Comments on: Securitized Loans Are 5X More Likely to Be Delinquent

By: tradeking13

tradeking13 — Tue, 20 Oct 2009 14:51:32 +0000

Who cares about delinquencies? Losses don’t count towards operating earnings and they eventually get socialized by the government.

By: Wonk Room » The WonkLine: October 20, 2009

Wonk Room » The WonkLine: October 20, 2009 — Tue, 20 Oct 2009 14:08:27 +0000

[...] Ritholz points to a study finding that “securitized mortgages were five times as likely to be delinquent as mortgages that were not resold to [...]

By: Wall Street corruption and crime round-up |

Wall Street corruption and crime round-up | — Tue, 20 Oct 2009 11:32:04 +0000

[...] Banks securitized the glop and kept the good stuff A study found that securitized mortgages were five times as likely to be delinquent as mortgages that were not resold to securitizers. In other words, banks held the good stuff and sold the glop to be securitized. Thus, they knew exactly what they were doing [...]

By: The Curmudgeon

The Curmudgeon — Mon, 19 Oct 2009 19:25:38 +0000

@Marc P:

It goes w/ being TBTF. At some point the subsidies are seamless and Marx wins.

By: Mannwich

Mannwich — Mon, 19 Oct 2009 19:15:35 +0000

@Marc P: And the taxpayers in the lower and middle classes (only the “little people” pay taxes) are largely broke, so who will we “lob” it too? The Chinese?

My earlier prediction of quiet tax and debt rebellions coming to a town near all of us has not changed one bit. If anything, it’s strengthening.

By: Marc P

Marc P — Mon, 19 Oct 2009 19:12:19 +0000

duh, indeed.

@Mannwhich and @curmudgeon: yours is the best point yet. The strategy of the players in the securitization chain was to lob the hot potato to someone else, anyone else. Now the mortgage industry has lobbed it to the government, who will lob it to the taxpayers.

The question is whether the lob from the mortgage industry to the gov’t at FMV. To the extent it is not the banks will receive yet another subsidy.

I’m still waiting for some brilliant economist/journalist/commentator to calculate all the subsidies that the banks have received from us.

By: wunsacon

wunsacon — Mon, 19 Oct 2009 19:00:05 +0000

ManhattanGuy = ben22? I forgot whether you announced that.

Kudos to you, though, for a great call.

By: MikeNYC

MikeNYC — Mon, 19 Oct 2009 18:57:36 +0000

I have seen lots of diagrams, articles, podcasts, etc., explaining the securitization process. Anybody who wants to understand it, at least on the surface, from the outside, can find an explanation to suit his level of financial knowledge.

Here’s what I have not seen: a diagram similar to the one above, that also has an annotation regarding the payments and profits extracted by each party at each step.

I think that would go a long way towards helping understand how so many people could be involved in what many knew to be a flawed or even fraudulent process. I know the numbers may vary, but perhaps example of the fees paid for an ‘average’ securitized mortgage bond from start to finish would be eye-opening. This would include fees paid to rating agencies, RE appraisers, originating banks, bond salesman, etc. Hell, even mortgage spammers fit in this food chain somewhere and extract some amount.

By: dss

dss — Mon, 19 Oct 2009 18:19:32 +0000

duh.

By: The Curmudgeon

The Curmudgeon — Mon, 19 Oct 2009 17:49:27 +0000

If by “securitized” you mean funded by entities other than those originating the loans, then the proportion of securitized loans is well above one in eight. About now, try nine in ten, which is about how many loans done today whose funding comes from the gse fed conservatorships, and the fed government itself, in the form of our very own subprime mortgage securitizer, Ginnie Mae and the FHA.

As Mannwhich observed, we’re all on the hook for these loans now, most of which would have been further “securitized” and sold on to the Chinese, et al, in the form of bonds sold by the gse’s. At least those that weren’t monetized in a purchase by the fed.