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Strategies & Market Trends : John Pitera's Market Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: stomper who wrote (9018)	3/16/2008 5:28:42 PM
From: Hawkmoon	Respond to of 33421

Thanks Stomper!! I hadn't seen that presentation yet, but it was informative regarding how they set up these trusts.. But I'm still a little shaky on who owes who what in the worst case scenario? Who is the ultimate "bag holder".. the banks, or the holders of the CMO's/MBS's? Ultimately, presuming RE prices fall to the mean average (approx 50% decline from the high) that means 50% of the equity value underlying those mortgage loans disappears in the case of a foreclosure and a forced sale (and likely more).. So, would that suggest that all of those mortgage loans underlying those CMO/MBSs are worth 50% of their current value? And presuming the banks that issued those MBS's to investors go belly up, does that mean the current owners of those MBS's effectively become the owner of the underlying mortgage securities and have to assume responsibility for liquidating the real property and recouping some fraction of their original investment? When a company goes bankrupt, the bond and preferred stock holders get paid off first, then the common stock.. I presume that's the same case for these owners of CMO/MBS's?? Hawk