05.01.08
Nuke of the Day: GASP! The Bond Insurers May have to actually pay for their Insurance on Imploding CDO’s! (BOOM!)
Yes, the news tonight just broke 10 minutes ago and I would call it a nuke. But only the people who are in the know realize the pain this will spread. Just as I was getting ready to write another long treatise on the swirling sensation we’re all feeling (no sense clutching or scratching the porcelain bowl is pretty slippery) and where we’ll be when we are deposited into a new sewer system. Then this story breaks on Reuters at 1948 EDT:
Bond insurers face new payments on CDOs-report
Wed Apr 30, 2008 7:48pm EDT
NEW YORK, April 30 (Reuters) - U.S. bond insurers, including MBIA Inc (MBI.N: Quote, Profile, Research) and Ambac Financial Group (ABK.N: Quote, Profile, Research), will likely need to make new interest payments for structured deals backed by residential mortgage debt, as more homeowners default on their mortgages, Citigroup analysts said on Wednesday.
This could place an even greater strain on the companies’ cash flows at a time when they are already grappling to sustain capital levels adequate for their top ratings, the analysts said in a report.
The bottom line? The sentence where it says “as more homeowners default” which of course is a given since the judicial system in Florida can not even keep up with the pace of foreclosure filings and word is (an unconfirmed rumor for now) that there are rumblings that creditors are fed up with the flippers are going to file bankruptcy against them to get some assets back. So this is about to take a seriously ugly turn gang with property tax payments way behind down here which means they are defaulting on that in California, Arizona and everywhere else the bubble is imploding at a record pace. So just when you thought the word “monoline” has departed our vocabulary, stay tuned. This story indicates we are about to witness Phase II where not only do we have Alt-A and Option Arm defaults accelerating; it means now the governments are going to start filing liens against properties to get their back taxes back.
I wonder what the U.S. will look like when 20% of all the real estate is owned by the Federal Reserve, various municipalities and the big banksters.
Never mind. I wrote about that already. It’s going to look like Pottersville.
