Walnut Creek, CA office: (925) 932-8899
Fairfield, CA office: (707) 428-7792
Washington DC: (202) 225-1880

Banks hold the mortgages on their books at full value.

this is the part i think is more complicated (with the caveat that i could have it very wrong as i’m just trying to learn about all this stuff now and am very definitely still in student mode) and one of the reasons that there is a lot of doubt that in many cases loan docs may not even still exist. by securitized, i mean weren’t the mortgages pooled, sliced and diced into various types of mortgage backed securities which were sold to pensions funds, SWFs, other banks and all manner of “investors” and even “insured” with CDSs?

here’s a bit from something i got a while ago from RGE (sorry, i don’t have the link handy): Structured Finance Glossary – Making Sense of the Alphabet Soup

Financial institutions that originate mortgages turn their loans into marketable securities by securitization in order to obtain more funds to make loans. Mortgage-backed securities (MBS) thus represent a claim on the underlying mortgage pool’s principal and interest payments. In order to trade the securities independently of the loan originating institution, MBS/ABS are not issued directly by the sponsoring financial institution. Instead, pools of loans are sold (“true sale”) to a special-purpose vehicle (SPV) –usually a corporation- who then may or may not sell the loan pools to a trust. The trust or SPV repackages the loans as interest-bearing MBS/ABS and actually issues them. The use of an SPV or MBS issuing trust is necessary to achieve “bankruptcy remoteness”, insulating the trust from the sponsor. It also enables MBS to receive their own credit rating independently of that of the sponsor. The MBS then are sold to investors by the investment banks that underwrite them.

my guess is that it’s the mortgage servicer who will being doing the cram downs, but how the losses would be taken by the holders of CDOs and other securities based on the mortgages, i don’t know. and i’m not so sure who they are.

doesn’t mean it shouldn’t be done – i think it should. i just have my doubts it’s as simple as described.

Otherwise, that name is clearly in error, because they aren’t new in any way and they surely aren’t Democrats.

Credit Suisse says that this bill would cut the rate of foreclosure by 20% and it wouldn’t cost the taxpayers a dime. Why? Because it would force banks to write down the value of the loans on their books to their true value — which would quickly show that they are probably insolvent. They’re also hoping that the taxpayer will pick up the tab and they’ll be able to escape taking responsibility for their own bad business decisions.

I don’t understand this paragraph at all. The first sentence sez cramdown wouldn’t cost the taxpayers a dime and the very next sentence sez that “they” (banks? what is the antecent?) are hoping the taxpayer will pick up the tab. Will someone please unconfuse me?