Solve the Economic Crisis

LoudRoar_IHB

LoudRoar_IHB

New member
Considering the fact that subprime loans were created in Irvine/Newport, maybe we are creative enough to get out of this mess.



Here is my question and I hope someone who knows details can explain it. A mortgage backed security is a pool of loans, including a note and deed of trust, which is serviced by a company which also sells bonds. The bonds have different risks. Most the prospectuses state that the bonds are backed only by the STREAM of payments of the obligations, not by the underlying asset (the house). But the pool still owns the deed of trust, right? So basically, if there is a foreclosure, does that mean that servicing company forecloses and disburses the assets only to a specific class of mbs bond holders? My question is, if the mbs pool owns the note, do they not also own the mortgage?



And if they do own both the note and mortgage, and now the stream of payments is worthless, what about the actual land/property/mortgage? Clearly they will have reduced value which is evident in falling RE prices.



In other words, what if a home owner could buy the mortgage from the bank for their own house? Is that mortgage not selling for much less?



Any information would help, thanks
 
Once the loan gets stuck in a MBS pool, what you are trying to do is hopeless because there are too many tranches and too many owners.



If you get lucky like Terrible Herbst and have a line that hasn't been sold that is owned by a bank taken into receivership, the FDIC may be your huckleberry ? half off baby!



<a href="http://www.nytimes.com/2009/02/14/business/economy/14assets.html?_r=1">http://www.nytimes.com/2009/02/14/business/economy/14assets.html?_r=1</a>
 
[quote author="LoudRoar" date=1234753652]Considering the fact that subprime loans were created in Irvine/Newport, maybe we are creative enough to get out of this mess.



Here is my question and I hope someone who knows details can explain it. A mortgage backed security is a pool of loans, including a note and deed of trust, which is serviced by a company which also sells bonds. The bonds have different risks. Most the prospectuses state that the bonds are backed only by the STREAM of payments of the obligations, not by the underlying asset (the house). But the pool still owns the deed of trust, right? So basically, if there is a foreclosure, does that mean that servicing company forecloses and disburses the assets only to a specific class of mbs bond holders? My question is, if the mbs pool owns the note, do they not also own the mortgage?



And if they do own both the note and mortgage, and now the stream of payments is worthless, what about the actual land/property/mortgage? Clearly they will have reduced value which is evident in falling RE prices.



In other words, what if a home owner could buy the mortgage from the bank for their own house? Is that mortgage not selling for much less?



Any information would help, thanks</blockquote>


My understanding, and this is just going off memory from a year or so ago, and possibly flawed understanding in the first place, is that MBSes in their simplest form are collateralized by and made up of the mortgages themselves. And the holder of the MBS is entitiled to the cash flow from the mortgages. Simple MBSes are not divided into tranches.



There are also specific types of MBS which are know as collateralized debt obligations, CDOs, which are divided into tranches and are not collateralized by the mortgages, but by a pool of MBSes. Yeah, it is already starting to get confusing, eh?

A tranche of a CDO is not comprised of MBSes or mortgages. It is collateralized by the pool MBSes and entitled to a specific cash flow from the pool of MBSes, but not the actual mortgages themselves, nor does it consist of MBSes or mortgages. It is just a contract in which the buyer pays for the cash flow. Different tranches have different risk profiles depending on the portion of the payment the tranche is entitled to.

Google CDO and tranche.



Per the title of your thread:

The solution to the economic crisis is to speed up the foreclosure process, expose insolvent banks and put them into bankruptcy. Do not bail out any insolvent corporations. End 95% of government intervention in the foreclosure process.

The long term solution to preventing these problems again is to get rid of the Federal Reserve, get rid of fiat currency, end fractional reserve banking, and uphold the Constitution regarding the coinage of money.
 
Some time ago a group of hyper-intelligent pan dimensional policy makers decided to finally answer the great question of the Crisis, the Economy, and Everything.

To this end they built an incredibly powerful computer, Deep Thought. After the great computer programme had run (a very quick seven and a half million years) the answer was announced.



The Ultimate answer to the Crisis, the Economy, and Everything...



(You're not going to like it...)



Is...



42



Which suggests that what you really need to know is 'What was the Question?'.



(Spoof of "The Hitchhikers Guide to the Galaxy" above...)
 
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