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On Fri, 19 Mar 2021 05:23:04 -0700 (PDT), trader_4
wrote:

On Thursday, March 18, 2021 at 10:48:02 PM UTC-4, wrote:
On Thu, 18 Mar 2021 14:23:53 -0700 (PDT), trader_4
wrote:

On Thursday, March 18, 2021 at 3:15:49 PM UTC-4, wrote:
On Thu, 18 Mar 2021 15:11:16 GMT, (Scott Lurndal)
wrote:
trader_4 writes:
On Thursday, March 18, 2021 at 9:35:25 AM UTC-4,
wrote:
On Thu, 18 Mar 2021 04:30:54 -0700 (PDT), trader_4
wrote:

On Wednesday, March 17, 2021 at 10:04:25 AM UTC-4,
wrote:

Clueless again.
The housing failure alone would have simply meant a lot of
people got
evicted. The thing that made it a global crisis was that the
banks and
mortgage companies leveraged these mortgages with derivatives
that
were worth many times more than the underlying mortgages.

That's wrong too. AFAIK, there was no leveraging that caused the
problems.
The "derivatives" were simply pooling mortgages together into
securities and
selling shares in them to investors. It was fundamentally sound,
not leveraged
and it increased funding for mortgages. The only problem was in
the lending
practices where banks and institutions made progressively
riskier loans to
people with marginal ability to be able to keep up with the
payments on real
estate that had already appreciated sharply and was over valued.
And then
when the problems started, it was further complicated by the
fact that investors
only knew they had an investment in mortgages, without any way
of knowing
how many of those mortgages were in trouble, what the properties
were really
worth at the moment, etc.

And absent the MBSs, it most certainly would not have simply
meant a lot of
people got evicted. There were huge losses there, because the
values of the
properties declined, the real estate market turned poor,
millions of properties
were under water, not worth the mortgage value. THAT is what
lead to the huge
losses, those were real and would have been widespread whether
the mortgages
were part of MBSs, held by Fannie or Freddie (which went
bankrupt), held by banks,
or held by the seller.


You really need to read more about what derivatives are. One
mortgage
ended up being many times as much in "bets" for and against that
mortgage.

I know exactly what derivatives are. You show us proof for your
claim that MBSs
resulted in one mortgage being turned into may times as much in
"bets". It
was not a leverage problem with MBSs, it was a leverage problem
with the
mortgages themselves. It was not the MBSs that created the problem.
The problem was lenders making increasingly risky loans to people
with marginal
ability to pay. ARM loans with low introductory rates, 5% down
mortgages,
mortgages where with two incomes they could barely afford it.
Appraisers
over valuing properties. Those mortgages were then pooled together
into MBS
and sold to investors.

Here's a reference for Fretwell to chew on.

https://www.investopedia.com/terms/c/cdo.asp
No problem there. The value is NOT the underlying asset, it is value
derived from that. Basically they take a $50M mortgage package that
is
still worth $50M and create another value from that.

That's another lie. An MBS, CDO is taking a bunch of mortgages and
pooling
them together. You know, 1+1+1 =3 not your twelve.



"A CDO is a particular type of derivative because, as its name
implies, its value is derived from another underlying asset. These
assets become the collateral if the loan defaults".

To put this in simple terms this is not a mortgage anymore where the
only value is what you can get for the house when the borrower
defaults. Now they have established an dollar value.

That;s wrong too. The value of an MBS or CDO is whatever investors are
willing
to pay for it based on the underlying assets it represents.


That is based on
the redemption value of the mortgage at full term.

No **** Sherlock, sure the value of a mortgage is partly based on that.
The other
factors are the interest rate of the mortgage, the current interest
rate, the
probability of default and the value of the underlying asset. MBSs
didn't change
that.


Not many people
stay with a mortgage, full term and that is particularly true of the
"flippers". They plan on being out before the ARM adjusts.
That is your first inflation of the value.

Cuckoo for cocoa puffs.

Then the owner of the CDO
understands that this may be a shaky investment so he buys insurance
(Credit Default Swap). That is where AIG came in. Then these default
swaps get traded like commodities (Why the 2000 CFMA is important).
By the time they are done that $500K mortgage may be trading at well
over a million or more when you add up all of the paper "Derived"
from
it.


Cuckoo for cocoa puffs. Again, this is like saying that soybean prices
plummeted
because there were futures and option on soybeans, not because of
Trump's
tariffs that had the soybeans piling up, with no buyers.

When the original mortgage fails, the bank of Iceland or RBS is not
going to foreclose on some LLC in the US and they have no interest in
trying to auction the house, they going after AIG or some other
similar operation that insured that original CDO. That pile of paper
suddenly becomes worthless unless someone bails them out.

Nothing stopped them from foreclosing to recover what they can from
their investment and I would expect that in almost all cases, that is
indeed
exactly what happened. The property was foreclosed on, the proceeds
were
sent to the investors. You act like because someone pools 1000
mortgages
together, suddenly no one can foreclose. So,by your theory, all the
original
owners are still owning and living in those 2009 properties or later
sold
them correct?

You really need to just stop. You're about to come out somewhere in
China
from the hole you've dug.
The people with the tranches got bailed out long before any
foreclosures happened.

Again, TARP was all repaid back, they were loans or equity positions. If
you got
temporary, emergency help because your financial situation was dire, would
you
then pay it back and just forget about what you were owed that caused it?
I don't think so.



Some of those properties sat vacant for 5 years
before they finally went through foreclosure.
Explain that if it was all just based on the value of the house.

1+1 = 7 again. The length of a foreclosure isn't determined by the value
of
the house. Foreclosures can be dragged out by legal maneuvers, filing
for
bankruptcy and at the time, there were foreclosures everywhere with the
courts and whole process overloaded.




You keep ignoring the credit default swaps and that was where
companies like AIG came in.

You're ignoring that all that did was transfer risk from one party to
another for
a premium. It was like insurance. When a house burns down, did the
insurance
cause it?

The insurance became an investment itself, having nothing to
do with the original mortgage and traded at much more money.

More mindless bull****.

Do a little homework yourself. What was the total
value of failed mortgages 2005-9? (Maybe a $T)
What was the total economic damage caused by all of
the MBSs, CDOs, and Credit Default Swaps? (Several $T)

The difference is the leverage I was talking about.

Bull**** it is.