15 replies to this topic

[OEXCHAOS]

SIVs, fundamentally, are little more than off-balance RV vehicles trying to arb spreads between ABCP and higher yielding ******** (much of it mortgage-backed).

When you don't learn from history and try to put on LTCM-style trades without managing your risk properly, you get whacked. End of story.

I wish it was the end of the story!


Alas, there's all kinds of comedy and tragegy yet to be writ.

But the underlying assets are worth something, and while we don't know what, we know with certainty that it's not par and it's not zip.

My guess is about $0.60 now and about $0.80 later with work outs and all manner of other stuff.

Mark

[TTHQ Staff]

These bonds are not getting a bid that is a fact. You bid on it Mark. Put your money where your ideas are. The reason they are not getting a bid is they are murky - undocumented - untraceable pieces of toxic fraud. And no one can get their hands around it.

Zedor,

Now you put your money where your mouth is. Sell me those bonds for zero. I am a buyer and will be putting my money where my mouth is

There is I am sure a huge bid ask spread. Why should I sell something I dont have for zero. That is a nonsense reply. Citi is writing off 11 billion today guess they dont know what they are doing. Go submit your resume to run their SIV department.

OK, then Zedor-- since you don't have any.... take the next step. Buy them for nothing and sell them to all of us. I think you're already gotten a buy at .50 on the dollar, and a definite .30 on the dollar.

My big 'wait a minute moment in reading your original post was (beyond the fuzzy math) was the assumption that these sub-prime loans were on homes that would need repair to get 'back on the market' Some of these homes are $500K beauties with bad loans. You can't assume they're all heaps of cr@p.

Also you assume that the current owners won;t be able to make due down the line. They may be the saving grace for this whole mess. They have the most invested - their lives, their income, their time and family. I bet you that 90% of the home owners WANT to make good and most will try. Chances are you won't be paying any high priced lawyers to evict. Just like the old days, if they know they have yo go, they'll just walk and leave the keys in the mailbox.

[zedor]

Why oh why if these are such beauties and wonderful things were they kept off balance by both Merrill and Cit from day one? Why did they not carry the proud corporate logo?



Why has Citi written off 18 billion in total out of 55 billion -- see details here.

NEW YORK (Reuters) - Charles Prince resigned on Sunday as chairman and chief executive of Citigroup Inc, as the bank said it may write off $11 billion of subprime mortgage losses, on top of a $6.5 billion write-down last quarter

http://www.reuters.c...05?pageNumber=2



Why is both Merrill and Citi now being investigated for HIDING more losses? Why hide losses from such wonderous things?



These beauties as you call them according to the WSJ are disproportianely concentrated in minority neighborhoods. You dont think on a 100,000 house 6000 dollars (6%) of repairs and cleaning and painting would be needed to sell ? And you consider that without 6000 of repairs makes them a heap of c*&p in your view? If I were to sell a car I would detail it first to get top dollar. Wouldnt you ?



Two major CEOs have been axed in as many weeks. Guess the boards did not see the beauty and luster in these subprime investments.

Obviously you have your mind made up how trivial this whole SIV sub pirme issue is. Good luck with that.

Edited by zedor, 05 November 2007 - 10:58 AM.

[OEXCHAOS]

FWIW, Zedor, on those that need repair at all, 6% is probably cheap for a lot of them. Some it's high. Others it not necessary since they won't be foreclosing.

Personally, I though it was probably a decent guess for the worst case scenario, depending upon the location and nature of the loans.

BTW, if these properties are mostly in minority neighborhoods, then chances are, there's a standing bid for them from the municipality in which they reside, if there's funds for such (and there often are). It's a way to promote urban redevelopment. There are suprising amounts of funds available and just waiting for this opportunity.

Mark

Why is both Merrill and Citi now being investigated for HIDING more losses? Why hide losses from such wonderous things?

The properties aren't the problem, it's the leverage and derivatives and the stupidity of the exposure that they are hiding or were trying to hide.

They will and should suffer for that. It's just the presumption that there's no value to the assets. There's lots, but it may not exceed the equity left to the hyper-leveraged holders.

M

[IndexTrader]

As a data point, a professional buyer at a trustee sale (the sale part of the foreclosure process), is probably going to be willing to pay 50-60% of current market value for a property. This clearly depends on the condition of the property. But one of the problems a trustee sale buyer faces is the inability to see the house on the inside normally. So you try to find out information by looking in windows (if you can), asking neighbors questions, observing the outside and ASSUMING the inside is similar, etc etc. But when it comes right down to it, rehab costs on foreclosed properties is a major wild card. But as a buyer, if you take that 50% number, and assume that the property is worth $200K, the way this might look is $12K for the realtor, 6 months interest carry cost ($7K), taxes and insurance for 6 months might be $4K. There are no foreclosure costs because the bank paid this (but in my area this run about $1500 to $2000). So the total here is about $23K. Assume we list the property $10K under market to speed the sale process up. That's $33K. Let's assume rehab costs of $30K. That leaves a profit for the buyer of about $30K for a property that he is going to fix up, list 5% under the market, and sell within 6 months. Now again, the rehab cost is a major variable. I've seen houses stripped of nearly everything of value, and I've seen houses that need nothing. These days, a house left vacant may get broken into, stripped of the copper water pipe, A/C stolen for copper, etc etc. But if I were bidding blind, I think when taken over a variety of houses, a 50% bid versus current market value is a pretty safe bid. IT

[dasein]

index - thanks for the numbers. I would say looking at other markets with a lot of foreclosures, like Buffalo and Germany - the initial wave goes like you said, but it all depends on demand in the end. if there is shrinking demand (and this will NOT hapen in a lot of US areas, as long as we keep the border porous), the first round is 50%, after a few years, then stuff will get less than 25% bid, and less that OK properties will get nothing. Some places in the ex east of germany, people walked away - and this in a country where you must put 20% down... the banks at times will unload for 1 euro, to make it a legal sale. the court process is slow, and banks do not want to be a RE manager - they are losing money to manage the buiding and pay tax, 1 euro looks good. but again, this takes a few years to happen, and there has to be a decline in demand - i.e. net reduction in local population. klh