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Commercial Mortgage-Backed Securities 2008 is repeating

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@urun
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Do you know what 2008 happens? A lot of people buy houses that they can never afford. They take loans for it and the banks give the cash.

Now a lot of people that can't buy houses because of their income, have bought houses. Most with flexible rates and not fixed. So in rates go up, it bust. The banks are not stupid and take that loans and bundle them up into "Collateralized Debt Obligations" or "Credit Default Swaps".

In simple words, the Banks say " all contracts are the same, so we can bundle them". From people that pay their bills to people they dont.

Because sell those 1 by 1 is too much work. Sure that point makes sense. Also for larger transactions not bad to have bundles.

But remember there was shitpaper in it, people that can't afford a house but have got a loan for it.

If those bundles get high ratings like AAA or something like this, Other Institutions are willing to buy them. And now we have the problem because there are technically worthless.

To leverage the problem these worthless papers have a secondary insurance market behind them. And these insurances of loans get sold out again.

Up to here, we would have no problem but, It can be done of margin. And this is the biggest problem.

The margin would make sense to secure some papers, if there are good, from people that pay their bills, the risk all bust is low.

But if there is shit in it and all bust bam, we become 2008.

That's my simple description.

Today, the new 2008

As you read first on the Headline we have the same market for Commercial property. And do you think these papers are 100% accurate? Nope. Last 2 weeks they bought up some ratings for this stuff, with an average of 5% better income of clients. Search for: "Commercial Mortgage-Backed Securities" + ratings or news" and you can read those. Remember, it was before the pandemic :)

Commercial Mortgage-Backed Securities

And what do you think happens now, after the pandemic "Black Swarn Event"?

Same mechanic as 2008 in a bigger market. With bigger loans and more income/economy-based. Also, this market depends closer on future predictions. Growth rates and so on.

There come also some new regulator rules in town to allow do short full indexes and stuff like this.

DTC-004: https://www.sec.gov/rules/sro/dtc/2021/34-91429.pdf

ICC-005: https://www.sec.gov/rules/sro/icc/2021/34-91806.pdf

OCC-004: https://www.sec.gov/rules/sro/occ/2021/34-91935.pdf

OCC-003: https://www.sec.gov/rules/sro/occ/2021/34-92038.pdf

The rules don't make the situation better. Banks try to sell these papers out. I would think that's not the best sign because even an idiot can see a pandemic is not good for it.

Home office, closed businesses, low revenue + high costs + unemployment + stimulus checks +++

It cant be good for this sector :)

Some words to the end

IMO that we see a bad economy after a worldwide pandemic, shootdown money printer mix, doesn't wonder at all. Also the fact people can't pay their bills because it's most likely not their fault if it's not allowed for them to make business. I think this could and up in the big brrrrr. Money printer pays the bills. Will Commercial Mortgage-Backed Securities the problem or something else? I don't know. It can be or not. Because this is not the only construction site that could makes problems.

It is something very interesting to monitor. But it also nothing to panic about IMO.

Don't go crazy and bet on it, it can take years to bring a bubble to bust, or it never happens.

No financial advice.

Want more Info about the new 2008 - "Commercial Mortgage-Backed Securities bubble"?

Look here, this guy spends way more effort on that topic. Also with a lot of references. https://www.reddit.com/r/Superstonk/comments/o0scoy/the_bigger_short_how_2008_is_repeating_at_a_much/

There are some other articles around google on this Topic.

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