Banks and investors have not written down jumbo loans underlying the related MBS nearly as aggressively
The operational purpose of institutional policy and administrative law is the protection of capital. It seems logical that the application follows a skewed distribution related to potential impact on the equity of the holders of the paper at issue. Evan handed application would injure the institutions themselves thus its absence.
If foreclosures vs mortgage arrears (or possibly tax arrearages) by zip code could be plotted your answers would be forthcoming.
It would seem that there are more than a few factors – taxes, ability to sell at or above the loan value, occupancy vs. vagrancy. I also wonder in non-recourse states the ability to sue for past due payments is also not a factor.
Very true, again it is the highly leveraged who are in trouble and causing trouble for the banks. 5 million and then took out a 1.5 million dollar home equity loan the system is in trouble. If you put 1.5 million down to buy a 3 million home recently and missed out on the appreciation then you could feel like a chump by continuing to pay your mortgage but not as easy to walk away as you have skin in the game.
When will it dawn on people that they can end-run the banks? If the banks are filing fraudulent paperwork to gain ownership why are people not going down to the county registrar’s and pulling a copy of a recent mortgage satisfaction and forging it to their home and mailing in the filing with a bit o’ cashier’s check? 😀
Given the size of jumbo loans and the comparatively low levels of credit enhancement for these deals, only a few defaults and liquidations can blow through the credit enhancement quickly and cause losses for the senior classes
to take over these properties refuts the mantra that the problem was sub prime and the governmeent, not bad banking.
Banks and Investors have written down their subprime Alt A loans aggressively. They, and their regulators, argue that they now are adequately capitalized for these bad investments. Jumbo MBS have retained more value and, in many cases have appreciated in value this year. If servicers started liquidating these very delinquent loans, the losses would reveal that the senior bonds were overvalued and need to be written down more aggressively. This would kill this market and require significantly more capital to be held against advance to payday Kentucky the MBS.
If the banks are extending credit to the servicers, it makes some sense in that they can fund the servicers to avoid, or at least delay taking hits on the senior pieces they still own , in other words robbing Peter (the bank, ultimately the govt) to pay Paul (the bondholders (themselves).
Their growing exposure to the servicers will have to be reserved and written off eventually. Are they arbing the write down process by keeping the senior bondholders whole while ignoring the bad loan impacts from the servicers. If that’s the case then the banks will have set themselves up for a bailout when it comes time to writeoff the servicer loans, and the senior bondholders could keep the payments received from the servicers. It seems like a possible mechanism for another backdoor bailout for sr bondholders.
I can’t see how the servicers are still afloat without a lot of help from the banks. Seems to me that help will only be available if it benefits the bankers, and the senior bondholders.