{"id":4455,"date":"2008-09-15T20:11:22","date_gmt":"2008-09-16T03:11:22","guid":{"rendered":"http:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/?p=4455"},"modified":"2008-09-15T23:35:31","modified_gmt":"2008-09-16T06:35:31","slug":"leveraged-loser-loans-lead-to-loss-of-liquidity","status":"publish","type":"post","link":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/4455\/leveraged-loser-loans-lead-to-loss-of-liquidity\/","title":{"rendered":"Leveraged Loser Loans Lead To Loss of Liquidity"},"content":{"rendered":"

I’m kicking this one<\/a> up to the top, in honor of today’s events.\u00a0 It’s a historical look about the early MBS markets.\u00a0 Now before you jump me for my incorrect conclusion, I didn’t realize that the hedge funds leveraged their loan holdings 10 to 1 (or more).\u00a0 That “38 bucks a month” translates to a loss of about 6%.\u00a0 In hindsight, with full knowledge of the leverage employed, I’d\u00a0 have thought that your “IRA” would lose half its value.<\/em><\/p>\n

Enjoy!<\/em><\/p>\n

BAD LOANS: Buried In The Back Of The BreadBox <\/a><\/h3>\n

Let me tell you a story about how the subprime mortgage market collapsed and millions of baby boomers had to accept less money in retirement. If you liked the Da Vinci Code<\/a>, you\u2019re gonna love this one. It\u2019s not wrapped up in sex, or murder, or corruption, just good-old fashioned \u201cpass the buck<\/em>\u201d and \u201cwhat the little guy doesn\u2019t know won\u2019t hurt him<\/em>\u201d attitudes.<\/p>\n

WARNING: If you are prone to believe conspiracy theories, you are going to curse, kick the cat, and be extremely pissed off after you finish reading this.<\/strong><\/p>\n

Here is the dirty little secret of the mortgage securitization boom of the last 5-10 years: The little guy gets stung with the losses.<\/em><\/p>\n

First, a little history lesson. It\u2019s kind of boring but stick with me here. Mortgage backed securities (MBS) were originally the old Ginnie Mae pass-through certificates<\/a>. The VA or FHA packaged up their loans and sold them through Wall Street to little old ladies who wanted to \u201cjuice up the yield\u201d on their portfolio. They were safe because they were backed by a government agency. They yielded more than treasuries because they were a conglomeration of various mortgages. The money was loaned at, oh\u2026 14% (remember the early 80\u2019s ?<\/em>) and the investors received, say\u202612%. It was a good deal because the little old lady could only get 9% on Certificates of Deposit<\/a>. The difference was spread among loan servicers, Wall Street, and even the gub-a-mint agency by employing this securitization tactic.<\/p>\n

The problem was that loan principal was returned, along with the interest, on the old Ginnie Mae pass-throughs. Little old ladies Read more<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

I’m kicking this one up to the top, in honor of today’s events.\u00a0 It’s a historical look about the early MBS markets.\u00a0 Now before you jump me for my incorrect conclusion, I didn’t realize that the hedge funds leveraged their loan holdings 10 to 1 (or more).\u00a0 That “38 bucks a month” translates to a […]<\/p>\n","protected":false},"author":15,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_crdt_document":"","jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[26],"tags":[],"class_list":{"0":"post-4455","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"hentry","6":"category-lending","8":"no-featured-image"},"jetpack_featured_media_url":"","jetpack_sharing_enabled":true,"jetpack-related-posts":[{"id":17256,"url":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/17256\/the-real-estate-correction-of-2021\/","url_meta":{"origin":4455,"position":0},"title":"The Real Estate Correction of\u00a02021","author":"Brian Brady","date":"October 6, 2020","format":false,"excerpt":"Over 13 years ago, I tried to explain how mortgage securitization would cushion losses to investors and lessen the negative effects of mortgage defaults to real estate prices: Basically, the Titans of Wall Street never had to answer for the performance of these loans because the money managers wanted that\u2026","rel":"","context":"In "Investment"","block_context":{"text":"Investment","link":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/category\/investment\/"},"img":{"alt_text":"","src":"https:\/\/i0.wp.com\/www.bloodhoundrealty.com\/BloodhoundBlog\/wp-content\/uploads\/2020\/10\/tim-mossholder-DZcZ4Kskq6U-unsplash-1-480x320.jpg?resize=350%2C200","width":350,"height":200},"classes":[]},{"id":7211,"url":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/7211\/the-federal-governments-housing-casino-will-never-play-fair-as-long-as-there-are-votes-to-be-bought-by-cheating\/","url_meta":{"origin":4455,"position":1},"title":"The federal government’s housing casino will never play fair as long as there are votes to be bought by cheating","author":"Greg Swann","date":"February 28, 2009","format":false,"excerpt":"This is my column for this week from the Arizona Republic (permanent link). Since I wrote this on Tuesday, events have overtaken some details, but it remains that few if any borrowers in the Phoenix area will be able to renegotiate or modify their loans under the Obama plan. Everyone\u2026","rel":"","context":"In "Big Mother"","block_context":{"text":"Big Mother","link":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/category\/big-mother\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":1745,"url":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/1745\/can-i-still-get-a-mortgage-in-todays-lending-markets-with-cold-hard-cash-and-great-credit-certainly-otherwise\/","url_meta":{"origin":4455,"position":2},"title":"Can I Still Get a Mortgage in Today’s Lending Markets? With Cold Hard Cash and Great Credit, Certainly; Otherwise…","author":"Cooksquared","date":"August 4, 2007","format":false,"excerpt":"On Friday, August 3rd American Home Mortgage officially closed its doors. That same week Standard & Poor's cut its outlook on Bear Stearns from stable to negative amid fears of firm wide exposure to subprime lending and the leverage finance market. If all that were not bad enough, the leveraged\u2026","rel":"","context":"In "General"","block_context":{"text":"General","link":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/category\/general\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":2787,"url":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/2787\/bear-stearns-employees-wake-up-to-tenuous-employment-prospects\/","url_meta":{"origin":4455,"position":3},"title":"Bear Stearns Employees Wake Up To Tenuous Employment Prospects","author":"Brian Brady","date":"March 16, 2008","format":false,"excerpt":"Bear Stearns employees will wake up on St. Patrick's Day and wonder about their future. JP Morgan Chase bought Bear Stearns, a venerable Wall Street institution, for about 2.5% of the firm's stated book value. The sales price was just 20% of the value of the Manhattan headquarters alone. How\u2026","rel":"","context":"In "Lending"","block_context":{"text":"Lending","link":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/category\/lending\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":5161,"url":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/5161\/mortgage-market-week-in-review-13\/","url_meta":{"origin":4455,"position":4},"title":"Mortgage Market Week in Review","author":"Tom Vanderwell","date":"October 24, 2008","format":false,"excerpt":"Here we are on Friday again.\u00a0 That means that it\u2019s time to try to summarize what\u2019s going on in the mortgage and finance world.\u00a0\u00a0 I\u2019m going to talk about a couple of main things:\u00a0 the economic fundamentals, some earnings reports\u00a0and the \u201cmargin calls\u201d that are going on in the equity\u2026","rel":"","context":"In "Lending"","block_context":{"text":"Lending","link":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/category\/lending\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":1387,"url":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/1387\/hard-money-buy-at-eight-sell-at-twelve-repeat\/","url_meta":{"origin":4455,"position":5},"title":"HARD MONEY: Buy at Eight. Sell at Twelve. Repeat.","author":"Brian Brady","date":"July 6, 2007","format":false,"excerpt":"Imagine a business with a 50% markup. No employees, no warehouses, some liability, and you can do it from the comfort of your own home. I'm not trying to introduce you to the hottest multi-level marketing craze nor am I trying to convince you to open a franchise. I want\u2026","rel":"","context":"In "Real Estate"","block_context":{"text":"Real Estate","link":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/category\/real-estate\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]}],"_links":{"self":[{"href":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/wp-json\/wp\/v2\/posts\/4455","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/wp-json\/wp\/v2\/users\/15"}],"replies":[{"embeddable":true,"href":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/wp-json\/wp\/v2\/comments?post=4455"}],"version-history":[{"count":4,"href":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/wp-json\/wp\/v2\/posts\/4455\/revisions"}],"predecessor-version":[{"id":4460,"href":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/wp-json\/wp\/v2\/posts\/4455\/revisions\/4460"}],"wp:attachment":[{"href":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/wp-json\/wp\/v2\/media?parent=4455"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/wp-json\/wp\/v2\/categories?post=4455"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/wp-json\/wp\/v2\/tags?post=4455"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}