Financial crisis

Financial crisis
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    Short housing bonds. Basic mortgage loans consist of ratings of this loans. Triple A, B and others. Before the crisis there were thousands of AAA mortgages bundled together, guaranteed by U.S. government. But the modern ones are private, which made by layers tranches (portions of some actives). The highest level (AAA) paying first, but B loans are taking on default first. So you are buying B loans, because you want to get more money (because of the high risks), but sometimes these loans fail and become rubbish. So after some time these B ’s  and BB’s  from a little risky became trash and show the lowest FICO scores (  рейтинг   кредитоспособности).  They are getting no income verification. So then the default betas turned from 1% into 4%. But if it goes higher (more than 8%), so the most BBB ’s  become rubbish too. Credit default swaps started to fail this blocks.  No-one believed that those underlying bonds could be so bad. It ’s  illegal. But 65% of all bonds got AAA rate, but this bonds consist of subprime credits on about 95% with FICO below 550 ( need to explain how i understand FICO). But when these too risky bonds became too risky, what banks could do with them? Those bonds didn ’t  keep on the financial statement. So banks repackaged it with other bonds (B’s’   BB’s’   BBB’s),  which couldn’t  be sold, and put it into CDO (Collateralised Debt Obligation) ( узнать   что   за   дичь) . When this  package became big enough, so the whole pile considered diversified and the rating agencies gave it about 92% AAA-rating. There were $500 millions In housing bonds sold at 2007. But if the bonds are zero and people couldn’t  pay for their mortgage, so the housing market inevitably is going to fall. Mortgage fraud ( спекуляция   с   ипотекой)  has raised 5 times since the year 2000. The average income didn’t  change but the housing prices shot up. It means that houses became debt, not assets. Before the year 2004 there were not so many housing credits, but after some time its quantity raised and most of these credits were with with adjustable-rate. Those credits could be liven to people without any  job or incomes. Bank workers got bonuses from fixed-rate prime loans for about $2000, but for a subprime adjustable they were getting about $10000 bonuses. That ’s  why they really wanted to give those credits to everyone. If you want to get a mortgage, you are offered an option-pay adjustable mortgage. It gives you some discount and optional payments initially. Prices have levelled off in housing credits, but initially you are  paying only 5% from the credit. If prices became fixed, so the loaner ( заемщик)   couldn’t  get any refinance ( узнать   о    рефинансировании   в   ипотечном   кредитовании)  and payments become general, but after 2-3 years you can get 200-300%    According to the film, there were some synthetic CDO, which consist of CDA a, CDO b and CDO c. They were mixed, but not like securities. People bet that the other ones win or lose. Mortgage bonds were a match (the market for insuring mortgage bonds bigger than actual mortgage itself in 20 times), CDO were a kerosene-soaked rags, Synthetic CDO was a disaster. Even when the mortgage companies filed to  bankruptcy, like New Century Financial, and Hedge funds also started to crash, the value of an insurance contract wasn’t  affected by the demise of the very thing it insurance? ( сумма   объекта,   который   страхуют,   не   влияла   на   сумму   страхового   контракта,   что   невозможно).  Banks started to sell their CDO with a junk status (nobody nows that it is, everyone is sure that there CDOs are great) and then go to another bank and short ( играют   на   понижение)  those CDO, that they just sold.

Eleusine indica

Mar 12, 2018


Mar 12, 2018
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