Ambac/M

[JMO]

My husband asked about VA, FHA mortgages, and I speculated that they had not gotten caught up in the hysteria. But this morning I heard a radio ad from some outfit (Republic??) offering to switch people with over $150 thou variable mortgages to "fixed rate FHA, no credit check."


(Were FHA and VA previously in over their heads? Are they about to be? What's the deal?)

[axjoke]

Originally Posted by JMO

My husband asked about VA, FHA mortgages, and I speculated that they had not gotten caught up in the hysteria. But this morning I heard a radio ad from some outfit (Republic??) offering to switch people with over $150 thou variable mortgages to "fixed rate FHA, no credit check."


(Were FHA and VA previously in over their heads? Are they about to be? What's the deal?)

There was a proposal to increase the amount up to the same limit as Freddie and Fannie I believe (417k??). Also I recall an a story about it changing from a requirement of 3% down payment to 1.5% downpayment. I thought stuff was still hung up in politics though. Agree, hearing the gov talk about using FHA to insure more people is an F'ing joke. Just a bailout for the original lenders.

[axjoke]

"SAN FRANCISCO (MarketWatch) -- Morgan Stanley analysts cut their profit forecasts for bond insurers Ambac Financial and MBIA because the deteriorating credit markets are continuing to take a toll on the companies' earnings and revenue. Bond insurers are beginning to realize "sizable" losses on their portfolios of residential mortgage-backed securities, refunding income has slumped and there's been a sharp slowdown in the use of municipal bond insurance, Ken Zerbe and colleagues at Morgan Stanley wrote in a note to clients on Tuesday. Ambac shares fell 14% to $20.15. MBIA shares declined 10% to $15.82 and Security Capital dropped 10% to $2.83. "

Is this really a surpise? Eugene Fama would suggest yes and the Monolines are down about 15% on the news, so I guess the market is suprised as well. Efficient Market at it's best.

1) Drop in Municiple usage has been well documented already. Value of guarantee going down in the open market thanks to their debt trading WAY below AAA while MBIA/Ambac's fees are going up.. hmm???
2) Sizable loss on their mortgage related portfolios... ya think?

[axjoke]

Fitch said they will maintain MBI's AAA rating given their plans to issue 1 billion in debt and cut the dividend. Along with these changes MBIA took a 3.3 billion dollar markdown. Market is reacting favorably sending MBIA up 10%.

Wonder what their CDS is trading at?

[axjoke]

Originally Posted by axjoke

Fitch said they will maintain MBI's AAA rating given their plans to issue 1 billion in debt and cut the dividend. Along with these changes MBIA took a 3.3 billion dollar markdown. Market is reacting favorably sending MBIA up 10%.

Wonder what their CDS is trading at?

Guess the market decided a 3.3 billion write down isn't a good thing after all. MBI,ABK, RDN and PMI are all down about 20%.

edit: MBI and ABK rebounded to finish near even, RDN and PMI weren't so lucky

[axjoke]

MBIA issued 1 billion of AA paper at..... 14%!! AA = 14%... lol Initially, they tried to issue the notes at 9 to 12% but the market balked.

Market liked that and probably the CFC buyout as MBIA and AMBAC have both ran up a bunch.

[axjoke]

Whoops... Ambac is finally marking to market and writing down $32.83 per share! Their stock was at $21 per share prior to this. Don't worry though, they expect the markets to recover and for them to never really recognize this mark to market accounting loss.

CEO is retiring... probably just wants to spend some time with the fam.

They are also going to raise 1 billion in cash. Wonder if this will be dilutive or if they'll issue some 14% AA notes like MBIA.

[axjoke]

Originally Posted by axjoke

MBIA issued 1 billion of AA paper at..... 14%!! AA = 14%... lol Initially, they tried to issue the notes at 9 to 12% but the market balked.

Market liked that and probably the CFC buyout as MBIA and AMBAC have both ran up a bunch.

Calculated Risk said that these notes are already trading at 90 cents on the dollar. Can't wait to see what rate Ambac issues theirs at.

[axjoke]

Personal Odds:

MBIA goes belly up... 6 out of 10
Ambac goes belly up 5 out of 10
Bkuna goes belly up 5.5 out of 10

[axjoke]

Even after MBIA's huge drop I officially hate them. Partner Re and ?? just declared their channel re investment value to be ZERO. Channel re, a captive of MBIA, accounts for about 50% of MBIA's reinsurance and and a disproportionate share of the really crappy stuff (CDOs/non muni).

I'm increasing my short position from about 3% to about 7% to 10%. Unfortunatly, shares are hard to find. Considering Puts but I hate options in general. I'll be very surprised if they exist 18 months from now. Previously, i suggested there were no companies I hated as much as AMD and BKUNA last year... MBIA just made the list.