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Any guesses? "Not all 2007 Subprime Deals are Performing Poorly"

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Riick

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LINK HERE

"It may seem at times as if every residential mortgage-backed security — particularly in subprime
— is in the process of being downgraded (which is, to a large extent, exactly what’s been going on).
You may be surprised, however, to learn that not all RMBS deals are collapsing
under the weight of a housing market gone south.

Fitch Ratings said Wednesday that it had affirmed $1.01 billion from a single 2007 subprime RMBS deal
— J.P. Morgan Acceptance Corp 2007-CH3.

True mortgage nerds might be interested in the prospectus for such a trend-breaker.

The affirmation here by Fitch would seem on the surface to fly in the face of two poorly-performing,
recently-downgraded WaMu subprime deals from 2007 that have been mentioned on this blog recently
(first deal mentioned here; second deal mentioned here).

The loans in this deal are predominantly first-lien 2/28s and 3/27s, and a good chunk were originated via the
wholesale channel at Chase Home Finance; most of the loans are in Florida, California, Illinois and New York.

I could not find any material differences in disclosed underwriting standards or deal structure,
either. In other words, there doesn’t appear to be much different here versus the loans pooled
in the two troubled WaMu deals and originated via Long Beach Mortgage.

It’s interesting to ponder — for a minute — why Chase-originated subprime loans are performing
(and are expected to perform) infinitely better than subprime loans originated by Long Beach Mortgage
.
 

Randolph Kinney

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I don't know why anyone would consider investing in subprime anything today.

I don't believe looking at deals that have not gone south yet is a meaningful exercise until 5 years from now.
 

Karl

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In this changing market any "Positive Spin" about any of the players should be taken as a caution, I read this "Hype" differently than many others. I read it as we need "Bail Money" please invest with us. BofA, WaMu, Chase are all structured the same so why wouldn't they all fall the same??? Cause one will eat up the others in order to compile resources. Mabe the new name will be ChaWaBomfa
 

moh malekpour

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They haven't seen the whole Enchilada yet. Banks have gotten a little help from the Fed and kept quiet at this time but it is now the hedgies turn. SUBPRIME SATAN IN HEDGE FUND HELL
December 27, 2007 -- MOVE over, banks, it's time for hedge funds to worry about subprime loans and such.

"They haven't been under the same pressure as public companies to own up" to problems, said Chris Whalen, who runs The Institutional Risk Analyst newsletter.

But with the year's end upon us, the hedgies will now be 'fessing up and reporting problems to clients.

And Whalen thinks hedge funds could have much greater susceptibility to bad derivatives than the banks that have been hogging the headlines these past few months.

In fact, some hedge funds could be at the mercy of the hemorrhaging financial institutions that sold them the derivatives.

Hedge funds could have 70 cents of every $1 of derivative securities sitting on their books. The 30 cents remaining on the books of Wall Street institutions in many cases represent just the remnants of unsold securities
 

George Hatch

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Q: What does a rating company do when their credibility gets trashed as a result of a couple of specatcular failures?

A: Talk about the ratings that are still holding up.
 

Karl

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Q: What does a rating company do when their credibility gets trashed as a result of a couple of specatcular failures?

A: Talk about the ratings that are still holding up.

LOL:: Again can't argue that statement. Mr Hatch is the MASTER!!
 

Brad Ellis

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Interesting.

I recommend you all take the time to read the actual prospectus.

Total weighted LTVs are 78%. About 40% of these are stated income- now note that those are not Alt-A that would require an "A" level credit score- these puppies are mostly subprime.

I love it. Sub-prime, stated income, sugar-free, low fat Venti mocha lattes- yum!

Margins about 5% ! Weighted mortage rates about 8%.

Ratings are not all investment grade either- each group.pool is individually rated. All ratings agencies are involved.

The World According to GAAP.

Brad
 

murray stroupe

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Tennessee
Re;ABC

Q: What does a rating company do when their credibility gets trashed as a result of a couple of specatcular failures?

A: Talk about the ratings that are still holding up.
==================
b]Haven't waded thru that swamp, i mean prospectus;but even if the plans are similar, i would not assume at all the execution of the WM ,JPM plans /leadership/loans are similar. Even if that is wrong,see ''c'' below.

c as in SEC] The stock prices are the differences between daylight & dark;
SEC investigation of WM,no SEC probe in JPM i am aware of..................
In other words, leadership matters.
 

George Hatch

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Fair enough - we'll wait and see.
 

Randolph Kinney

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North Carolina
What I find interesting about the rating agencies is that they did not track these instruments after they were issued. Normally the rating agencies will review their ratings periodically on instruments they have rated. Once the problem of defaults became very visible and only after some time after year or two from the date of issuance, rating agencies began to review and downgrade these instruments.

So how is it that you have an A rating a year or two ago on a particular instrument and your first review by the rating agency drops by 6 grades to junk status?

In the beginning of the problem, issuers of these instruments put the arm on the rating agencies not to review past issuances knowing that any downgrade would cause problems with new issuances. The game was hot and billions of dollars were made selling A rated paper. Rating agencies were making millions as long as they cooperated so they would get new business.

I really don't believe the true value of these instruments are known or their safety. Any rating other than junk on existing paper of this kind is wishful thinking. The only value to count on is market value, not some rating model.
 
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