For every problem, there is a solution that is simple, elegant and wrong.” -H.L. Mencken
"Most people would rather die than think; in fact, they do so." -Bertrand Russell
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