Mortgage-Backed Securities: the Reunion Tour

[quote name='UncleBob']Myke, perhaps you should spend more time reading what I post instead of assuming you already know what I've posted and forming ill-conceived opinions based on that.

I mean, I know it's more work and all. Having to read. Considering ideas outside of your own mindset. Doing something that doesn't involve playing with hand puppets. But I think you're up to the challenge.

As for your request for a quote...


...which, of course, was followed by multiple posts discussing the topic and hand and not centered around me.

For someone who's so upset that people reply to my posts, you tend to reply to a lot of my posts.[/QUOTE]

Somewhat fitting that you're telling something they should spend more time reading your posts when I've made 2 direct replies to things you've said to/about me and you've yet to address them. Why? Probably because you don't have shit to say in reply, unlike the rest of us who find, and point out, the holes in your arguments big enough to drive a mack truck through.
 
[quote name='RedvsBlue']Somewhat fitting that you're telling something they should spend more time reading your posts when I've made 2 direct replies to things you've said to/about me and you've yet to address them. Why?[/QUOTE]

...

[quote name='UncleBob']Why? Because that single statement you made was a bold-faced lie. Un-truth. Falsehood. Misrepresentation. Bulls***.

Thus, you're not really worth the time to attempt to have an adult conversation with. Instead of actually having an honest conversation, you're taking the familiar vs. stance of making up your opponent's position and attacking them based on your made-up lies.

I'm not going to have any of that. So either back-up your statement with some proof or continue to post bulls***. I don't really care much either way - but don't cry to your mommy when I decide you're not worth playing with.[/QUOTE]
 
So essentially, you're saying until I find a post in which you state you hate foreign investments in our economy then you won't interact with me at all?

[quote name='UncleBob']I hate foreign investments in our economy.[/quote]

Where did you learn your debate tactics? 1st grade?
 
[quote name='RedvsBlue']So essentially, you're saying until I find a post in which you state you hate foreign investments in our economy then you won't interact with me at all?



Where did you learn your debate tactics? 1st grade?[/QUOTE]

I guess not in the school of "Make up crap about your opponents and then trash them based off of that."

I can only assume your school mascot was a steaming pile of turd.
 
[quote name='RedvsBlue']So essentially, you're saying until I find a post in which you state you hate foreign investments in our economy then you won't interact with me at all?



Where did you learn your debate tactics? 1st grade?[/QUOTE]
Bob learned from the Eric Cartman school of debating.
 
[quote name='UncleBob']I guess not in the school of "Make up crap about your opponents and then trash them based off of that."

I can only assume your school mascot was a steaming pile of turd.[/QUOTE]

You have completely regressed to childhood at this point. You are, at this point, doing the internet message board equivalent of putting your fingers in your ears and saying "na, na, na I can't hear you."

I specifically laid out how I never even outright said you A) believed foreign investments were bad OR B) had made that sentiment in any post. Nevertheless, na na na you can't hear me, right?

By the way, I just posted where you said it so leave the boards now. You think it was made up? Prove it, show me every one of your posts where you didn't post that.
 
[quote name='RedvsBlue']I specifically laid out how I never even outright said you A) believed foreign investments were bad OR B) had made that sentiment in any post. Nevertheless, na na na you can't hear me, right?[/quote]

No, you back-tracked on what you said and attempted to do so in such a way that didn't make you look like you have no idea what you're talking about.

You made a post, directed to me, and used the word "you" twice and "yourself" once. You were clearly talking about me. And you clearly had no idea what you were talking about.

By the way, I just posted where you said it so leave the boards now. You think it was made up? Prove it, show me every one of your posts where you didn't post that.
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http://www.cheapassgamer.com/forums/search.php?searchid=5422008
 
[quote name='UncleBob']No, you back-tracked on what you said and attempted to do so in such a way that didn't make you look like you have no idea what you're talking about.

You made a post, directed to me, and used the word "you" twice and "yourself" once. You were clearly talking about me. And you clearly had no idea what you were talking about.



http://www.cheapassgamer.com/forums/search.php?searchid=5422008[/QUOTE]

Sorry - no matches. Please try some different terms.
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I was talking to *you* and I'm not backtracking at all. What I exactly said was "LIKE you." Now, I know the complexities of the English language are difficult for someone like yourself but even you can't be obtuse enough to not understand the difference between "you" and "like you."
 
If they were "like me" then they wouldn't be against foreign investments in our economy... which is a moot point, since "like you" isn't what you said at all.

Also, since you conservatives like to concern yourselves so much with foreign involvement in our economy, who do you think would have had the funds to purchase those banks as they went under? Foreign companies most likely.
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In the words of Gordon Gekko "Greed, for lack of a better word, is good. Greed is right. Greed works. Greed clarifies, cuts through, and captures, the essence of the evolutionary spirit. Greed, in all of its forms; greed for life, for money, for love, knowledge, has marked the upward surge of mankind and greed, you mark my words, will not only save Teldar Paper, but that other malfunctioning corporation called the U.S.A."

Anyone who knows anything about real estate/banking will tell you MBS are here to stay. Thus far, they have proved to the best way to reduce risk for banks... The other option being derivatives. Both are greatly flawed and will lead to boom-bust cycles, but our financial institutions seem to like that sort of thing. Hopefully by eliminating the subprime and predatory lending we'll fare better this time.

Greed is good for them but not so much for us.
 
The "awesome" thing about the boom-bust cycles is that the smaller banks are the ones that get screwed. They can't make enough money during the boom to survive the bust. This allows the bigger banks to get even bigger. It almost backfired on them during the last bust cycle though... I wonder what lessons they learned?
 
[quote name='kill3r7']Anyone who knows anything about real estate/banking will tell you MBS are here to stay. Thus far, they have proved to the best way to reduce risk for banks... The other option being derivatives.[/QUOTE]

Help me understand how derivatives and MBS reduce risk.
 
The bank no longer holds the mortgage as it has been bundled into the MBS product and sold. Now of course, they still have the deed so they get the house for free in the event of forclosure. It's almost as win-win as it gets.
The derivative market is so backwards and complex that I don't even try to wrap my head around it. The equation that drives the whole thing is some beyond Good Will Hunting shit.
 
[quote name='mykevermin']Help me understand how derivatives and MBS reduce risk.[/QUOTE]

Let's say a bank issues 1000 mortgages any given month, total worth $50 million. The bank now has to figure out how to reduce the risk associated with having those kinds of loans on their books. So by grouping them together and creating tranches they can sell them to investment banks. Who in turn will sell them to the public (most likely hedge funds or retirement funds). The risk has now been passed on to the market while the money generated can be lent back out or reinvested. The real money is made in the transactions involved in creating, selling and maintaining the MBS. The investment firms to further reduce risk created derivates (essentially the investment firms now play the role of a bookie). The problem with that is that you have investors, who are not tied to the mortgage in any way shape or form, betting that the mortgagor defaults. I'm oversimplifying derivatives but you can do you own research on the subject.

Try sec.gov and google to look up RMBS deals and the structure of a tranche. Check the following video out for a better explanation of derivatives.

Credit Derivatives
 
Thanks for the explanation, guys.

[quote name='nasum']The bank no longer holds the mortgage as it has been bundled into the MBS product and sold. Now of course, they still have the deed so they get the house for free in the event of forclosure. It's almost as win-win as it gets.[/QUOTE]

That didn't get much traction during the original crisis, but I've always believed this to be the case. When GOP folks whinged about how the Community Reinvestment Act was responsible for all of this in the first place, I was skeptical for two reasons:

1) CRA was responsible for 1/3 of all ARMs by the mid-90's (and it stayed that way). So while people on the right lamented how big government forced banks to use risky strategies to lend to high risk people, the banks saw enough in it to triple its use without big gummint's hand

2) In the context nasum describes, the bank is in a position that foreclosures shouldn't harm a bank at all (theoretically). Win-win indeed.
 
[quote name='mykevermin']Thanks for the explanation, guys.



That didn't get much traction during the original crisis, but I've always believed this to be the case. When GOP folks whinged about how the Community Reinvestment Act was responsible for all of this in the first place, I was skeptical for two reasons:

1) CRA was responsible for 1/3 of all ARMs by the mid-90's (and it stayed that way). So while people on the right lamented how big government forced banks to use risky strategies to lend to high risk people, the banks saw enough in it to triple its use without big gummint's hand

2) In the context nasum describes, the bank is in a position that foreclosures shouldn't harm a bank at all (theoretically). Win-win indeed.[/QUOTE]

Just a slight correction. The banks do not have the deed to the house. They merely have a lien against the property which secures their loan. They only get the deed to the house upon foreclosure (the mortgagor defaulting on the loan). With the housing market bubble bursting the banks/investment firms were left holding a bunch of loans worth more than the properties they were secured by. So, they ended up losing a ton of money.

It's also worth noting that banks are not in the business of buying and selling homes. They are there to provide you with a line of credit.

Edit: Freddi Mac started the whole securitization process. The conservatives blame the government but in reality greed was the driving force behind subprime mortgages. The market was frothing at the mouth for these securities and every joe out there decided they could own a home. We are all responsible for what happened but the blame lies equally with the banks and the government. Better regulation would have helped. Banks who played by the rules would have helped. And last but not least, folks who understood what they were buying and investing in.
 
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well yeah, they get the deed after the foreclosure. I didn't intend to imply that the loaner had the deed the whole time. Sorry if it came out that way.

As far as homes with higher principle balance than their value, we can argue about accounting measures and profit sectors, but in the end this is the bank that took in however many years of interest and principle and get's to do the whole thing all over again with $0 cost outside of origination fees on the next loan.
 
[quote name='nasum']well yeah, they get the deed after the foreclosure. I didn't intend to imply that the loaner had the deed the whole time. Sorry if it came out that way.

As far as homes with higher principle balance than their value, we can argue about accounting measures and profit sectors, but in the end this is the bank that took in however many years of interest and principle and get's to do the whole thing all over again with $0 cost outside of origination fees on the next loan.[/QUOTE]

I agree... but you are not accounting for their overhead and gigantic bonuses. :lol: That money has to come from somewhere.

The problem with MBS was that the banks issued bad mortgages and sold them to investment firms, who inturn packaged these bad mortgages and sold them on the market. Once their value tanked the IBs were forced to buy some of them back to save face. The "smart" ones were able to offload their position while others went bankrupt. Either way credit dried up and we are worse off for it.
 
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[quote name='mykevermin']1) CRA was responsible for 1/3 of all ARMs by the mid-90's (and it stayed that way). So while people on the right lamented how big government forced banks to use risky strategies to lend to high risk people, the banks saw enough in it to triple its use without big gummint's hand
[/QUOTE]

Actually, I'd argue that "banks" under the CRA didnt "triple its use". It's more accurate to say that unregulated 'financial institutions' were the ones who increased the practice of subprime lending (see myth #4 and the associated cites).

CRA in and of itself didnt create the mess. When 80% of the "bad" loans are made by institutions who are not bound by the CRA in the first place, for politicians to keep pointing at the CRA is at best a gross misunderstanding of how the law (act) works - rising to the level of being incompentent to serve in Congress or a willful distortion of the facts.

Either way, it send a burr up my butt when the 'poor and minorities' are scapegoated this way.
 
[quote name='nasum']shouldn't that be "How's ya working for that austerity" instead?[/QUOTE]
I'm not that fucking clever, ok?:lol:
 
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