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|User Info||Ratings Extortion? Maybe - And Yet More Fraud; entered at 2008-04-28 17:12:55|
"You can't fudge coupon payments"|
FNM is the greatest in this kind of game.
First call it "Loss mitigation".
Let's say the loan "updated" LTV is 95 (it was 80 two years ago). What you do is simply
1. reduce the coupon - take the reduction present value as immediate hit. So far so good.
2. Then add back whatever modification cost, unpaid interest from delinquency etc. back into the balance so that the new LTV is 100.
Then call it instead of a "seriously delinquent 95 LTV loan" with a street price of $70, a "performing 100 LTV loan" with a street price of $96.50.
The key is in the past by being selective the guys who are mod stays good to the end. Will it this time? I am betting my left nutsack on NO, but they will flash the statistics and BUY BUY BUY.
Two years from now, Daniel Mudd the CEO will take my right nutsack as well as he retired to his house in the Caribbean along with everybody's balls because it turns out that what they really have is a 125 LTV loan that is finally not performing because the holder is simply out of money or out of job or out of luck or everyone of the above.
It won't matter because nobody cares, to make selling worthwhile you first need to pump it sky high and then it's worth something to sell. Everyone would play along since you be damned if you dont cuz there's real money to be made and if there's a problem it's not yours so long as by that time you're cashed out completely.