Upside Down Mortgage

Posts Tagged ‘economy’

Subprime Financing

Question: how does citibank writes off $XYZ billions work?

I mean I read in many places that major banks write off bad-debt(subprime loan etc...) . Is the real loss to those banks. From what I know, those banks intern have sold those mortgages as some kind of securities or bundles, which are at some point or other finally sold to individual investors. So how do those mortgage loans contribute to the $XYZ Billion write-off. The loss should be to the individual investors not the finance companies. Can somebody explain?

Answer: The bank also bought thos eCDO and MBS to park their cash. Banks seat on billon of cash. When they give you a 6 monbth CD at 3%, the money to pay your CD interest come from their own investment. Banks also set up off balance sheet entities that bought these CDO and MBS, and the bank gaurantee repayment on these off balance sheet arrangement. The write off comes from the issue or marked to market. As there is no liquidity for these type of investments (i.e. it is not being traded daily, nor even monthly) they have design complicated calculations to estimate the fair value of the CDO and MBS. The problem arised when the market froze itself and no one was buying these securities and the deliquency rate was increasing. The banks were stuck with these investments, with increasing delenquency rate and they had to market them down on their balance sheet (eventually that does not mean that the cash flow generated by the investment is bad). If noone can put a fair value to the security you have to writte it off to $0.
Hope this help
PS: bank buy each other bonds and securities all the time. That's how they lend each other.

Fresh Start Auto Loans. Cincinnati's leader in subprime financing!

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Aig Subprime

Question: Whose fault it is actually?

for the financial slump now in the US and the fall of companies Lehman Brothers,Merill Lynch and now AIG...who is to blame for the subprime crisis and the slump now?

Answer: the american people for not rising up sooner and taking out the evil that is within are government.. its been there for along time but people are more concerned with dancing with the stars and american idol...
trust me on this its going to be worse then the great depression we are no longer united states of america we are the north american union and are currency is just a piece of paper so we will soon go to the amero.. most of are rights are being stripped away from us and people just continue to be slaves.. no one to blame but are selfs

Random Ass Theatre - AIG gives Congress Sub-Prime lulz

Subprime Housing Crisis

Question: what is mean by subprime loan write-off?

I read about a subprime crisis in US and resulted write-off by major home loan lenders. Does it mean customer needs not to pay the home loan taken by them and own the house without paying the rest of installment?

Answer: No! It means the banks are assuming they won't get paid in full - they are 'writing off' the investment as a total or partial loss.

U.S. Sub-Prime Mortgage Crisis