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Ratings Extortion? Maybe - And Yet More Fraud; entered at 2008-04-29 01:58:28

Quads4444
Posts: 1628
Registered: 2007-11-09

Quote:

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.

I don't get it. They change the coupon from say 7% to 4% and take a 30% hit on the value of the loan. Then they add that 30% back into the value of the loan as modification costs? And then securitize a 4% loan? But that will sell at 70% not 96.5%.

And where are the auditors in all this? How do they sign off on this? It would stand out like a sore thumb. This doesn't make sense.

Arthur Anderson was destroyed. There is no upside for auditors to allow this kind of stuff. Only destruction.

Last modified: 2008-04-29 02:12:03 by quads4444

2008-04-29 01:58:28


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