Wall Street to Securitize Delinquent Loans. Because it went so well last time, I suppose.

Bonds of Confusion

(With Apologies to The Temptations)

People moving out… people moving in.

We haven’t changed a thing, so we’re going ’round again.

I said run, run, run, Wall Street is your guide.

An eye on the prize

No truth with Vermouth

Buy from me ’cause I sell debris

Rap on Moody’s, Rap on

Well the only people talking about bonds

Without rating.

And it seems,

Nobody is interested in learnin’

Just skating.

Determination, securitization, break the nation, aggravation,

Humiliation, obligation to our bankers.

Bonds of Confusion

That’s what the world is today.


Okay, first of all… I am not making this up.

Yesterday, Reuters reported that in the next couple of weeks, it appears that Wall Street firms will be back to their old ways, packaging delinquent loans into securities, or securitizing them, as the process has come to be known.  Why, you might ask?  Why not?

Jon Daurio, CEO of Kondaur Capital Corp, one of the largest buyers of U.S. non-performing loans, on Monday explained: “It’s how we satisfy the higher yields demanded by investors.”  And if that made any sense at all to you, perhaps you should go to work in that industry, because I have no idea what he’s talking about.

“I’m being solicited heavily to securitize my stuff,” Daurio told reporters in New York after a panel sponsored by the Mortgage Bankers Association.

Well, alrighty then.  Since you and your stuff are being solicited, I understand.  ‘Nuf said.

The creation of mortgage-backed securities using “non-performing” loans on residential property would be the first real activity since the Wall Street banks broke the bond market, by betting against improperly rated and fraudulently constructed bonds.  Since that time, according to Reuters, there have been maybe a handful of bonds backed by existing mortgages, and only one that was supported by brand new loans.

Kondaur says that after acquiring the non-performing loans, they either intimidate… I mean work with borrowers to bring their mortgage payments current, or they initiate foreclosures, other alternatives to foreclosure, such as Deeds in Lieu.

The thinking seems to be that securitization of non-performing loans could be sold to investors who recently seem willing to accept lower-quality assets in return for more yield.  But shocker of shockers, some of these residential mortgage backed securities, along with other risky assets, have not done so well lately, supposedly due to fears about Europe’s debt crisis that is now shattering expectations that the U.S. economy was on the mend.  This causes investors to reassess risks they had taken when they still believed all the happy talk about our recovery.

So, based on that… the only logical thing to do is securitize some non-performing loans.  Of course, it’s brilliant!  I’m calling AIG-FP later today to see if they’ll sell me a credit default swap against this crap.  If they say yes, I’m leaving the country for good by Friday, and I’d suggest you all do the same.

During the panel discussion Daurio said that the new securities, backed by non-performing loans, would be ready by the end of June, so mark your calendar… you wouldn’t want to miss this opportunity to be a certificate holder in a slice of a tranche of non-performing loans, would you?  Of course you wouldn’t.

God, I do love this country.  Come on everybody, the water’s fine… everyone into the pool!  Isn’t this exciting?  Anyone interested in lending with my certificate as collateral?  I’m not going to make the same mistakes everyone made last time though… I’m not going to borrow more than 30 to 1.  That’s right… I’m going to be much more conservative this time around.

And people say we don’t learn from our mistakes in this country.  Pish-tosh!

Laissez les bon temps roulle!

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