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Annaly Capital Management, Inc. Message Board

  • hedgefundmanipulatlon hedgefundmanipulatlon Feb 18, 2009 3:20 PM Flag


    1. Obama put in place a massive Fannie/Freddie loan mod initiative today focusing on 'reduced payments for 5-years'.

    2. 5-year loan mods 'temporarily' reduce cash flow to Mortgage Backed Securities

    3. NLY owns Mortgage Backed Securities

    4. NLY will have reduced cash flows on all securities containing loans that have been modified in this nature

    Why is this so hard to understand. When it was a onesey/twosey deal it was not a problem. But now Obama is talking about modifying millions.

    NLY rather have a home go into foreclosure than to take reduced cash flow for years. This will require them to reduce their dividend and likely raise capital to cover the shortfall on the Bonds. At least in a foreclosure they get the entire value of the sold property into the security asap.

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    • hedgefundmanipulatlon hedgefundmanipulatlon Feb 19, 2009 12:45 PM Flag

      ok - flaw in my theory. My theory is only accurate IF Obama's plan works. That is a big IF as stated by many here. Point taken.

    • Sporto, you are misinterpreting how this works. However, I do find your authoritarian tone amusing in its assuredness, so thanks for the laughs!

      here's the deal:
      For the loans that are getting the interest rate subsidy, what happens is that FNMA and FHLMC actually remove those loans from the MBS pool in which it is held. If NLY owns any of these pools, this shows up as a normal prepayment at par. FNMA or FHLMC will hold the loan for the five year subsidy period, after which its interest rate will be reset to today's mortgage rate (about 5%). That's why the bill increased FH & FN's portfolio cap - so they could retain on balance sheet more of these loans.

      Now, there is a negative impact for NLY, so you were kinda right - way to go!!! Because loans will be pulled out of pools, the prepayment rate will be unexpectedly faster than forecasted. This means that the yield on those securities priced above par will go down. Now, NLY's average MBS holding has a 101 price, so it's not a killer for these guys. My guess is that it will reduce NIMs by a few bps. For the other agency REITs, ANH & MFA are ok (mostly ARMs, not high premiums) while AGNC is hurt (high coupon premiums)

      ok - now apologize to the Message Board!

      • 3 Replies to exabpm
      • -------- ok - now apologize to the Message Board! -----------

        ya made me laugh too,

        if you look at how the new plan is written, it really isn't a prepayment risk (more than normal anyway) either... at least until rates get down to 4.5%...

        the way it is written is this: (i'm going to post it on a new thread too)

        the "Homeowner Affordability and stability Plan" in a nut shell

        there are two parts:

        1: Affordability, (which really is a refinance of home mortgage plan):

        which means really nothing because as is outlined here below quoted directly from the plan itself, it is exactly the same as any other refinance, you are simply at the mercy of what interest rate a lender will give you... which is exactly the same as it has always been for the last 50 years... what's different? really nothing. So no real benefit for "middle class americans". Some, those with low equity in their house, they can qualify for this "what ever the lender gives you" rate refinance, so that they can join in the same boat as "middle class families"... no real benefit except placing more people in the same boat. (a sinking boat of the middle class slowly losing ground in the economy)

        "All loans refinanced under the plan will have a 30 or 15 year term with a fixed interest rate. The rate will be based on market rates in effect at the time of the refinance and any associated points and fees quoted by the lender. Interest rates may vary across lenders and over time as market rates adjust. The refinanced loans will have no prepayment penalties or balloon notes."

        (does anyone see any difference in that statement with the way it has been for the last 50 years? hey thanks Mr President. what exactly does that get us?

        cont, next post.

      • those loans would have 'prepayed' anyway, only not from refinancing, but from defaulting.

      • exabpm, You actually made me laugh out loud! Why on earth do you think that Hedgie would ever apologize to anybody?

        On a separate topic, why'd you leave AB? They seem like a pretty shrewd company from the outside.

    • G'won hedgie. Please, no more BS.

      Government backed mortgages are guaranteed to the holder as to both principal and interest and I don't see that changing without holder consent.

      As to being "hardheaded" I've rarely seen an investor/ poster so glued to the negative for so long after he's been proven wrong by events.

      Your alarmist postings are just too much. I actually laughed at "$3 by the end of the week (a year ago)" and "reminds me of TMA". You are unintentionally funny my friend.


    • What part of guarantee don't you understand?

    • it seems your analysis is one dimensional

      1. all nly mortgages do not qualify
      2. nly must approve
      3. foreclosure takes time and there is a period of time when there is no paystream.
      4. nly does not get back more than they have invested in the foreclosed mortgage
      5. with more certainty in the process nly they would surely have the opportunity to leverage up on a reduced risk environment.

    • you can tell who is correct on this subject by simply watching the stock price for the month, like what we did last quarter when you were also proven wrong...

      1. modification is Voluntary on the lenders part....... PERIOD.......
      2. modification is Voluntary on the lenders part....... PERIOD.......
      3. NLY owns Mortgage Backed Securities that don't have to be modified.... PERIOD.....
      4. modification is Voluntary on the lenders part....... PERIOD.......

      Why is this so hard to understand... Seriously...

    • we understand... the market is relieved that it is so lighthanded.

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