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Strategies & Market Trends : The Residential Real Estate Crash Index -- Ignore unavailable to you. Want to Upgrade?

To: Think4Yourself who wrote (109243)	3/12/2008 9:03:08 AM
From: Smiling Bob	Read Replies (1) \| Respond to of 306849

The fed is not accepting MBS collateral at face value. I read yesterday that it is either .8 or .85. Didn't pay close attention to which it was because there was too much other info to digest. --- 80% of what? If nobody else wants to touch it or knows how to value them, why or how should the Fed? Jeopardize the US economic system to save the banks? Message 24392207

To: Think4Yourself who wrote (109243)	3/12/2008 9:08:03 AM
From: Paul Kern	Read Replies (1) \| Respond to of 306849

I read yesterday that it is either .8 or .85. The holders have been trying to peddle the paper at these prices and find no buyers so the Bernanke put is now set at .8-.85 of face value. Of course, this paper, like all assets, was worth what a buyer would pay -- not 80 cents on the dollar.

To: Think4Yourself who wrote (109243)	3/12/2008 9:54:20 AM
From: XoFruitCake	Read Replies (1) \| Respond to of 306849

for MBS that doesn't have a market price, Fed will loan 85% face value. For Agency paper that has ha market price, 97% to 98% of the market price. This table is for discount window. Apparently TSLF is following the number for shortest duration repo at the discount window. The new repo period is 28 days and Fed made statement that they will extend the duration of the repo and size of the repo if needed. frbdiscountwindow.org I don't think Fed will loss money on TSLF. Fed will only be the proud owner of the collateral if the prime dealer to BK. And Fed is engineering a steep yield curve to pump profit into the same banks. As long as Fed doesn't call the collateral, banks has plenty of time to wait for the profit. So the collateral ready is the paper with haircut + the future earning power of the prime dealers. Let's say if Fed get stuck with some paper. Most of the MBS securitization has only 60% of the AAA tranches.. So you have to figure a combination of loss severity and loss frequency that will make AAA loss money (e.g. 100% of all securitization default and the recover is less than 60% on the dollars or more than 40% of all securitization default and they recover 0 on every loans). The HE and CDO square type of paper has already be downgrade from AAA. So you left with mostly mortgage (and some of them are the stupidest mortgage originate in 06 and 07) and there is a big difference between liquidity driven pricing vs the value of the paper at the end of the cycle. Since Fed don't have to mark to market, they can wait for the next 6-10 years until the cycle play out.. (It is the same principle of bargain hunting on stock, buying when everyone is panic because the price does not reflect the actual value of the stock?)