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#1017906 - 08/12/08 04:29 PM Re: Over-Conservative Bankers a Legitimate Fact? Hated By Some
TheManofSteel Offline
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Originally Posted By: Ronzilla
amlf, the reason that they can't sell them and thus maintain assets for llr is because the buyers are scared based on recent history, ie, they are being over-conservative.

From the same quote I bolded a few posts ago:

Those losses have depleted the capital they need as reserves against future losses and made it more difficult for the banks to sell their mortgages and other loans as asset-backed securities, a process that provides them with money to make new loans.

This has nothing to do with market perceptions and fear, but with regulatory requirements. They have to cover their LLR because there are regulator-instituted standards that banks must meet. That takes away many of the assets they could use to package asset-backed securities for sale in the secondary market, thus they severely limit the funds generated for use in making loans.

Like I wrote, it is a non-voluntary catch-22 for many of these banks until the landscape brightens for them in other arenas. In the interim, they can still make mortgages, but fewer and higher priced as a result.
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#1017913 - 08/12/08 04:31 PM Re: Over-Conservative Bankers a Legitimate Fact? Hated By Some
straw Offline
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Have you also considered the conservatism is arising from the secondary market conditions that have MBS and CMO purchasers vanished, or charging huge premiums, for asset purchases.

There is just very little liquidity in the market, so lenders have to tighten up.

But since you know everything, I am sure you have factored that into your opinion.

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#1017919 - 08/12/08 04:33 PM Re: Over-Conservative Bankers a Legitimate Fact? TheManofSteel
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amlf, do you even know why collateralized debt/mortgage/etc instruments were created? if you did, my answers to you would make more sense. as it stands, you are not seeing the forest through the trees.

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#1017925 - 08/12/08 04:36 PM Re: Over-Conservative Bankers a Legitimate Fact? straw
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Quote:
Have you also considered the conservatism is arising from the secondary market conditions that have MBS and CMO purchasers vanished, or charging huge premiums, for asset purchases.

considering that this is the point of this thread, i'd have to say that i have.

Quote:
There is just very little liquidity in the market

and the reason is excessive conservatism. these fools modeled it wrong or ignored their models on the way up and are overcompensating on the way down.

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#1017927 - 08/12/08 04:37 PM Re: Over-Conservative Bankers a Legitimate Fact? Hated By Some
TheManofSteel Offline
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Originally Posted By: Ronzilla
amlf, do you even know why collateralized debt/mortgage/etc instruments were created? if you did, my answers to you would make more sense. as it stands, you are not seeing the forest through the trees.


I am seeing it quite well Ron. They do not have enough funds to extend mortgages as readily as when they had the funds, and underwriting standards are a direct reflection of that.

Watch the simple equation:

Higher LLR and capital cushions = fewer assets = fewer ABS packages avaiable for sale = less income to fund mortgage loans = fewer and more expensive mortgages.

Does not take a PhD in Economics to understand.
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#1017929 - 08/12/08 04:38 PM Re: Over-Conservative Bankers a Legitimate Fact? Hated By Some
straw Offline
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Or, as has been pointed out, the fools aren't buying now because of the market uncertainty, and Fannie/Freddie latest vacillations don't help.

Perhaps you quit your internship and start a consulting business on this, since you seem to know how the models were wrong and what the right model is.

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#1017932 - 08/12/08 04:39 PM Re: Over-Conservative Bankers a Legitimate Fact? TheManofSteel
straw Offline
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Originally Posted By: AMLFishingFella
Originally Posted By: Ronzilla
amlf, do you even know why collateralized debt/mortgage/etc instruments were created? if you did, my answers to you would make more sense. as it stands, you are not seeing the forest through the trees.


I am seeing it quite well Ron. They do not have enough funds to extend mortgages as readily as when they had the funds, and underwriting standards are a direct reflection of that.

Watch the simple equation:

Higher LLR and capital cushions = fewer assets = fewer ABS packages avaiable for sale = less income to fund mortgage loans = fewer and more expensive mortgages.

Does not take a PhD in Economics to understand.


Oh, AMLF, our minds are not sophisticated enough to understand. We should just turn to Ron. He knows better than all of us. Just ask him.

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#1017936 - 08/12/08 04:42 PM Re: Over-Conservative Bankers a Legitimate Fact? straw
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Ron knows the infinite mind of God ur um, Constitution.

Constitution forbid anyone try to point any facts out to him.
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#1017937 - 08/12/08 04:43 PM Re: Over-Conservative Bankers a Legitimate Fact? TheManofSteel
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Quote:
They do not have enough funds to extend mortgages as readily as when they had the funds

this is related to llr. in order to get the funds, banks have to sell cmo's etc to other banks to maintain their llr. that isn't happening. why? the buyers are being too conservative.

and if a given institution hasn't maxed out its llr, then it is because they are being excessively conservative which likely means that their underwriting is economically flawed just like it was on the way up.

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#1017941 - 08/12/08 04:45 PM Re: Over-Conservative Bankers a Legitimate Fact? straw
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Originally Posted By: straw
Or, as has been pointed out, the fools aren't buying now because of the market uncertainty, and Fannie/Freddie latest vacillations don't help.

how many new loans would be considered risky since this correction? 0.001%? the market learned their lesson.

Quote:
Perhaps you quit your internship and start a consulting business on this, since you seem to know how the models were wrong and what the right model is.

why? as a capitalist, i see more value for myself in taking advantage of arbitrage opportunities.

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#1017963 - 08/12/08 05:00 PM Re: Over-Conservative Bankers a Legitimate Fact? Hated By Some
straw Offline
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"and if a given institution hasn't maxed out its llr, then it is because they are being excessively conservative which likely means that their underwriting is economically flawed just like it was on the way up."

Can anyone other than Ron explain what he is trying to say here?

And Ron, I think your comment about 0.001% of new loans being risky since the correction demonstrates all we need to know about the depth of your knowledge on this subject.

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#1017975 - 08/12/08 05:06 PM Re: Over-Conservative Bankers a Legitimate Fact? straw
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what are the normal default rates when sane, econometrically sound appraisals, 80% ltvs and other similar underwriting practices are used?

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#1017998 - 08/12/08 05:24 PM Re: Over-Conservative Bankers a Legitimate Fact? Hated By Some
straw Offline
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Originally Posted By: Ronzilla
what are the normal default rates when sane, econometrically sound appraisals, 80% ltvs and other similar underwriting practices are used?


I thought you know everything. Of course the default rates are 0.001%.

As I said, shows your deep knowledge and understanding of the subject and that deep knowledge forms your opinion of past, present and future underwriting practices.

Move along to your next delivery son.

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#1018002 - 08/12/08 05:26 PM Re: Over-Conservative Bankers a Legitimate Fact? straw
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it was a legitimate question. i'm sure that the default rate given my (as well as the markets' corrective) parameters isn't that riskless, but it is pretty small. relative to the lack of activity, it is super small. that was the point behind my hyperbole.

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#1018004 - 08/12/08 05:29 PM Re: Over-Conservative Bankers a Legitimate Fact? Hated By Some
straw Offline
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Yeah Ron. Weak economy, rising unemployment, inflation, high debt loads and declining values all lead to the conclusion that credit risk is pretty small.

Go to school for some underwriting lessons next please.

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#1018011 - 08/12/08 05:33 PM Re: Over-Conservative Bankers a Legitimate Fact? straw
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straw, answer the gd question. and don't worry about my capacity to underwrite/model.

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#1018017 - 08/12/08 05:37 PM Re: Over-Conservative Bankers a Legitimate Fact? Hated By Some
straw Offline
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Classic. You already have formed your opinion regarding lax underwriting last year and over conservative underwriting this year, yet you have no idea what the "normal" performance of these loans are. Then you get mad at me for not providing you an answer that would be pretty essential to forming the opinion you already have.

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#1018020 - 08/12/08 05:40 PM Re: Over-Conservative Bankers a Legitimate Fact? straw
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it is not essential at all since i am speaking in relative terms. the actual rate is not critical and i said that .001% was hyperbole.

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#1018021 - 08/12/08 05:41 PM Re: Over-Conservative Bankers a Legitimate Fact? Hated By Some
straw Offline
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Speaking in realtive terms i.e. too loose or too tight, but you don't know relative to what i.e. what is norm.

But go right ahead and pontificate.

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#1018026 - 08/12/08 05:45 PM Re: Over-Conservative Bankers a Legitimate Fact? straw
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so you got nothing, is that correct?

you see the level of risk priced in at the moment as being proper, right?

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#1018039 - 08/12/08 05:49 PM Re: Over-Conservative Bankers a Legitimate Fact? Hated By Some
straw Offline
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No, I have the exact stats you are seeking, right at my fingertips, because that is part of my job. I just don't feel like having a discussion with someone who is obviously a subject novice.

Sorry Ron.

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#1018043 - 08/12/08 05:52 PM Re: Over-Conservative Bankers a Legitimate Fact? straw
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cool. so, based on the actual default rate according to my parameters, is business slower than it should be? (you can pm me with the answer if you want to save face.)

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#1018049 - 08/12/08 06:00 PM Re: Over-Conservative Bankers a Legitimate Fact? Hated By Some
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OMC!!!!!!!!!!!!!!!! don't you guys EVER get tired of saying the same things over and over???????? (and hold your - if you don't like it don't read it statements; sometimes i do actually try to learn something in these thread)

but jeezy creezy, take a powder for a little while!!!!!!!!
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#1018054 - 08/12/08 06:02 PM Re: Over-Conservative Bankers a Legitimate Fact? kitten
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well, i first had to set amlf straight and now straw is playing the fool but i think that we are actually making some progress here, kitten.

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#1018060 - 08/12/08 06:06 PM Re: Over-Conservative Bankers a Legitimate Fact? Hated By Some
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Not prison


well you are a giver, ron.
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