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    WHAT ROLE DID WALL STREET PLAY IN THE BOOM?

    WHAT ROLE DID WALL STREET PLAY IN THE BOOM?

     

    A perfect example of the boom is found in the chart below.  After reviewing many originators history, it is clear that ALL of them abandoned originating fixed rate loans- or even normal 5 year arms, in favor of no-doc, subprime, negatively amortizing arms. 

    Then, as if that wasn’t dangerous enough, they layered on debt with second mortgages, home equity lines of credit and even third mortgages.

     

    Bear Stearns went from originating only roughly 15, 000 home equity or second lien loans with a value slightly over ½ Billion to well over 100,000 loans with a value of 5.5 Billion. Did the home values really warrant such a spike in value to support such an explosion of credit? Of course not, it was a fabrication of epic proportions that included an industry manipulating a market for short term financial gain. 

     

     

    BEAR STEARNS SECURITIZATION  EXAMPLE 

     

    Loans                                        December 31, 2004                       December 31, 2005                       June 30, 2006

    TYPE                                     No. Loans -  Total Value               No. Loans -  Total Value              No. Loans -  Total Value

    Alt-A ARM                            44,821 -  $11,002,497,283.49        73,638  -  19,087,119,981.75         45,516 – $12,690,441,830.33

    Alt-A Fixed                           15,344 -    $4,005,790,504.28        17,294  -  $3,781,150,218.13           9,735 -   $2,365,141,449.49

    HELOC -                                       0      $ 0                                   9,309 -      $ 509,391,438.93          4,360  -     $310,097,521.60

    Prime ARM                           30,311-  $11,852,710,960.78        27,384  – $13,280,407,388.92          4,203 -   $2,168,057,808.87

    Prime Fixed                            1,035 -      $509,991,605.86          3,526  -   $1,307,685,538.44          1,083 -      $484,927,212.35

    Seconds                               14,842 -      $659,832,093.32      114,899  -   $5,609,656,263.12        68,788 -   $3,755,330,847.76

    Prime Short

    Duration ARM                       23,326 -  $7,033,626,375.35         38,819 – $ 14,096,175,420.37        39,946 -  $15,102,521,877.81

    SubPrime                             98,426 – $13,051,338,552.19       101,156 -  $16,546,152,274.44        34,396 -    $6,069,878,975.92

    Totals                                  230,907 -$48,427,650,052.74      388,902 -   $74,488,789,990.05       209,831 – $43,061,525,370.96

     

     

    Notice that between 2004 and 2005 Bear Stearns Alt-A arm originations almost doubled while FIXED loans remained relatively flat.  Did all the borrowers suddenly ask for adjustable rate loans instead of fixed? Of course not, it was the mandate of the Wall Street participants to originators and brokers to sell and push only adjustable rate loans which were necessary to support residual and net interest margin investment classes they held for themselves or could sell them for additional profits, as well as using excess interest to cover for losses on other loans which were not paying. This fundamental structure for excess profit would not have been possible if they originated a securitized only fixed rate loans. They did this to borrowers for greed and profit. 

     

     

    WHY ADJUSTABLE RATE LOANS WERE

    The investor pass through rates were tied to the 1 month LIBOR plus a small margin, while the borrower’s loan was tied to the 1 year LIBOR plus a large margin. A spread existed in the difference between the 1 or 6 month LIBOR and the 1 year LIBOR already, but combine that with the rounding code of .125% found on all adjustable rate notes, and the margins of 1% -6% or higher found on borrower loans, and Wall Street had a hidden dirty secret for profit – EXESS INTEREST SPREAD.

     

    The investors DO NOT GET PAID ANY MORE IF YOU PAY 2% or 10% they were only promised the LIBOR plus small spread.

    No matter what the borrower pays that’s all they get!!!

     

    From this chart you can see the built in spread between 1 month LIBOR and 1 Year LIBOR which began in April of 2008 and how over time the LIBOR has gone down. Current spread as of December 2011 is the investor 1 month LIBOR is .2830% and the borrower is tied to the 1 year LIBOR of 1.0987% for a built in profit spread of .8157%.  But when further adding the investor margin of less than 1% on average and the borrower margin of 2-6%, Wall Street planned the biggest scheme of all, skimming large interest payments

    based on the spreads. This is not Wall Street doing good business for investors, in fact they scammed all sides!!


    This is why the investors are not getting the return they bargained for, not because of borrower defaults. In fact, the excess or residual classes held by the Wall Street firms are the one who are suffering the most losses and have lost the excess interest they schemed to receive. 

     

    You searched for historical values of the following indexes:
     
    1-Month LIBOR, 6-Month LIBOR, 1-Year LIBOR
     
    Time Period: January, 2008 – January, 2012

     

    Date

    1-Month
    LIBOR

    6-Month
    LIBOR

    1-Year
    LIBOR

    Jan 2008

    3.9772

    3.8548

    3.5091

    Feb 2008

    3.1393

    3.0112

    2.8140

    Mar 2008

    2.8069

    2.6815

    2.5124

    Apr 2008

    2.7809

    2.8227

    2.8019

    May 2008

    2.5315

    2.8591

    3.0270

    Jun 2008

    2.4702

    3.0941

    3.4106

    Jul 2008

    2.4601

    3.1184

    3.2852

    Aug 2008

    2.4672

    3.1069

    3.2374

    Sep 2008

    2.8615

    3.2976

    3.3365

    Oct 2008

    3.8681

    3.9158

    3.8236

    Nov 2008

    1.6550

    2.6843

    2.8435

    Dec 2008

    1.1214

    2.2003

    2.4058

    Jan 2009

    0.3842

    1.6264

    1.9038

    Feb 2009

    0.4589

    1.7498

    2.0571

    Mar 2009

    0.5323

    1.8303

    2.1240

    Apr 2009

    0.4541

    1.6619

    1.9409

    May 2009

    0.3503

    1.3818

    1.7007

    Jun 2009

    0.3165

    1.1854

    1.6773

    Jul 2009

    0.2914

    0.9855

    1.5014

    Aug 2009

    0.2708

    0.8467

    1.4266

    Sep 2009

    0.2476

    0.6816

    1.2709

    Oct 2009

    0.2444

    0.5930

    1.2339

    Nov 2009

    0.2385

    0.5229

    1.0980

    Dec 2009

    0.2330

    0.4546

    0.9999

    Jan 2010

    0.2316

    0.4021

    0.9059

    Feb 2010

    0.2289

    0.3876

    0.8518

    Mar 2010

    0.2364

    0.4081

    0.8698

    Apr 2010

    0.2573

    0.4688

    0.9514

    May 2010

    0.3291

    0.6418

    1.1148

    Jun 2010

    0.3489

    0.7518

    1.1894

    Jul 2010

    0.3361

    0.7224

    1.1240

    Aug 2010

    0.2769

    0.5834

    0.9485

    Sep 2010

    0.2571

    0.4793

    0.8073

    Oct 2010

    0.2562

    0.4556

    0.7688

    Nov 2010

    0.2539

    0.4454

    0.7640

    Dec 2010

    0.2618

    0.4587

    0.7842

    Jan 2011

    0.2606

    0.4555

    0.7817

    Feb 2011

    0.2629

    0.4634

    0.7928

    Mar 2011

    0.2540

    0.4610

    0.7800

    Apr 2011

    0.2216

    0.4423

    0.7699

    May 2011

    0.1993

    0.4162

    0.7417

    Jun 2011

    0.1874

    0.3978

    0.7267

    Jul 2011

    0.1864

    0.4131

    0.7445

    Aug 2011

    0.2103

    0.4577

    0.7774

    Sep 2011

    0.2304

    0.5203

    0.8315

    Oct 2011

    0.2435

    0.5929

    0.9059

    Nov 2011

    0.2526

    0.6741

    0.9934

    Dec 2011

    0.2830

    0.7782

    1.0987

                                 

                                                    CURRENT LIBOR FOUND ON MORTGAGEX.com 

    You searched for historical values of the following indexes:
     
    1-Month LIBOR, 6-Month LIBOR, 1-Year LIBOR
     
    Time Period: November, 2011 – January, 2012

     

    Date

    1-Month
    LIBOR

    6-Month
    LIBOR

    1-Year
    LIBOR

    Nov 2011

    0.2526

    0.6741

    0.9934

    Dec 2011

    0.2830

    0.7782

    1.0987

     


    The investor will never receive more than LIBOR plus the margin you see below added for that class. In this case the investors in the senior classes will only receive pass through rates of LIBOR currently at

    .22% plus .150% or .37%! YES That is less than one percent interest!!!

     

       

    Initial Aggregate
    Certificate
    Balance

     

    Pass-Through

    Rate(1)

     

     

       

    Underwriting
    Discount

       

    Proceeds to the
    Depositor (2)

     
    Class A-1A Certificates   $

    637,531,000

     

    LIBOR + 0.150%

     

     

       

    0.1985282

    %   $

    636,265,321

     
    Class A-2A Certificates   $

    168,800,000

     

    LIBOR + 0.070%

     

     

       

    0.2000000

    %   $

    168,462,400

     
    Class A-2B Certificates   $

    120,500,000

     

    LIBOR + 0.120%

     

     

       

    0.2050000

    %   $

    120,252,975

     
    Class A-2C Certificates   $

    97,300,000

     

    LIBOR + 0.170%

     

     

       

    0.2050000

    %   $

    97,100,535

     
    Class A-2D Certificates   $

    30,169,000

     

    LIBOR + 0.240%

     

     

       

    0.2100000

    %   $

    30,105,645

     
    Class M-1 Certificates   $

    63,050,000

     

    LIBOR + 0.240%

     

     

       

    0.2300000

    %   $

    62,904,985

     
    Class M-2 Certificates   $

    40,300,000

     

    LIBOR + 0.290%

     

     

       

    0.2500000

    %   $

    40,199,250

     
    Class M-3 Certificates   $

    24,050,000

     

    LIBOR + 0.360%

     

     

       

    0.2750000

    %   $

    23,983,863

     
    Class M-4 Certificates   $

    18,850,000

     

    LIBOR + 0.380%

     

     

       

    0.3000000

    %   $

    18,793,450

     
    Class M-5 Certificates   $

    18,850,000

     

    LIBOR + 0.400%

     

     

       

    0.3250000

    %   $

    18,788,738

     
    Class M-6 Certificates   $

    14,950,000

     

    LIBOR + 0.450%

     

     

       

    0.3500000

    %   $

    14,897,675

     
    Class M-7 Certificates   $

    11,050,000

     

    LIBOR + 0.800%

     

     

       

    0.4250000

    %   $

    11,003,038

     
    Class M-8 Certificates   $

    9,100,000

     

    LIBOR + 1.050%

     

     

       

    0.5000000

    %   $

    9,054,500

     
    Class M-9 Certificates   $

    13,650,000

     

    LIBOR + 1.950%

     

     

       

    0.5389581

    %   $

    13,576,432

     
    Class M-10 Certificates(3)   $

    11,700,000

     

    LIBOR + 2.250%

     

     

       

    N/A

         

    N/A

     
                                   
    Total   $

    1,279,850,000

                      $

    1,265,388,806

     
                                   
                                   
                                   
     Class

    Related

    Mortgage

     Pool(s) 

    Class

    Principal

     Amount(1) 

     

     

    Interest Rate

    Formula

    (until Initial

    Optional

    Termination

      Date)(3)(4) 

    Interest Rate

    Formula

    (after Initial

    Optional

    Termination

       Date)(4)(5)  

    Principal Type

    Interest

      Type   

     

     

     

    Initial Certificate Ratings

    Moody’s

    S&P

    Fitch

    A1

    1

    $274,177,000

    LIBOR plus 0.130%

    LIBOR plus 0.260%

    Senior(7)

    Variable Rate

    Aaa

    AAA

    AAA

    A2

    2

    $125,000,000

    LIBOR plus 0.030%

    LIBOR plus 0.060%

    Senior, Sequential Pay(6)

    Variable Rate

    Aaa

    AAA

    AAA

    A3

    2

    $ 30,000,000

    LIBOR plus 0.090%

    LIBOR plus 0.180%

    Senior, Sequential Pay(6)

    Variable Rate

    Aaa

    AAA

    AAA

    A4

    2

    $ 90,210,000

    LIBOR plus 0.150%

    LIBOR plus 0.300%

    Senior, Sequential Pay

    Variable Rate

    Aaa

    AAA

    AAA

    A5

    2

    $ 42,333,000

    LIBOR plus 0.310%

    LIBOR plus 0.620%

    Senior, Sequential Pay

    Variable Rate

    Aaa

    AAA

    AAA

    A6

    2

    $148,747,000

    LIBOR plus 0.050%

    LIBOR plus 0.100%

    Senior, Sequential Pay(6)

    Variable Rate

    Aaa

    AAA

    AAA

    A7

    1

    $274,177,000

    LIBOR plus 0.130%

    LIBOR plus 0.260%

    Senior(7)

    Variable Rate

    Aaa

    AAA

    AAA

    M1 

    1 & 2

    $ 50,431,000

    LIBOR plus 0.280%

    LIBOR plus 0.420%

    Subordinated

    Variable Rate

    Aa1

    AA+

    AA+

    M2

    1 & 2

    $ 40,591,000

    LIBOR plus 0.290%

    LIBOR plus 0.435%

    Subordinated

    Variable Rate

    Aa2

    AA

    AA

    M3

    1 & 2

    $ 22,756,000

    LIBOR plus 0.320%

    LIBOR plus 0.480%

    Subordinated

    Variable Rate

    Aa3

    AA-

    AA-

    M4

    1 & 2

    $ 18,451,000

    LIBOR plus 0.350%

    LIBOR plus 0.525%

    Subordinated

    Variable Rate

    A1

    A+

    A+

    M5

    1 & 2

    $ 19,066,000

    LIBOR plus 0.370%

    LIBOR plus 0.555%

    Subordinated

    Variable Rate

    A2

    A

    A

    M6

    1 & 2

    $ 17,221,000

    LIBOR plus 0.450%

    LIBOR plus 0.675%

    Subordinated

    Variable Rate

    A3

    A-

    A-

    M7

    1 & 2

    $ 14,760,000

    LIBOR plus 0.900%

    LIBOR plus 1.350%

    Subordinated

    Variable Rate

    Baa1

    BBB+

    BBB+

    M8

    1 & 2

    $ 12,300,000

    LIBOR plus 1.050%

    LIBOR plus 1.575%

    Subordinated

    Variable Rate

    Baa2

    BBB

    BBB

    M9

    1 & 2

    $ 11,070,000

    LIBOR plus 1.900%

    LIBOR plus 2.850%

    Subordinated

    Variable Rate

    Baa3

    BBB-

    BBB-

                                                         

     

     

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