tag:blogger.com,1999:blog-30213905.post9196004874920044056..comments2023-12-23T03:16:36.014-05:00Comments on Robert Hansen's Blog: Reverse Auction QuestionsRobert G. Hansenhttp://www.blogger.com/profile/08922339441309144396noreply@blogger.comBlogger4125tag:blogger.com,1999:blog-30213905.post-15033014612173912922008-09-30T15:41:00.000-05:002008-09-30T15:41:00.000-05:00Maybe this is a journey best not taken...Use FDIC ...Maybe this is a journey best not taken...<BR/><BR/>Use FDIC to inject cash and match the solvent with insolvent banks.<BR/><BR/>Use the bank "workout departments to deal with defaults and related properties.<BR/><BR/>No new rules or complex government agency to spool up and staff. And then find a new lease on life when its original mission is complete.<BR/><BR/>Congress will find oversight harder, but this is good, so far as I can see.<BR/><BR/>And I have been broke, but survived, so I know a little about being backed up to the wall.Harry Schellhttps://www.blogger.com/profile/17427287025034954394noreply@blogger.comtag:blogger.com,1999:blog-30213905.post-45028610360338007002008-09-30T07:08:00.000-05:002008-09-30T07:08:00.000-05:00Anonymous provided some good information on the in...Anonymous provided some good information on the information problems with MBS. I was looking at the data on Bloomberg for one mortgage pool, and was impressed at the breadth of information that seemed to be available. Knowledge of prepayments is critical, of course, and it sounds like that is available only to some parties. Also the errors in the data and lags are scary and contribute to information asymmetries. All of which makes the old adverse selection/winners curse problem real and severe.<BR/><BR/>There will be horror stories, for sure. But those seem to be more a function of the shoddy workmanship up front than from the mistakes that will surely be made in trying to sort it all out.Robert G. Hansenhttps://www.blogger.com/profile/08922339441309144396noreply@blogger.comtag:blogger.com,1999:blog-30213905.post-60454267601018975682008-09-30T02:51:00.000-05:002008-09-30T02:51:00.000-05:00Former student here:There are more issues than the...Former student here:<BR/><BR/>There are more issues than the ones you just mentioned. Essentially, for RMBS, there are only so many characteristics that are available to the investing public through media like Bloomberg. The data includes pool statistics like LTV, FICO scores, geographic concentration of the pool, % of secondary residences in the pool, % of a tranche that is 30, 60, 90 overdue (and there is already a 30-60 day delay when this info gets to Bloomberg, so those delinquency numbers can change significantly. If you are a party to the PSA, you can get further info like prepayment speeds (also with a lag). The issue really is the timeliness and accuracy of the data. It's often not right, and a few months old. Hard to price a black box. <BR/><BR/>The biggest problem for repackaging is that the loan tapes (lists of mortgages in pools) are messy and often just flat wrong. These securities were slapped together so fast that often a single loan can appear in multiple RMBS tranches, which should be impossible, unless the cash flow has distinct characteristics that allow for an easy split (fixed for a period, then floating, for instance). Hard to divvy up a single cashflow twice...but it happens. A lot.<BR/><BR/>These auctions can/will be a disaster. Look for any place that runs a loss mitigation arm to do well, like Clayton Holdings. There will be plenty of cleanup jobs created in the mortgage industry if the fine print actually needs to be sorted properly. Chances are that it will not be sorted properly, and all sorts of servicing horror stories will ensue, not to mention bonds that aren't receiving proper cash flows.<BR/><BR/>CMOs are just like CDOs--extra slicing and dicing to make chicken $hit into chicken salad. It won't work.<BR/><BR/>One of my favorite auction theory economists is Paul Milgrom. I am sure he will opine on this. He's a well-tapped expert at govt autcions.<BR/><BR/>I enjoy your blog, even if you do come off as a UP/UV right-wing nutjob sometimes.<BR/><BR/>I am eagerly awaiting the house passing the bill, as I watch my dollar-cost-averaged, index-invested 401(k) melt away (on paper). Ouch.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-30213905.post-74240298988806011742008-09-29T01:22:00.000-05:002008-09-29T01:22:00.000-05:00This comment has been removed by a blog administrator.Unknownhttps://www.blogger.com/profile/13719249124306947469noreply@blogger.com