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What Are Those “Toxic Assests” Worth? February 27, 2009

Posted by tkcollier in Economy & Business.
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From late 2005 to the middle of 2007, around $450bn of CDO of ABS were issued, of which about one third were created from risky mortgage-backed bonds (known as mezzanine CDO of ABS) and much of the rest from safer tranches (high grade CDO of ABS.)

Out of that pile, around $305bn of the CDOs are now in a formal state of default, with the CDOs underwritten by Merrill Lynch accounting for the biggest pile of defaulted assets, followed by UBS and Citi.

The real shocker, though, is what has happened after those defaults. JPMorgan estimates that $102bn of CDOs has already been liquidated. The average recovery rate for super-senior tranches of debt – or the stuff that was supposed to be so ultra safe that it always carried a triple A tag – has been 32 per cent for the high grade CDOs. With mezzanine CDO’s, though, recovery rates on those AAA assets have been a mere 5 per cent.

via FT.com / Markets / Insight – Insight: Time to expose those CDOs.

Jingle Mail Mortgage Myth? May 11, 2008

Posted by tkcollier in Economy & Business, Lifestyle.
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In mortgage market, ‘walkaway’ homeowners may be urban myth – Los Angeles Times
Jingle Mail is the sound of the house keys being mailed back to the lender. Experts say some supposed owner-occupants who are “walking away” may in fact be speculators in disguise: buyers who acquired properties as investments to resell for a fast profit. Investors, unlike genuine homeowners, will treat their purchases strictly as economic transactions; their decisions to abandon payments shouldn’t be seen as a sign that American homeowners no longer feel obligated to pay their debts, says Stuart Gabriel, director of the Ziman Center for Real Estate at UCLA’s Anderson School of Management.

“A number of [foreclosed] properties are actually investor-owned, not owner-occupied, and we have to be careful that we’re not attributing to homeowners the actions of investors,” Gabriel said. (more…)

Economist: Housing slump may exceed Depression April 22, 2008

Posted by tkcollier in Economy & Business, Lifestyle.
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Economist: Housing slump may exceed Depression
Yale University economist Robert Shiller, pioneer of the widely watched Standard & Poors/Case-Shiller home price index, said theres a good chance housing prices will fall further than the 30 percent drop in the historic depression of the 1930s. Home prices nationwide already have dropped 15 percent since their peak in 2006, he said.

“I think there is a scenario that they could be down substantially more,” Shiller said during a speech at the New Haven Lawn Club.

Shiller’s Standard & Poor’s/Case-Shiller home price index is considered a strong measure of home prices because it examines price changes of the same property over time, instead of calculating a median price of homes sold during the month. (more…)

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