Posts Tagged ‘MBS’

PIMCO, Blackrock, NY Fed Seek to Force BofA to Repurchase $47 Billion in Soured Mortgages; Viral Nonsense on “Show Me the Note” and “ForeclosureGate”

Excellent article by Mish who separates fact and fiction in the Foreclosuregate drama. - Ilene 

PIMCO, Blackrock, NY Fed Seek to Force BofA to Repurchase $47 Billion in Soured Mortgages; Viral Nonsense on "Show Me the Note" and "ForeclosureGate"

foreclosureCourtesy of Mish

At long last, the real issue regarding soured mortgages has stepped up to the plate. The misguided focus on "ForclosureGate" is but a sideshow compared to Pimco, NY Fed Said to Seek BofA Mortgage Repurchases

Pacific Investment Management Co., BlackRock Inc. and the Federal Reserve Bank of New York are seeking to force Bank of America Corp. to repurchase soured mortgages packaged into $47 billion of bonds by its Countrywide Financial Corp. unit, people familiar with the matter said.

A group of bondholders wrote a letter to Bank of America and Bank of New York Mellon Corp., the debt’s trustee, citing alleged failures by Countrywide to service loans properly, their lawyer said yesterday in a statement that didn’t name the firms. The New York Fed acquired mortgage debt through its 2008 rescues of Bear Stearns Cos. and American International Group Inc.

Investors are stepping up efforts to recoup losses on mortgage bonds, which plummeted in value amid the worst slump in home prices since the 1930s. Last month, BNY Mellon declined to investigate mortgage files in response to a demand from the bondholder group, which has since expanded. Countrywide’s servicing failures, including insufficient record keeping, may open the door for investors to seek repurchases by bypassing the trustee, said Kathy Patrick, their lawyer at Gibbs & Bruns LLP.

Patrick represents investors who own at least 25 percent of so-called voting rights in the deals and stand to recover “many billions of dollars,” Patrick said.

Countrywide hasn’t met its contractual obligations as a servicer also because it hasn’t asked for loan repurchases and is taking too long with foreclosures, Patrick said. The delays stem from missing documents, process mistakes and insufficient staffing to evaluate borrowers for loan modifications, she said.

If Countrywide doesn’t correct the servicing problems within a few months, her clients could have the right to pursue legal action against Bank of America, Bank of New York or both, she said. “None of the bondholders are opposed to modifications for deserving borrowers, but you’ve got to get it done” in a timely fashion, she added.

Mortgage-bond contracts are explicit in requiring repurchases of loans when their


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Capitalism Without Capital

This is an excellent article by Mike about the causes of the financial meltdown. – Ilene

Capitalism Without Capital

Statues of lions, Terrace of the Lions, Delos, Greece

Courtesy of MIKE WHITNEY writing at CounterPunch 

Volatility is back and stocks have started zigzagging wildly again. This time the catalyst is Greece, but tomorrow it could be something else. The problem is there’s too much leverage in the system, and that’s generating uncertainty about the true condition of the economy. For a long time, leverage wasn’t an issue, because there was enough liquidity to keep things bobbing along smoothly.  But that changed when Lehman Bros. filed for bankruptcy and non-bank funding began to shut down. When the so-called "shadow banking" system crashed, liquidity dried up and the markets went into a nosedive.  That’s why Fed Chair Ben Bernanke stepped in and provided short-term loans to under-capitalized financial institutions. Bernanke’s rescue operation revived the system, but it also transferred $1.7 trillion of illiquid assets and non-performing loans onto the Fed’s balance sheet. So the problem really hasn’t been fixed after all; the debts have just been moved from one balance sheet to another.

Last Thursday, troubles in Greece triggered a selloff on all the main indexes. At one point, shares on the Dow plunged 998 points before regaining 600 points by the end of the session. Some of losses were due to High-Frequency Trading (HFT), which is computer-driven program-trading that executes millions of buy and sell orders in the blink of an eye. HFT now accounts for more than 60 percent of all trading activity on the NYSE. Paul Kedrosky explains what happened in greater detail in his article, "The Run on the Shadow Liquidity System". Here’s an excerpt:

"As most will know, liquidity is, like so many things in financial life, something you can choke on as long as you don’t want any….Liquidity is a function of various things working fairly smoothly together, including other investors, market-makers, and, yes, technical algorithms scraping fractions of pennies as things change hands. Together, all these actors create that liquidity that everyone wants, and, for the most part, that everyone takes for granted…..

“Largely unnoticed, however, at least among non-professional investors, the provision of liquidity has changed immensely in recent years. It is more fickle, less predictable, and more prone to disappearing suddenly, like snow sublimating straight to vapor during a spring heat wave. Why? Because traditional providers of liquidity,


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The Perversity Of Bank-Driven Policy Response

The Perversity Of Bank-Driven Policy Response

Courtesy of Karl Denninger, The Market Ticker 

If you’re wondering why the big banks have "captured" the political environment in every nation of the world, you need only look at the Goldman results through a somewhat-different lens.

See, it wasn’t just Goldman - it was also Bank of America, Citibank and JP Morgan who scored "perfect quarters."

Aliens selling spaceship in outer space

Now if Goldman’s record was predicated on the outcome of a game of chance set of odds and had an 8.67 x 10-19 probability of occurring, for four of these institutions to do so would be that to the 4th power, or something approaching 5.65 x 10-73.

As pointed out in the forum by Tsberts, there are fewer than this many particles (atoms, etc) in the known universe.

Now it is certainly true that trading activities are not a pure game of chance, and that most of the trading profits are generated from "market making" (that is, earning a spread.)

But that makes the performance even more outrageous, because these "market making" activities are claimed to be something that provides net benefit to market participants and thus the economy as a whole.

That claim looks awfully hard to sustain when the book-maker never loses – not even once on a daily aggregate basis.

Indeed, this puts into stark relief the nature of "banking" these days in the Wall Street context, which is increasingly nothing more than an activity intended and executed to skim off profits for the banksters at the expense of literally everyone else in the economy.

They seem to be doing a good job of it too, if these results are any indication.

Here’s the problem with this, assuming you’re not a bank executive:…
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Goldman Sachs (GS) VP Email Jan 2007: “The whole building is about to collapse anytime now.”

Goldman Sachs (GS) VP Email Jan 2007: "The whole building is about to collapse anytime now."

Courtesy of Trader Mark at Fund My Mutual Fund

I have no idea the implication but for those of you around a decade ago you know what this parallels… Eliot Spitzer made his career on almost the same exact thing a decade ago.  Investment banks bringing product (IPOs) public, their analysts cheerleading the stocks to the public while writing internal emails about how the companies were complete trash.

Well this London based VP looks like the sacrificial lamb.

  • The suit also named Fabrice Tourre, a vice president at Goldman who helped create and sell the investment

As usual the snake oil never really changes… but in the past the snake oil salesmen would be run out of town.  Now they are protected by government, backstopepd by our Federal reserve, and glorified.  We’ve really evolved as a society :)

  • According to the complaint, Goldman created Abacus 2007-AC1 in February 2007, at the request of John Paulson, a prominent hedge fund manager who earned an estimated $3.7 billion in 2007 by correctly wagering that the housing bubble would burst.
  • Goldman let Mr. Paulson select mortgage bonds that he wanted to bet against — the ones he believed were most likely to lose value — and packaged those bonds into Abacus 2007-AC1, according to the S.E.C. complaint. Goldman then sold the Abacus deal to investors like foreign banks, pension funds, insurance companies and other hedge funds.
  • But the deck was stacked against the Abacus investors, the complaint contends, because the investment was filled with bonds chosen by Mr. Paulson as likely to defaultGoldman told investors in Abacus marketing materials reviewed by The Times that the bonds would be chosen by an independent manager.

———————————

Fascinating to see John Paulson’s firm involved as well – I don’t see any wrong doing on his part but apparently one of his former lieutenants, Paolo Pellegrini was the ‘snitch’. [Oct 2, 2009: Paolo Pellegrini, Formely of John Paulson's Hedge Fund, on Bloomberg]

Full pdf file of SEC complaint here.

p.s. bought some SPY puts to get some hedging going on.


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The Shell Game Continues…

The Shell Game Continues… 

Scallop shells lined up on desk, one shell lifted to reveal bean

Courtesy of Chris Martenson

Executive Summary

  • Record-breaking Treasury auctions continue to go off without a hitch, thanks to massive foreign participation.
  • However, the amounts reported to be bought in the auction results do not match the Custody Account or TIC report amounts.
  • The Fed is allegedly all done buying MBS and Treasury paper.  This cuts off an important source of liquidity for the Treasury, commodity, and stock markets.  
  • How will these markets respond to a liquidity drought?

The end of March is upon us.  I need to take a moment to re-analyze the data to see what might happen now that the stimulus money has worn off, and, more importantly, now that the Federal Reserve’s massive Mortgage Backed Security (MBS) purchase program is over.

This is important for a variety of reasons.  The first is that the enormous flood of liquidity that the Federal Reserve injected into the financial system has found its way into the Treasury market, supporting government borrowing and also lowering interest rates for the housing market.  How will the Treasury market respond once the liquidity spigot is turned off? 

The second is that this flood of liquidity has supported all sorts of other asset markets along the way, including the stock and commodity markets.  What will happen to these when the flood stops?  Will the base economy have recovered enough that the financial markets can operate on their own?  Will stocks falter after an amazing run?  Or will the whole thing shudder to a halt for a double-dip recession?

Back in August of 2009, I wrote that the Federal Reserve was basically just directly monetizing US government debt by buying recent Treasury issuances as well as Mortgage Backed Securities (MBS).

Here’s the conclusion from that report: 

The Federal Reserve has effectively been monetizing far more US government debt than has openly been revealed, by cleverly enabling foreign central banks to swap their agency debt for Treasury debt.  This is not a sign of strength and reveals a pattern of trading temporary relief for future difficulties.

This is very nearly the same path that Zimbabwe took, resulting in the complete abandonment of the Zimbabwe dollar as a unit of currency.  The difference is in the complexity of the game being played, not the substance of the actions themselves.

When the full scope of this program is more widely recognized,


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MORE MONEY MORE PROBLEMS

MORE MONEY MORE PROBLEMS

Close-up of stacks of Indian coins of different denominations

Courtesy of The Pragmatic Capitalist 

By Annaly Capital Management:

Headline CPI came out this morning and surprised to the downside, 2.6% year-over-year versus 2.8% expected.  Core CPI was also cooler than expected at 1.6% versus the 1.8% predicted by economists.  Watchers of the monetary aggregates aren’t as surprised, but who watches M2 anymore?  Every economic theory enjoys its time in the sun, but ideas fall in and out of popularity.  Monetarism is no different.  Money supply data used to be pored over upon its release by the Fed.  If it was 4:30 on a Thursday, you could be sure to find professional and amateur Fed-watchers alike holding their collective breath in anticipation of the new data.  Those days are long gone, as the Ms seemingly haven’t had the same predictive power (more on this and its deflationary portents next week).  We believe that the tracking and analysis of money supply will enjoy its day in the sun again, and in the meantime we plan to keep watch.

We’ve taken to following a measure of money supply that adds together M2 and the only surviving component of M3:  institutional money funds.  As you can see below, it has been falling since June of 2009 and is now down year-over-year.

Click Here to Enlarge Charts

Money supply spent all of 2009 in a deceleration pattern, a period in which we had actual CPI deflation, a rare event.  Since the peak in June of 2009, this measure of money supply has dropped $314 billion from a peak of nearly $11 trillion.  It’s in the harsh light of a falling money supply that we view the recent announcements from Fannie Mae and Freddie Mac that they will be purchasing delinquent loans from pools of loans that they guarantee.  These purchases will flow through to holders of agency MBS in the form of prepayments over a relatively brief period, to the tune of roughly $200 billion in cash.  This isn’t only an event for holders of these securities, it’s likely that it could be a money supply event as well, showing up in the aggregates.  It would be easy to look at $200 billion on a base of over $10 trillion as a drop in the bucket, but this would be a mistake.  It would eliminate most of the decline from the peak in money supply, and more importantly, it could be misinterpreted as an…
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Money Markets are the New Suspenders

Money Markets are the New Suspenders

By EB, courtesy of Zero Hedge

The Financial Times recently reported on the Fed’s latest exit strategy to eventually contain the inflation zombie:

 During the crisis, the Fed created roughly $800bn of additional bank reserves to finance asset purchases and loans. This total is likely to rise in the coming months as the central bank completes its asset purchases and the Treasury unwinds financing it provided to the Fed. Fed officials think they could raise interest rates even with this excess supply of reserves by offering to pay banks to deposit their surplus funds with it rather than lend them out. However, they also want to use reverse repos in tandem to soak up some of the excess reserves. Policymakers call this a “belt and braces approach”. [The latter, clearly a nod to the great Gekko.]

nice suspenders, zero hedgeTD touched on this last Thursday, and we will expand upon it here as it is particularly relevant to our ongoing theory that it is the proceeds from permanent open market operations (POMOs) and their close cousins that are driving equities.  Though this may be received wisdom to ZH readers, the Fed has done us the favor of providing additional evidence through the FT story.  A bit of background, as we are new contributors to this forum:

Money Supply:  Based on our previous research on the effects of swings in M2 non-seasonally adjusted money supply (M2) on the stock market, we were a bit surprised in July 09 by the resiliency of the rally, which continued in the face of such a dramatic contraction in M2.  The dismal Durable Goods report from last Friday confirms that the capital goods sector is still under significant pressure as a result of a lack of money in the general economy.  With banks not lending to normal businesses and consumer credit contracting equally as violently, what is the basis for this rally and from where does the never-ending flow of equities juice flow? 

Bank Non-Borrowed Excess Reserves:  The Fed statistic that most closely correlates with the 2009 equities run-up appears to be bank non-borrowed excess reserves (bank NBER), which


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The Shell Game – How the Federal Reserve is Monetizing Debt

Fascinating!  H/t to Zero Hedge for finding this excellent article by Chris Martenson. (See also Tyler Durden’s "Is The Fed Enabling Foreign Central Banks To Swap Out Their Agency Debt Into Treasuries?")  And welcome to Chris Martenson of ChrisMartenson.com!

The Shell Game – How the Federal Reserve is Monetizing Debt 

Courtesy of Chris Martenson

Executive Summary

  • The Federal Reserve and the federal government are attempting to "plug the gap" caused by a slowdown of private credit/debt creation.
  • Non-US demand for the dollar must remain high, or the dollar will fall.
  • Demand for US assets is in negative territory for 2009
  • The TIC report and Federal Reserve Custody Account are reviewed and compared
  • The Federal Reserve has effectively been monetizing US government debt by cleverly enabling foreign central banks to swap their Agency debt for Treasury debt.
  • The shell game that the Fed is currently playing obscures the fact that money is being printed out of thin air and used to buy US government debt.

The Federal Reserve is monetizing US Treasury debt and is doing so openly, both through its $300 billion commitment to buy Treasuries and by engaging in a sleight of hand maneuver that would make a street hustler from Brooklyn blush. 

This report will wade through some technical details in order to illuminate a complicated issue, but you should take the time to learn about this because it is essential to understanding what the future may hold. 

One of the most important questions of the day concerns how the dollar will fare in the coming months and years. If you are working for a wage, it is essential to know whether you should save or spend that money.  If you have assets to protect, where you place those monies is vitally important and could make the difference between a relatively pleasant future and a difficult one.  If you have any interest at all in where interest rates are headed, you’ll want to understand this story.

There are three major tripwires strung across our landscape, any of which could rather suddenly change the game, if triggered.  One is a sudden rush into material goods and commodities, that might occur if (or when) the truly wealthy ever catch on that paper wealth is a doomed concept.  A second would occur if (or when) the largest


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Zero Hedge

What's Hot In Women's Fashion?

Courtesy of ZeroHedge View original post here.

Via Global Macro Monitor,

Capitalism at its best or worst?

We have a few questions:

1)  Does the Tariff Man get a royalty for the sale of each dress sold, and will that violate the Emolumen...



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Phil's Favorites

Look Out Bears! Fed New QE Now Up to $165 Billion

Courtesy of Lee Adler

I have been warning for months that the Fed would need new QE to counter the impact of massive waves of Treasury supply. I thought that that would come later, rather than sooner. Sorry folks, wrong about that. The NY Fed announced another round of new TOMO (Temporary Open Market Operations) today.

In addition to the $75 billion in overnight repos that the Fed issued and has been rolling over since Tuesday, next week the Fed will issue another $90 billion. They’ll come in the form of three $30 billion, 14 day repos to be offered next week.

That brings the new Fed QE to a total of $165 billion. Even in the worst days of the financial crisis, I can’t remember the Fed ballooning its balance sheet by $165 bi...



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Lee's Free Thinking

Look Out Bears! Fed New QE Now Up to $165 Billion

Courtesy of Lee Adler

I have been warning for months that the Fed would need new QE to counter the impact of massive waves of Treasury supply. I thought that that would come later, rather than sooner. Sorry folks, wrong about that. The NY Fed announced another round of new TOMO (Temporary Open Market Operations) today.

In addition to the $75 billion in overnight repos that the Fed issued and has been rolling over since Tuesday, next week the Fed will issue another $90 billion. They’ll come in the form of three $30 billion, 14 day repos to be offered next week.

That brings the new Fed QE to a total of $165 billion. Even in the worst days of the financial crisis, I can’t remember the Fed ballooning its balance sheet by $165 bi...



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The Technical Traders

Is A Price Revaluation Event About To Happen?

Courtesy of Technical Traders

Skilled technical traders must be aware that price is setting up for a breakout or breakdown event with recent Doji, Hammer
and other narrow range price bars.  These types of Japanese Candlestick patterns are warnings that price is coiling into
a tight range and the more we see them in a series, the more likely price is building up some type of explosive price breakout/breakdown move in the near future.  The ES (S&P 500 E-mini futures) chart is a perfect example of these types of price bars on the Daily chart (see below).

Tri-Star Tops, Three River Evening Star patterns, Hammers/Hangmen and Dojis are all very common near extreme price peaks and troughs.  The rea...



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Kimble Charting Solutions

India About To Experience Major Strength? Possible Says Joe Friday

Courtesy of Chris Kimble

If one invested in the India ETF (INDA) back in January of 2012, your total 7-year return would be 24%. During the same time frame, the S&P 500 made 124%. The 7-year spread between the two is a large 100%!

Are things about to improve for the INDA ETF and could it be time for the relative weakness to change? Possible!

This chart looks at the INDA/SPX ratio since early 2012. The ratio continues to be in a major downtrend.

The ratio hit a 7-year low a few months ago and this week it kissed those lows again at (1). The ratio near weeks end is attempting to...



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Insider Scoop

10 Biggest Price Target Changes For Friday

Courtesy of Benzinga

  • Credit Suisse raised IHS Markit Ltd (NYSE: INFO) price target from $68 to $76. IHS Markit shares closed at $67.75 on Thursday.
  • Wedbush boosted Restoration Hardware Holdings, Inc (NYSE: RH) price target from $170 to $185. RH shares closed at $169.49 on Thursday.
  • Mizuho lifted Seagate Technology PLC (NASDAQ: STX) price target from $46 to $50. Seagate shares closed at $52.94 on Thursday.
  • UBS raised the price target for Weight Watchers Intern...


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Chart School

Crude Oil Cycle Bottom aligns with Saudi Oil Attack

Courtesy of Read the Ticker

Do the cycles know? Funny how cycle lows attract the need for higher prices, no matter what the news is!

These are the questions before markets on on Monday 16th Aug 2019:

1) A much higher oil price in quick time can not be tolerated by the consumer, as it gives birth to much higher inflation and a tax on the average Joe disposable income. This is recessionary pressure.

2) With (1) above the real issue will be the higher interest rate and US dollar effect on the SP500 near all time highs.

3) A moderately higher oil price is likely to be absorbed and be bullish as it creates income for struggling energy companies and the inflation shock may be muted. 

We shall see. 

...

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Digital Currencies

China Crypto Miners Wiped Out By Flood; Bitcoin Hash Rate Hits ATHs

Courtesy of ZeroHedge View original post here.

Last week, a devastating rainstorm in China's Sichuan province triggered mudslides, forcing local hydropower plants and cryptocurrency miners to halt operations, reported CoinDesk.

Torrential rains flooded some parts of Sichuan's mountainous Aba prefecture last Monday, with mudslides seen across 17 counties in the area, according to local government posts on Weibo. 

One of the worst-hit areas was Wenchuan county, ...



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Biotech

The Big Pharma Takeover of Medical Cannabis

Reminder: We are available to chat with Members, comments are found below each post.

 

The Big Pharma Takeover of Medical Cannabis

Courtesy of  , Visual Capitalist

The Big Pharma Takeover of Medical Cannabis

As evidence of cannabis’ many benefits mounts, so does the interest from the global pharmaceutical industry, known as Big Pharma. The entrance of such behemoths will radically transform the cannabis industry—once heavily stigmatized, it is now a potentially game-changing source of growth for countless co...



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Mapping The Market

How IPOs Are Priced

Via Jean Luc 

Funny but probably true:

...

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Members' Corner

Despacito - How to Make Money the Old-Fashioned Way - SLOWLY!

Are you ready to retire?  

For most people, the purpose of investing is to build up enough wealth to allow you to retire.  In general, that's usually enough money to reliably generate a year's worth of your average income, each year into your retirement so that that, plus you Social Security, should be enough to pay your bills without having to draw down on your principle.

Unfortunately, as the last decade has shown us, we can't count on bonds to pay us more than 3% and the average return from the stock market over the past 20 years has been erratic - to say the least - with 4 negative years (2000, 2001, 2002 and 2008) and 14 positives, though mostly in the 10% range on the positives.  A string of losses like we had from 2000-02 could easily wipe out a decades worth of gains.

Still, the stock market has been better over the last 10 (7%) an...



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Phil has a chapter in a newly-released eBook that we think you’ll enjoy.

In My Top Strategies for 2017, Phil's chapter is Secret Santa’s Inflation Hedges for 2017.

This chapter isn’t about risk or leverage. Phil present a few smart, practical ideas you can use as a hedge against inflation as well as hedging strategies designed to assist you in staying ahead of the markets.

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