"U.S. financial
system (appeared)/is systematically corrupted by a cabal of Wall Street banks, rating
agencies, and government regulators" my own tweak on the quote from " Big Short "
In finance, subprime lending (also referred to as near-prime, non-prime, and second-chance lending) means making loans to people who may have difficulty maintaining the repayment schedule, sometimes reflecting setbacks, such as unemployment, divorce, medical emergencies, etc.[1] Historically, subprime borrowers were defined as having FICO scores below 640, although "this has varied over time and circumstances."[2]
In finance, subprime lending (also referred to as near-prime, non-prime, and second-chance lending) means making loans to people who may have difficulty maintaining the repayment schedule, sometimes reflecting setbacks, such as unemployment, divorce, medical emergencies, etc.[1] Historically, subprime borrowers were defined as having FICO scores below 640, although "this has varied over time and circumstances."[2]
These loans are characterized by higher interest rates, poor quality collateral, and less favorable terms in order to compensate for higher credit risk.[3] Many subprime loans were packaged into mortgage-backed securities (MBS) and ultimately defaulted, contributing to the financial crisis of 2007–2008.[4]
Proponents of subprime lending maintain that the practice extends credit to people who would otherwise not have access to the credit market. Professor Harvey S. Rosen of Princeton University explained, "The main thing that innovations in the mortgage market have done over the past 30 years is to let in the excluded: the young, the discriminated-against, the people without a lot of money in the bank to use for a down payment."[5]
The most difficult subjects can be explained to the most slow-witted man if he has not formed any idea of them already; but the simplest thing cannot be made clear to the most intelligent man if he is firmly persuaded that he knows already, without a shadow of doubt, what is laid before him.--Leo Tolstoy, 1897
rapidly growing industry of specialty finance, the mortgage bond was about to be put to a new use: making loans that did not qualify for government guarantees. The purpose was to extend credit to less and less creditworthy homeowners, not so that they might buy a house but so that they could cash out whatever equity they had in the house they already owned.
Lewis S. Ranieri (born 1947) is a former bond trader, and founding partner and current chairman of Ranieri Partners,[1] a real estate firm. He is considered the "father" of mortgage-backed securities, for his pioneering role in their emergence in the 1970s, during his tenure in Salomon Brothers, where he reached the position of Vice Chairman.[2][3][4] Although he was named by BusinessWeek in 2004 as "one of the greatest innovators of the past 75 years",[2] he was later strongly criticized for his role in the subprime mortgage crisis of 2007–09.[3][4]
the Salomon Brothers trading floor gave birth to small markets in bonds funded by all sorts of strange stuff: credit card receivables, aircraft leases, auto loans, health club dues. To invent a new market was only a matter of finding a new asset to hock. The most obvious untapped asset in America was still the home. People with first mortgages had vast amounts of equity locked up in their houses;
The most difficult subjects can be explained to the most slow-witted man if he has not formed any idea of them already; but the simplest thing cannot be made clear to the most intelligent man if he is firmly persuaded that he knows already, without a shadow of doubt, what is laid before him.--Leo Tolstoy, 1897
rapidly growing industry of specialty finance, the mortgage bond was about to be put to a new use: making loans that did not qualify for government guarantees. The purpose was to extend credit to less and less creditworthy homeowners, not so that they might buy a house but so that they could cash out whatever equity they had in the house they already owned.
Lewis Ranieri
From Wikipedia, the free encyclopedia
| Lewis Ranieri | |
|---|---|
| Born | 1947 (age 68–69) Brooklyn, New York City |
| Nationality | American |
| Occupation | Bond trader Banker |
| Employer | Ranieri Partners, Salomon Brothers |
| Known for | Securitization Mortgage-backed securities |
the Salomon Brothers trading floor gave birth to small markets in bonds funded by all sorts of strange stuff: credit card receivables, aircraft leases, auto loans, health club dues. To invent a new market was only a matter of finding a new asset to hock. The most obvious untapped asset in America was still the home. People with first mortgages had vast amounts of equity locked up in their houses;
Michael J. Burry is an American physician and hedge fund manager. He was the founder of the hedge fund Scion Capital LLC, which he ran from 2000 until 2008, and then closed to focus on his own personal investments. Wikipedia
Born: 1971, New York City, NY
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Meredith Ann Whitney is an American financial analyst. She is best known for successfully forecasting the difficulties of Citigroup and other major banks during the financial crisis of 2007–08, and ...Wikipedia
Born: November 20, 1969 (age 46), New Jersey
Spouse: John Layfield (m. 2005)
Steve Eisman is an American money manager known for shorting securitized subprime home mortgages. Wikipedia
Born: July 8, 1962 (age 54)
John Alfred Paulson is an American hedge fund manager and billionaire who heads Paulson & Co., a New York-based investment management firm he founded in 1994. Wikipedia
Born: December 14, 1955 (age 60),Queens, New York City, NY
Spouse: Jenny Paulson (m. 2000)
Education: Harvard Business School(1980), More
Alice Schroeder is an American author, columnist and former insurance analyst. Schroeder is a Bloomberg News columnist who was until 2003 an influential analyst in the field of property/casualty insurance, ...Wikipedia
Books: The Snowball: Warren Buffett and the Business of Life
"They were doing it so that when the borrowers get to the end of the teaser rate period, they'd have to refinance, so the lenders can make more money off them."
Ivan Frederick Boesky is a former American stock trader who is notable for his prominent role in a Wall Street insider trading scandal that occurred in the United States in the mid-1980s. Wikipedia
Born: March 6, 1937 (age 79), Detroit, MI
"They were doing it so that when the borrowers get to the end of the teaser rate period, they'd have to refinance, so the lenders can make more money off them."
Ginnie Mae - Government National Mortgage Association - GNMA
What is 'Ginnie Mae - Government National Mortgage Association - GNMA'
A U.S. government corporation within the U.S. Department of Housing and Urban Development (HUD).Ginnie May aims to:
1. Ensure liquidity for government-insured mortgages, including those insured by the Federal Housing Administration (FHA), the Veterans Administration (VA) and the Rural Housing Administration (RHA).
2. Bring investors' capital into the market for these types of loans, so that the issuers have the means to issue more.
2. Bring investors' capital into the market for these types of loans, so that the issuers have the means to issue more.
Most of the mortgages securitized as Ginnie Mae mortgage-backed securities (MBSs) are those guaranteed by FHA, which are typically mortgages for first-time home buyers and low-income borrowers.
BREAKING DOWN 'Ginnie Mae - Government National Mortgage Association - GNMA'
Ginnie Mae neither issues, sells or buys pass-through mortgage-backed securities, nor does it purchase mortgage loans. It simply guarantees (insures) the timely payment of principal and interest from approved issuers (such as mortgage bankers, savings and loans, and commercial banks) of qualifying loans, such as those issued by the FHA and RHA.
Unlike its cousins Freddie Mac, Fannie Mae and Sallie Mae, Ginnie Mae is not a publicly-traded company. An investor in a GNMA security will not know who the underlying issuer of the mortgages is, but merely that the security is guaranteed by GNMA, which is backed by the full faith and credit of the U.S government, just like U.S. Treasuries.
Read more: Ginnie Mae - Government National Mortgage Association (GNMA) Definition | Investopedia http://www.investopedia.com/terms/g/ginniemae.asp#ixzz4JW1t3wFC
Interest rate swaps--in which one party swaps a floating rate of interest for another party's fixed rate of interest-
Joseph Cassano
Joseph J. "Joe" Cassano is an American insurance executive who was an officer at AIG Financial Products from the division's founding in 1987 until his resignation in February 2008. WikipediaBorn: March 12, 1955 (age 61), Brooklyn, New York City, NY
Education: Brooklyn College
Organization founded: AIG Financial Products
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