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JPMorgan To Issue CMBS Backed By... Defaulted Loans
No, this is serious news. Dow Jones reports:
JP. Morgan Chase & Co. (JPM) next year plans to issue the first U.S. commercial mortgage-backed securities supported by defaulted loans since the 1990s as it revives a practice that regulators used to extricate the nation from the savings-and-loan crisis.
The investment bank has approached rating agencies with two pools of distressed loans that it acquired from European banks and other financial institutions, according to people familiar with the matter.
Uh.....
111011010010101010101011 Buffer Overflow
#Ref! #Ref! #Ref! #Ref! #Ref! #Ref! #Ref! #Ref! #Ref!
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I'll be REALLY, REALLY curious what their prospectus says about the enforceability of the mortgages going along with those loans.
I am not at all ashamed in admitting that I don't have a clue about how this is supposed to work. Could anyone please explain this rationally? Oh wait,... nevermind.
It's a lot like a person backing their bad credit by not paying their bills. You bundle up the unpaid bills in a UBS (unpaid bill security) and then sell it back to creditors, like in never never land...
Oh my God, I'm really a millionaire! If only I could collateralize myself to CALPERS, since they almost assuredly would be buying the dreck from JPMorgan.
It's pretty straightforward actually. Surprised to see that ZH "cannot compute."
Considering that France, a country with a defaulted banking system, is AAA, a CMBS backed by defaulted loans should clearly be AAA as well.
Hey, even the EFSF is AAA, a pile of troubled european sovereigns backed by themselves and France.
Null Pointer Exception on mortgage.getPayment()
You are correct...
http://www.youtube.com/watch?v=ieuBkWHfCuc
PUSH Ag
PUSH Au
POP ES
Kernel Panic
Will we be able to get these CMBS through Groupon?
halt
reboot
far better to buy a mortgage backed security where you know going in the loans are bad. it's the finding out after purchase that's the real disappointment.
No Mystery At All Folks.
JPM exchanges a pool of Zero Coupon Perpetuals backed by nothing (no cash flows, no perfected titles, no possibility of recovery--- in the extreme case) with Zero Coupon Perpetuals issued by the Federal Reserve (liability, pays no interest which never matures) both of which were created on a computer by enrty of key strokes, neither of which are available in hard copy, tactile form.
What's the problem?
No problem.. they will just sell it to the Bernak
A small tranch could get rated AAA.
Seriously.
When someone buys up a bunch of bad debts they know roughly the minimum percentage they will collect. Structure half of that as Senior with absolute priority, then the tranches become more equity-like as further pieces are sliced off.
Lets say worst case is five cents on the dollar of a group of bad debts totalling 100 million. Best case is 50 cents on the dollar but you estimate only a ten percent chance of that level of recovery. If the "risk free" portion (half of the minimum of five million you are virtually guaranteed to collect) is being offered at three percent over ten years, then what would the next portion yield if it included 2.5 million that has a hundred percent chance of recovery and an additional 7.5 million in bad debt, with an 80 percent chance of recovery?
At what price and yield would you pay for that ten million of bad debt junior to that senior tranch, but with priority over any other tranches down the line?
Now u understand financial engineering!
JPM may know something you don't. What are our Congress critters up to now?
The concept is easily understood, but the big fly in the ointment is that this is like buying a very old used car. Who usually has the best idea of the true value of the used car - the seller that's who! He knows if he is selling a dud for a good price because he drove the piece of shit for 100,000 miles. The buyer gets screwed most of the time.
Same thing here. This time, the guy selling you the used shit box is JPM.
No problem on high level languages but go to the low ones and you get a core dump! Surprise, Surprise :)
// small C# method to express the situation more clearly!
// Remember to check the ref value after calling this function. Always returns True and an undesirable result will be loaded into billToTaxPayer
public bool IsTaxPayerFucked(List<Mortgage> mortgages, ref int64 billToTaxPayer)
{
bool isTaxPayerFucked = true;
int theBillToTaxPayers = 0;
try
{
foreach(Mortgage mortgage in mortgages)
{
if(mortgage.getPayment() == null)
{
theBillToTaxPayers += mortgage.Balance + JPM.Fees;
}
else
{
theBillTotaxPayers = int64.MaxValue;
throw new AccountingCorruptedException();
}
}
}
catch(Exception ex)
{
isTaxPayerFucked = true;
}
finally
{
isTaxPayerFucked = true;
}
return isTaxPayerFucked;
}
perl -e 'print "Taxpayer is fucking fucked, bigtime!\n"'
+she-bang
This is just a variant of the old Basic Computer Language statement "10 GOTO 10" except they added a few steps:
10 GOTO 20
20 GOTO 30
30 GOTO 40
40 GOTO 10
See, I'm productively writing more lines of code and my computer is just humming along.
You got one smokin' CPU!
WTF! Hey can you dudes debug my code. I cannot compile!
for( i=0; i<= tyler_posts_a_technical_reference; i++)
retards_come_out_of_the_woodwork();
NAN
You're having a problem with trying to use an object to reference itself.
Lmao
(Bitchez)this.suckIt();
Simple.
CMBS Backed by defaults = "Sack 'o sh!t loans" ^ 2
http://www.zerohedge.com/article/jp-morgan-sold-investors-mbs-covered-sa...
They are trying to figure out what their shit is worth....they are sitting on so much of it that they are trying to find an exit strategy which gives them the highest return...foreclosing and selling the properties are not an option, they can't distort the value of a building to look like its worth more than it is like they can with a synthetic CDO....you can be sure that they will be the fuckors in the end and that the poor sod's who buy this shit will be the fuckees.
They are trying to figure out how to get people to pay them for leaving a burning bag of dog shit at the front door, ringing the doorbell, and running away.
Their task is more complex: present dog shit as AAA structured financial instrument backed by a pile of burning dog shit that yields flowers and sell it to the willing buyers. It takes a lot of MBAs and CFAs on both sell and buy side to make this structure work and create appearance of something noble and useful happening.
"Could anyone please explain this rationally?"
Sure they can! Oh wait, "rationally"? No. No they can't.
Sure...let me explain. 10 years ago I took a shower with Jerry Sandusky. He told me all we were doing is 'horsing around'. He just invited me again to another 'horsing around' party. Why wouldn't I want to go back again?
Same thing. JP Morgan is Jerry Sandusky and they can't understand why everyone wouldn't line up for another good ass-raping/horsing around session (allegedly).
I assumed that it meant that they pursue the settlement of these bad debts. Pay 50 cents on the dollar, recover 70 cents--damn! just made 40%. it's like a colection agent buying your debts of $1000 for $500 who then calls you and settles with you for $700.
Actually its more like a collection agent buys your fake debt of 1000 bernak bux for about 10 dollars and tries to collect 1200$ for the interest, you know... Collection attorneys are bottom of the barrel scum who prey on ignorant people and business is good today.
Somebody has to be the vulture and eat up the putrid mess. It is the cycle of life and finance.
Vultures or at least organisms that eat dead organisms are necessary.
“Hey everyone, look at me, I’m a cowboy! Howdy, Howdy, Howdy!”
http://www.kylechipman.com/blog/?p=2317
And after that, whoever bought it for $700 will sell it for $300 (braineless investor) to the same money transfer people/sharks again. And they will sell it again for $500 and will make 66.66(6)% this time and so on and so on. Anyone see something wrong with this logic ???????? If you do you have an idea what is going on and you know what to do, if not continue playing according to the system rules, for this is the only thing left in your heads.
The problem is that because the loans have not been handled properly the loans aren't actually secured. I sure as heck wouldn't give'm anything more than pennies on the dollar. Seriously ... 6% ... maybe 8%.
What you bet there is a hold harmless clause in there regarding mortgage origination and servicing irregularities.
And to think our government thinks these are the guys we should be paying billions to.
What a crock of odoriferous material.
yeah, um...to recover, they will actually have to foreclose and then SELL...aka, let the market clear
It's pretty easy........shit backed by shit leveraged up with shit.
aka....a bucket shop
I'm curious who would buy the stuff? And why?
http://newyorkfed.org/markets/maidenlane.html
Again.
Why? Keeps the party going.
and what are these loans going to be called: "E-N-R-O-N"?
Ben would do it.
jpm devides by zero
This has "Retail Mutual Fund" written all over it...
...right next to government pensions.
Paging all CALPERS portfolio managers...please come to a JPM all-you-can-eat dog-and-pony luncheon.
That is a BINGO!!!
As a dog returns to his vomit, so a fool repeats his folly.
Has Leo seen this?
Could be even better than Chinese Solars!
Putting the 'BS' back into the CMBS market.
I don't know but the fight club scene about Brad Pitt explaining how the expensive soap he is selling woman is basically him selling their own fat asses back to them really seems to apply in this situation especially on this site.
well played sir!
The kartrashians could have their own brand of bar soap. The benefits of scale with that herd is enormous.
Enforceability is not really an issue. NPL (Non-performing loan) securitizations have been around for a very long time. In fact they were popular in places like Italy and Germany. The only question in my mind is whether the rating agencies have learned their lessons. There's no real benchmark for rating defaulted CMBS, especially if the loans are large and non-granular. You also have jurisdictional issues and complex legal issues, but enforceability is likely the least of the problems with this.
To wit, I'd be shocked if JPM, even if they were able to get this pile of manure rated in part, was able to place this paper with anyone.
The rating doesn't really matter; this is just a vehicle for the Fed to assume more bullshit from the banks. Instead of going through all the trouble of trying to figure out how to assume bad loans straigh off the books the banks they are creating an intermediary security "instrument" so that the Fed doesn't have to change charter.
But really there is nothing new here. It's just more yachts and champagne for the bankers while the rest of us roll around in our own filth (underwater loans, high unemployment, etc). All of it is legal and done right in front of everyone.
It's not hubris on the part of the malefactor if the observer is too stupid to understand or apathetic to do anything about it.
Ding, Ding, Ding! Winnah!
You just know they wouldn't cook this up if there wasn't somebody waiting at the table with deeeeep pockets.
I expect to see this play out over and over, as bad "assets" are repackaged into something new in order to extend the con yet another day.
Think we'll ever get a chance to own an italian or spanish vila for a buck?
'To wit, I'd be shocked if JPM, even if they were able to get this pile of manure rated in part, was able to place this paper with anyone.'
Bernanke may consider these CMBS tranches 'investment grade', if JPM instructs him to do so.
LNR will take the B and unrated pieces, assign themselves as special servicer and churn fees on this shit for years. If JPM gets the pricing of the tranches correct, they will attract buyer, and the waterfall cash flows generated through LNR's (and other efforts) will come from discounted pay-offs, foreclosure sales and loan payments once these NP's are brought into the realm ofperformace through some type of modification/forebearance.
LNR will take the B and unrated pieces, assign themselves as special servicer and churn fees on this shit for years. If JPM gets the pricing of the tranches correct, they will attract buyer, and the waterfall cash flows generated through LNR's (and other efforts) will come from discounted pay-offs, foreclosure sales and loan payments once these NP's are brought into the realm ofperformace through some type of modification/forebearance.
This has "desperation" written all over it. Ask Dr. Michael Burry what he thinks of it. I will only buy if the Fed backs up the CMBSs.
He would probably be thinking about where to buy the CDS against it...
@MadMax - The Prospectus will be identical to Goldman Sach's Timberwolf & Abacus deals - all references to Timberwolf & Abacus redacted & the name of JPM's offering inserted - Hedge with CDS from AIG - Repeat as necessary -
Focus on chicks! - http://hedge.ly/gFWVSm
CMBS is commercial real estate loans, not residential. Commercial real estate might be deeply underwater crap, but, generally speaking, the loan documentation is night and day compared to residential mortgage docs.
All the prospectus has to say is, "Hey, at least these things aren't stuffed with performing European sovereign debt."
This really shouldn't come as a surprise. The crediit crisis had hardly started in 2008 before people were setting up vulture funds to pick up defaulted assests on the cheap. It mostly didn't play out that way since the banks mostly have played extend and pretend.
So, for those of you with $$resources, instead of all these questions about how JPM can do this, shouldn't you be asking who and how you can buy a CDS against the CMBS? Maybe its a Zion and/or Greenlight type repeat/opportunity, but on a commercial RE scale.
There will be two tranches. The top AAA tranche (As rated by S&P and Moody) will be backed by a bridge in New York.
What no one is asking is "Hey, Jamie! How long ya had them there distressed loan pools that ya got from them dodgy Yoo-Ropeein banks? Was you on vacation in Italy last week and picked em up?"
No. I don't think so. I think this is EuroCrap that's been on the Morgue's books for quite some time---and is further evidence of massive un-reported exposure to Eurocalypse.
By the way, Dow Jones is incorrect. JPM packed up defaulted mortgage pools into MBS and sold them to the Fed in 2009. I can't prove it, but I'm pretty certain that all the Too Big To Jail banks unloaded a bunch of their defaulted crap this way while the Fed was expanding its balance sheet with innumerable liquidity facilities at a feverish pace.
Hey, they couldn't be expected to really assess all that "collateral" in real time, could they? Not while Goldman Sachs was hitting the PDCF 84 times for more than $600 billion?
Wait a minute. I don't think ZH read the fine print. JPM is selling these in the bathroom tissue aisle.
This would also seem to portend a tidal wave of new foreclosures and actions for deficiency judgments. And a fair chance of Congress doing something blatantly unconstitutional to save the banks from the defective property title scandal that they created.
These are COMMERCIAL loans, not residential. Maybe I missed it, but not aware of any substantial title problems on CRE.
Of course not, most of it is controlled by TPTB. Most is owned outright, now the "valuation" is another thing altogether.
You are right - valuations are the issue. A 100 bp change cause a 7% change in value. When interest rates get back to normative - reversion to the mean - this pile of crap will become crappier.
Dig in boys!
The underlying *ahem* "stuff" could well be floating rate notes and the cashflow on the structure the same.
This may well be priced as a distressed debt vehicle-- pure play on recovery-- or a vehicle to facilitate forebearance to improve performance. The latter is a time-honored part and parcel of capitalism.
Somehow I overlooked that this was commercial loans rather than residential. Yes, that probably makes a big difference. I'm still curious what the offering documents would say about title and enforceability though.
"title and enforceability"
Not as much of an issue with CMBS and CDO's.
A lot of CMBS has technically defaulted and banks have allowed owners to continue managing the assets while tacking the principal and interest on the end of the instrument as a balloon or addition to existing balloons.
Lots of toxic shiz out there still waiting for the inflation gravy train. Caveat emptor.
Get ready for a massive assault by banks to obtain deficiency judgments followed by sellling those judgments to collection agencies that will seize anything of value in satisfaction of the deficiencies. That's the ony way those bonds will pay . . . . .
Can anyone suggest another country for me to move to with:
1. Beautiful women
2. Opportunities to invest capital for real growth
3. A system for establishing credit and obtaining business loans
4. Good beer
? ? ? ?
If there is not one with good beer, then maybe I will start a brewery, but there MUST be beautiful women.
Don't know about countries, you might want to try another planet. Personally I have noticed that attractive women are always easy to find with a fat wallet.
HAHAHA A system for establishing credit and obtaining business loans. Thanks I needed that
asia
I would say Singapore or Hong Kong.
Try Uruguay. Hope the neighbors don't start coveting your country though.
Colombia.....I live there
well my mum USED to be beautiful
and she SMELLS of beer...
So you could try the UK??
I would say your only hope is moving out to sea, in international waters. You can choose which beautiful women come with you and you dont have to answer to any government. You may want to put a small distilery on as well. Too bad we can't do it yet.......
http://www.seasteading.org/about-seasteading/our-strategy?gclid=CKWpmuXLuawCFcleTAodXm8KoQ
great idea - i got a boat for sale
http://www.sunseekerpoole.com/brokerage-boats/searchfullspecs.php?Docume...
its up for 2.25m but will take a dozen JPM CMBS or 10,000 bog rolls
please send SERIOUS offers to my new PA;
sberlusconi@cocksuckers.it
Check out our blog, this is pretty much our main topic.
www.singledudetravel.com
Iran
1. Check
2. Check
3. Check
4. Well, goats milk is ok chilled
Wouldn't advise that -- because when Iran finishes their nukes and fires a nuke at Israel, all those pretty nukes Israel has on their 3 nuclear submaries will go airborne, and Iran will become a nice, glass parking lot -- and glass parking lots are not conductive to the brewing of good beer.
Mexico qualifies, with a few caveats:
1. Plenty of beautiful women, but they're all under 19. Older than that, they get fat.
2. Investing opportunities are good with La Familia or El Chapo. I'd stay away from the Zetas.
3. They have a system for establishing credit and getting business loans, but it requires that you come from, or marry into, a wealthy Mexican family.
4. Good beer...sorry, no. Everything from Mexico tastes like Bud Light, except Negra Modelo or Bohemia, which are like watered-down doppelbock, but otherwise not too bad.
I know such a country - Poland
1. beautiful women - sure, plenty of
2. lots of opportunities for investment
3. it depends on your business plan
4. Beer is very good
I am guessing EJ is not one of the rating agencies.
Your right, Sean Egan tried to build a securitization business but the shortseller-paid model doesn't really work there...
So they offer them to the market at 15 cents on the dollar and get 85 cents (plus commissions and fees) from the US Taxpayer/Fed?
Every time I think I see bottom, this rabbit hole keeps getting deeper.
You might not be in a rabbit hole, what's that smell?
This deal smells so ripe that I doubt if even honeydippers would go near it.
Buy a telescope - then you can look at Uranus.
Those are called telescopes, now?
Good thing we spanked those bankers hard....never again will they do something that puts the taxpayers at risk.
I've got some good shit to sell. No really, this shit is good..
And for the people who want in on that, they should also look at my private label securitization. Fantastic concept -- securities backed by cash flow from the Penn State kids summer camp program. Money in the bank!
Crack me up
This actually happened to my parents for real back when Paine Webber existed, their account manager offering exclusive private investment opportunities. (He was gambling the cash in Vegas, and PW discretely fired his ass and made all the clients whole.)
Nowdays they'd give the guy a bonus and surcharge the accounts for conceierge-class service.
Wow...gimmie three of 'em....no, make that five.
Say whAt??
They are going to create a derivative security ( fake useless asset) using defaulted loans( source fake useless asset)? What TRANCHE is that? AAa?
The big issue about today's depression is that the banks have had unprecedented access to the creation of phoney assets and phoney asset values- so they can pimp their balance sheet and go to the casino tables and lose it all. This far outweighs the mild garbage the Treasury is pooping out.
It really is a pyramid scheme, all of it.
It's really time to hit the exits- just to punish the system
Sums it up:
http://www.youtube.com/watch?v=8ZD89CEO1Vk
Excerpt from Monty Python and the Search for the Holy Grrrrrrrrail.
You can't expect to wield supreme executive power just 'cause some watery tart threw a sword at you
Well that should excellerate paper's demise.
@mad Max: These are COMMERCIAL MORTGAGES, so title issues etc, are beside the point, they are problems of the residential mortgage market.
Sales of defaulted loans to investors are fairly common and have been on-going in the crisis in the residential market (and privately in the CMBS market). If you think you can analyze stressed recovery value on the propertiesm there is nothing too shocking here.
big MBS book...there was always a bid at every tick on the way down until there wasn't...then they sold the book as securities.
right, as long as there is a greater than zero percent chance of this thing producing cashflows, someone in Germany will buy it.
Question 2, are people really that desperate for yield? Who buys these?
"Dusseldorf"
if the usa doesnt have any money and we are printing thru QE, we are supporting new debt with old debt...there isnt any 'real' assets or money now. it cant be ......how is this different...?
Human adaptation and ingenuity at its best
The absurdity isn't the creation of yet another pile of shit but that there is a market for it
Honestly i was getting worried that the Europeons were on the verge of 1 upping us on the surreal
Game on
....
>>>The absurdity isn't the creation of yet another pile of shit but that there is a market for it<<<
or that they "think" there is a market for it.
We shall see....
isnt that called the efsf?
desperation rising
Urge to kill rising
http://www.youtube.com/watch?v=5yGJGTjV2WE
If you can't raise capital ... you figure out a way to offload your cmBS.
Not surprising, they are like a wounded animal about to be killed. They pull out ALL the stops. Every possible avenue will be explored down to the last straw. There is no shame...
AAA is the new D.
Just ask Italy.
i prefer bra-less DDD
What's the basis of the cmb? The loan which was implied or the asset?
If they have defaults on it, then the title will go to the bank. This isn't an REIT, it's a CMBS that is based on the securitization of the loan as an asset- which is defaulted on. And they are going to write the prospectus for a bunch of idiots assuming they get the asset.
They're only testing the water with this fraud heap. If this sells, their next step is securitizing corn in turds and passing it off as an ethanol play.
If JPM goes down to 2$ I'm buying!
The reason is because JPM always made it through every crisis and is so interconnetec into the US powersystem, that it's a sure thing that they'll survice this crisis.
I MIGHT EVEN BUY 5 STOCKS IF IT GOES TO 2$!!
All the rest goes to Silver ;)
I'd buy that for a dollar.
Crazy day.
One of my worst in a while. 2 of my long stocks are down and 1 is unchanged. The ETF and stock I am short are both up.
I'd like to say Lol. I guess days like these happen.
You're trading this market? You deserve what you get. Nanosecond by nanosecond.
Sorry but No fuckin way. This shit can't be real.
Don't spend your money too quick, in Q1 2012 I'm expecting to get my first issuance out of Bridge Backed Securities (BBS) backed by the Brooklyn Bridge. I have a few other variations to roll out but I'll see how this one prices first to test the market.
Am with you Sudden, put me down for 20,000 shares at 2.00. Absured all, just freaking absurd. And so glad I have hardly touched my trading mouse for over a month. This market is insane. Like what I got. Shorts are getting killed now, not daily but hourly. Longs also. Miners and cash thank you very much.
guys, don't go up to canada to drink, signs everywhere are written, "we don't serve miners!"
00000001 00000011 00000111 00001111 boogie
http://www.youtube.com/watch?v=B1BdQcJ2ZYY
If I buy them at 53 times leverage, can I convert to a bank holding company?
only if you continue to pay a JPM desk for their "research" or agree to hold a certain percentage of your capital reserves in defaulted MBS
The snake is eating its tail!
does it come in a ETF? then i'm in, i think, NOT!!!!
JPM: JMP THE SHRK MMNT
Alchemy; American Style..
It's the purest refinement of the securitisation model! The equity tranche comes pre-defaulted for your convenience.
Trading this market is insane. I do not care how sharp you are. No way guys. No way.
I would love to see these pitchbooks.
Distressed debt is a legitimate investment class.
At least this time investors are being up front they are buying garbage.
Ab, you are correct. I have one company in our commercial building that has expanded 2 times in three years. They do distressed debt. Easy to find space for them as 2 other companies failed in same building.
I have over 100 on my daily scan and 2, 2 stand out AAPL and PCLN everything else, why even bother to open the market.