Foreclosure moratorium implodes pension funds etc.?

[mooncliff]

“That collateralized debt obligation is now effectively worthless because the collateral behind the debt can no longer be collected. ...

Let’s say you have 10 mortgages at $1 million a piece, the sum total of those mortgages are $10 million. So, the banks took the 10 mortgages and bundled them together into a collateralized debt obligation or CDO with a face value of $10 million.

They then sold that new entity that they created to an investment group of some sort, a pension fund, hedge fund, etc. promising them a yield of let’s say 7%. The sales pitch would emphasize the fact that this CDO was backed by real collateral. In the event of loan defaults by the borrowers, the banks would tell the buyer of the CDO that the collateral behind the loan could be sold to recapture any potential losses on the part of the purchaser.

Everything seemed to work fine until the defaults began and the foreclosure process kicked into high gear. The foreclosure process has exposed fatal flaws in the system and the flaw is that the banks cannot prove clear ownership of the mortgage.

Consequently, they are then barred from foreclosing on the property. Because they can no longer foreclose on the properties, the CDO is now effectively worthless.
[Mooncliff comment: And I think nearly everyone significantly underwater will stop paying their mortgages, so the income from the toxic fraction of the mortgages in the CDO will crash to near zero in a matter of months.]

http://kingworldnews.com/kingworldne...he_System.html


If you haven't listened to this highly entertaining story about Toxie the toxic asset, it perfectly illustrates how a $100,000 bundle of toxic mortgages can go to zero pretty fast.
http://www.npr.org/blogs/money/2010/...0/toxie-s-dead

[Slimprofits]

Re: Foreclosure moratorium implodes pension funds etc.?

Implodes pension funds if Bank$ters don't take the hit instead?

Is it that black and white?

[mooncliff]

Re: Foreclosure moratorium implodes pension funds etc.?

Hmm, I don't know... that's why I wrote "etc.?" Certainly the banksters made the mess to make money, but it seems to me that the current situation is that we have had way underfunded pension liabilities to begin with (I think the actuaries vastly underestimate how long people are going to live, and when did our concept of retirement change from having enough to reasonably live to getting paid your final salary plus COLA until you die), and we have had a series of asset bubbles, which were used as the assets of the pension funds. These assets were supposed to be AAA and have collateral behind them, but if we don't have clear chains of titles and no clear idea who actually owns the mortgages, it seems to me that at least for years until everything is sorted out (assuming it can be sorted out because the documentation actually exists someplace), these are accounting fictions.

[jiimbergin]

Re: Foreclosure moratorium implodes pension funds etc.?

Hmm, I don't know... that's why I wrote "etc.?" Certainly the banksters made the mess to make money, but it seems to me that the current situation is that we have had way underfunded pension liabilities to begin with (I think the actuaries vastly underestimate how long people are going to live, and when did our concept of retirement change from having enough to reasonably live to getting paid your final salary plus COLA until you die), and we have had a series of asset bubbles, which were used as the assets of the pension funds. These assets were supposed to be AAA and have collateral behind them, but if we don't have clear chains of titles and no clear idea who actually owns the mortgages, it seems to me that at least for years until everything is sorted out (assuming it can be sorted out because the documentation actually exists someplace), these are accounting fictions.

As a retired actuary, I can assure you that it is unlikely they have underestimated how long people are going to live. The real problem is in the investment assumptions, where management and others think they know enough to influence the assumptions. 8% return has been typical with no allowance for recession etc.etc. That is where the real problem lies. Actuaries can not claim to have special knowledge about future earning rates (even if many of us believe we do), but they certainly do know how to project mortality improvements better than others.

[mooncliff]

Re: Foreclosure moratorium implodes pension funds etc.?

Oh, OK. I think many more people are going to live to 90+ than they think. They themselves don't realize this.
So the actuaries knew that drugs to slow aging are coming on line say in the next 5 years?
I guess that they know this now, but how about longevity assumptions from say 1990?

Yes, and they did "assume" there would be 8% returns, but isn't that the model the states etc. ordered them to produce so they wouldn't have to actually adequately fund the damn pensions?

By the way, doctors are finally testing my relatives for serum vitamin D, and they are all coming in deficient, even though they are taking 400 iu. I think basically everyone should take 1,000 or 2,000 iu because we hardly get enough sunlight and the body's ability to synthesize it goes way down as we age.
And, ahem, gentlemen should be particularly interested in this:
Just having a high PSA does not mean prostate cancer is growing fast. Out of 15 men with high PSA, actually, the cancer is so slow that 14 out of 15 will die of something else first, like a heart attack or stroke, and so in general, what should be done is monitoring.
http://www.sciencefriday.com/program/archives/200909043

Vitamin D might help
http://news.bbc.co.uk/2/hi/health/8017323.stm
I take this
http://www.vitaminworld.com/pages/fi...=817&CPID=3242

And the mortgage fraud problem is hardly news:

Consumer advocates and lawyers warned federal officials in recent years that the U.S. foreclosure system was designed to seize people's homes as fast as possible, often without regard to the rights of homeowners.
http://www.washingtonpost.com/wp-dyn...100904125.html

[mooncliff]

Re: Foreclosure moratorium implodes pension funds etc.?

When you treat people unfairly, eventually, they just turn their backs and withdraw. Monkeys do the same.

http://www.zerohedge.com/article/gon...-class-anarchy

[jiimbergin]

Re: Foreclosure moratorium implodes pension funds etc.?

Actuaries do not use static models in their valuations. They will use several different mortality improvents in numerous projections and I assure you, this is the one place that they will be conservative because it is still their playground. On the other hand, the investment side in a pension valuation will have other hands in it, including CPAs etc. That is where the biggest problem lies.

Mortality has not improved more than I was projecting in 1990 or for that matter in 1975.

jim

[swgprop]

Re: Foreclosure moratorium implodes pension funds etc.?

By the way, doctors are finally testing my relatives for serum vitamin D, and they are all coming in deficient, even though they are taking 400 iu. I think basically everyone should take 1,000 or 2,000 iu because we hardly get enough sunlight and the body's ability to synthesize it goes way down as we age.

I'd say 10-20,000 iu is better advised (unless you are getting a good dose of sunlight).

The following is from the Vitamin D Council site:

How To Get Enough Vitamin D

There are 3 ways for adults to ensure adequate levels of vitamin D:

• regularly receive midday sun exposure in the late spring, summer, and early fall, exposing as much of the skin as possible for 20–30 minutes (being careful to never burn). (Those with dark skin will need longer exposure time — up to six times longer.)
• regularly use a sun bed (avoiding sunburn) during the colder months.
• take 5,000 IU per day for 2–3 months, then obtain a 25-hydroxyvitamin D test. Adjust your dosage so that blood levels are between 50–80 ng/mL (or 125–200 nM/L) year-round.

I was taking 5-10,000 alternating daily. My test results came in around 40 ng/mL so I jacked up the dosage.

Just having a high PSA does not mean prostate cancer is growing fast. Out of 15 men with high PSA, actually, the cancer is so slow that 14 out of 15 will die of something else first, like a heart attack or stroke, and so in general, what should be done is monitoring.

The PSA test results are rife with false positives and negatives. I couldn't care less about my score since I'd avoid conventional treatment anyway.

Should I get a PSA test that screens men for prostate cancer?
By Dr. Gabe Mirkin on 07/30/2010

Dear Dr. Mirkin:
Should I get a PSA test that screens men for prostate cancer?
Answer: I don't recommend it. Dr. Richard Ablin, who discovered PSA in 1970, says the test should be given only to:
1. follow a man who has already been treated for prostate cancer and
2. screen men with an extensive family history of prostate cancer. (1)
The vast majority of prostate cancers are harmless. They grow so slowly that they never cause trouble. PSA screens millions of men. Those with an elevated PSA are sent for biopsy. Those who are diagnosed with cancer are almost always pushed into surgery, intensive radiation or other damaging treatments.
An American study shows that over 10 years, screening did not reduce the death rate in men 55 and over. Dr. Ablin writes: “A European study showed that 48 men need to be treated to save one life. That's 47 men who, in all likelihood, can no longer function sexually or stay out of the bathroom for long.”

[mooncliff]

Re: Foreclosure moratorium implodes pension funds etc.?

Whoa!

When houses that have been packaged into a mortgage bond are liquidated at a foreclosure sale—the very end of the foreclosure process—the holders of the junior, or riskiest debt, would be the first investors to take losses. But if a foreclosure is delayed, the servicer must typically keep advancing payments that will go to all bondholders, including the junior debt holders, even though the home loan itself is producing no revenue stream.

http://online.wsj.com/article/SB1000...696918076.html

[loweyecue]

Re: Foreclosure moratorium implodes pension funds etc.?

Whoa!

When houses that have been packaged into a mortgage bond are liquidated at a foreclosure sale—the very end of the foreclosure process—the holders of the junior, or riskiest debt, would be the first investors to take losses. But if a foreclosure is delayed, the servicer must typically keep advancing payments that will go to all bondholders, including the junior debt holders, even though the home loan itself is producing no revenue stream.

http://online.wsj.com/article/SB1000...696918076.html

Nice! Finally a way to hold the gun to the Bankster's head! Just don't tell the Govt.

[swgprop]

Re: Foreclosure moratorium implodes pension funds etc.?

Whoa!

When houses that have been packaged into a mortgage bond are liquidated at a foreclosure sale—the very end of the foreclosure process—the holders of the junior, or riskiest debt, would be the first investors to take losses. But if a foreclosure is delayed, the servicer must typically keep advancing payments that will go to all bondholders, including the junior debt holders, even though the home loan itself is producing no revenue stream.

http://online.wsj.com/article/SB1000...696918076.html

This is just delays the inevitable. Upon liquidation of the asset (the foreclosed home) the servicer recoups all advances from the liquidation proceeds, effectively clawing back the advances. The subordinated tranche holders will lose out.

[ThePythonicCow]

Re: Foreclosure moratorium implodes pension funds etc.?

Oh, OK. I think many more people are going to live to 90+ than they think.

It's a minority who will watch their health and nutrition thus. The majority still eat the processed foods from the super market and restaurants (fast or not), and still take the drugs their doctor prescribes ... and still spend a majority of their remaining life savings or a chunk of our collective Medicare fundings on medical care in their last few months of life. Their life expectancy is going nowhere fast in my opinion.

By the way, doctors are finally testing my relatives for serum vitamin D,

Vitamin D, Vitamin C, a healthy mix of Omega 3 and 6 oils (not industrially processed with excessive heat, pressure or harsh extracting chemicals), the full spectrum of minerals (e.g. selenium, iodine, magnesium, ...) and a variety of "anti-oxidants" and phytonutrients. In particular, I recommend 5 to 20 grams (sometimes more more when ill) of Asorbic Acid (Vitamin C). The most potent form seems to be liposomal Vitamin C, which you can make at home using an Ultrasonic Cleaner, distilled water, lecithin granules and Vitamin C powder. Consume up to near bowel tolerance. Note: I am not a doctor.

[cjppjc]

Re: Foreclosure moratorium implodes pension funds etc.?

When you treat people unfairly, eventually, they just turn their backs and withdraw. Monkeys do the same.

http://www.zerohedge.com/article/gon...-class-anarchy

What an terrible experience. It's a wonder they don't hurt someone. Why though are they paying the lower rate?

[Southernguy]

Re: Foreclosure moratorium implodes pension funds etc.?

My formula: a lot of fruits and raw vegetables.Eat everything, but no junk food, quite a bit of beef, etc. Keep your body mass index under 25. 30 minutes intense bycicle every day. Two glasses of red (tanat) wine every night. No pills. One hour siesta every day.
61 years old, but look 10 years younger.
I´am a doctor, though not a practising one.