All GLG News Analyses Filed Under: Mortgages, Consumer & Specialty Finance

Nitish GroverPrincipal, OwnerNitish Grover and Associates

Lehman Bros - The Problems with Banking - 100 Years Down the Line - No Solutions?

September 15, 2008

Analysis of:U.S Gives Banks Urgent Warning to Solve Crisis | www.nytimes.com

100 years since the panic of 1907 the banking system is looking for another white knight. In the meantime we have had the breakdown of  the  gold standard, the  breakdown of  bretton woods, the curse of inflation and stagflation yet there appears no permanent cure for recurring financial crisis. Yet the situation is not as bad as it  appears. The world has made great progress during this period with rising productivity levels. In  this analysis I look at this particular conundrum and  where we are possibly headed.

Mark MariottiChief Executive OfficerFuture Management Holdings Inc

Southern California Mortgage Lending Rates Drop

September 15, 2008

Analysis of:Mortgage market improves with new market-leading deals | www.timesonline.co.uk

Effective immediately after the Fannie/Freddie take over, the DITECH origination service of Cerberus' GMAC Financial Services launched a television campaign to offer 5.5% interest rate mortgage loans.

Martin KamarckPrincipalMAKO Consulting LLC

With the GSEs "Nationalized," Will There Still be a Market for Mortgage Insurance?

September 15, 2008

Analysis of:U.S. bails out Fannie Mae, Freddie Mac, ousts CEOs | www.bizjournals.com

The GSEs succeeded in supporting the creation of a broad, deep, liquid national market for mortgages.  They used their market power to impose standardization on mortgage terms and underwriting.  Thus was born the "conforming mortgage." Mortgage insurance is an artifact of this history.  It is an inefficient and (at the individual whole loan level) unnecessary credit enhancement.  But the rumors of MI's demise are premature. The last thing the new management of the GSEs want to do is spook the markets with sudden moves, loud noises or big changes. That said, there will be pressure to impose much more rigorous capital allocation/portfolio risk management controls.  Politically, they can't reduce volume, per se, immediately at least, but the management of counterparty risk exposure to the MIs may well become more active. Bad news for weaker MIs.   Later the survivors will again be caught between price competition and "innovation" (bad risk) in a smaller market.

Martin KamarckPrincipalMAKO Consulting LLC

With the GSEs "Nationalized," Will There Still be a Market for Mortgage Insurance?

September 12, 2008

Analysis of:U.S. bails out Fannie Mae, Freddie Mac, ousts CEOs | www.bizjournals.com

The GSEs succeeded in supporting the creation of a broad, deep, liquid national market for mortgages.  They used their market power to impose standardization on mortgage terms and underwriting.  Thus was born the "conforming mortgage." Mortgage insurance is an artifact of this history.  It is an inefficient and (at the individual whole loan level) unnecessary credit enhancement.  But the rumors of MI's demise are premature. The last thing the new management of the GSEs want to do is spook the markets with sudden moves, loud noises or big changes. That said, there will be pressure to impose much more rigorous capital allocation/portfolio risk management controls.  Politically, they can't reduce volume, per se, immediately at least, but the management of counterparty risk exposure to the MIs may well become more active. Bad news for weaker MIs.   Later the survivors will again be caught between price competition and "innovation" (bad risk) in a smaller market.

CDO cycle

September 12, 2008

Analysis by: GLG Expert Contributor

Analysis of:CDO Performance Outlook Cut on Increased Defaults, Moody's Says | www.bloomberg.com

Investors have to rebalance protfoliosEvaluating and monitoring risk and manager performance is crucialevery CDO will run through credit cycle

Joseph SmithPresident & CEODefault Mitigation Management

What to expect from the bailout.

September 12, 2008

Analysis of:U.S. bails out Fannie Mae, Freddie Mac, ousts CEOs | www.bizjournals.com

1. Shows how truly bad the mortgage industry has gotten and how scared the feds are of where we are going. 2. If the major source of liquidity can not survive, who will? 3. What should be the outcome.

Martin KamarckPrincipalMAKO Consulting LLC

With the GSEs "Nationalized," Will There Still be a Market for Mortgage Insurance?

September 12, 2008

Analysis of:U.S. bails out Fannie Mae, Freddie Mac, ousts CEOs | www.bizjournals.com

The GSEs succeeded in supporting the creation of a broad, deep, liquid national market for mortgages.  They used their market power to impose standardization on mortgage terms and underwriting.  Thus was born the "conforming mortgage." Mortgage insurance is an artifact of this history.  It is an inefficient and (at the individual whole loan level) unnecessary credit enhancement.  But the rumors of MI's demise are premature. The last thing the new management of the GSEs want to do is spook the markets with sudden moves, loud noises or big changes. That said, there will be pressure to impose much more rigorous capital allocation/portfolio risk management controls.  Politically, they can't reduce volume, per se, immediately at least, but the management of counterparty risk exposure to the MIs may well become more active. Bad news for weaker MIs.   Later the survivors will again be caught between price competition and "innovation" (bad risk) in a smaller market.

Leveraging Buyout Debt, Loans, Credit Swaps Enhances a Negative Financial Outlook!

September 11, 2008

Analysis by: GLG Expert Contributor

Analysis of:CDO Performance Outlook Cut on Increased Defaults, Moody's Says | www.bloomberg.com

Implications: 1.All Global and Domestic default rates have risen and a strong forecast of a Recession are on the radar screen. 2.Emerging Market Debt and Loans by the Japanese to large coporations appear to be the only issues that have a positive synergy. 3." Emerging Markets " appear to present themselves with a factor of growth. Long and/or Short implications of the same may or may not be predictable. 4.The CDO vehicle is the pooling of income securities and derivatives with the theory of being able to channel income to investors by way of differing credit risks and/or returns: either weak or strong by virtue of the type of investment. 5.A frightening option - the viability of an economic/financial recession is  "high" in most developed ecomomies!

Nitish GroverPrincipal, OwnerNitish Grover and Associates

The Mortgage Giant Takevover and Global Capital Markets - Implications

September 9, 2008

Analysis of:US Unveils Takeover of Two Mortgage Giants | www.nytimes.com

Nothing fails like failure - thats what  has  happened  to  the mortgage giants. Fannie and  Freddie  have become so  important to  the  stability of global and american financial markets that the possible failure of  these institutions just had to be checked. In my analysis below I argue that the federal takeover of  Freddie and Fannie  will not improve the loan portfolios or values of derivative instruments dependent on loans. What is needed  is  a  different  kind of  systemic response. Global  capital markets will probably continue to be in continuous gyration with a emphasized tailspin.

Does The Worst Seem to Be Over for the UK Credit Crunch?

September 8, 2008

Analysis by: GLG Expert Contributor

Analysis of:Mortgage market improves with new market-leading deals | www.timesonline.co.uk

Implications: 1.The Credit Crisis seems to be leveling - off and Mortgage Rates seemed to have fallen into a downward trend. 2.Raising funds on-the-swap market may have relieved the Major burden. The question , at hand, is the length of time for proof positive. 3.Decision Makers have chosen to raise the rate by .75 points - the "new" base rate of 5.75%. 4.The salient issue is the amount of required deposit by the consumer - a deposit of 10% to 25%. The question remains as to reasonableness. 5.Competition between lenders is predicated by the fact that Rates are on a downward slope. 6.The application of the theory applies, primarily , to Fixed Rates and Variable Rates are not at hand!

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