Earlier this week, Oxford announced that its portfolio reflected an annualized return on investment exceeding 90% during 2007.
EXCUSE my bad english but is 90% return equal to 10% loss
30% of collateral value is so much lower than would be recovered from foreclosure and auction that I suspect Oxford is engaged in chest puffing - either by using valuations that it knows are bogus, or by neglecting to disclose other terms of the transaction.
90% ROI would be a great number if the company had audited financial statements available, SEC filings, and was traded on a something other than the pink sheets. With all those caveats I don't really believe the figure.
30% of collateral value is so much lower than would be recovered from foreclosure and auction
Um, why do you say this? We don't even know where this collateral is located. I don't know of any market in which average severities for all (first lien) loan types is now more than 70%.
Does this mean each loan is 2.6mil and above or is that a typo meant to say 2.6 billion?
No, I don't think this outfit has the capital to buy $2.6 billion.
I'm sorry to confuse everyone. I didn't post this because I thought it was a major transaction.
This Oxfam--I mean, OxFund--is buying a small pool of a bankrupt lender's portfolio. It is relevant to the rest of us only to the extent that you got a BK trustee to agree to it. (This was the high bid.)
So 2.6MM is the current loan balance of the pool. If the loans are underwater, that means the collateral value is less than $2.6MM. All this is saying is that the price paid for the loans worked out to 30% of whatever they think collateral value is.
I don't know of any market in which average severities for all (first lien) loan types is now more than 70%.
You got that right. I'd like to know which market you know of that is experiencing avg loss severities of 69%?
btw, did you see the new UBS forecast on OA loss severities? I'd link to it, but I only saw an article about it in Inside Alternative Mortgages (1/25/08, page 6) and that is sub only.
Approximately 80% of working families would be bankrupt within 3-1/2 months if they lost their jobs. Most of the families in the lower quintiles could not last 1 month. Scary numbers in the face of a recession and housing bust.
The notion that wall street and housing is a SUBSTITUTE for household savings is a farce. Stocks, bonds and real estate can indeed be good forms of saving, but only when purchased at reasonable valuations.
I was looking at the pools coming out of a Credit Union doing IO loans in the 260k range. Most of the assets were in Lee and Charlotte county. POst BK they might have been worth .30 on the dollar. This pool was nonperforming. Probably worth .10 on the dollar. All built in 2006 and unoccupied. Scary.
A word of caution is in order,
OXFD -oxford funding corporation is newly established and listed on the pink sheets.
They have issued 20million shares initially to 10 investors par value $0.0001/share.
28 mill shares currently outstanding and total of 200 mil share planned for sale.
the unaudited Sept earnings indicate that they had $2,000 in the bank and a roughly 18000 loss on the books.
ah, yes. Detroit subprime. What a great business. Hey bacon, you wanna go halvsies on this charming bungalow? I think I'm ready to do some specuvesting. Or do you think we should wait for the price to drop? $2 grand seems a little steep. I mean, there's only one bath.
Hey bacon, you wanna go halvsies on this charming bungalow?
let's see...i've got $2.13, some lint, and a fig newton in my pocket. can you come up with the rest? sorry, but i lost all my money when IMF busted me forwarding my copies of their publications to other people.
CEO is Ron Redd, former head of Huntington Fianacial Corporation-a company specializing in subprime mortgages, founded 1998.
Bob Dunn, president, head of San Filipe Commerical Mortgage--from their site it looks like mainly "affordable" housing, distressed commecial and industrial properties.
From their Pink Sheet Filing
(quote)
We were incorporated on August 16, 1982 as Amee, Inc. The corporation subsequently changed its name to Aquaplan, Inc. in December 1998.
In June of 2003 the charter of the corporation was revoked due to Inadvertance and negligence of the Officers and Directors of the Corporation; therefore, depriving the shareholders of any equity interest therein.
The Company was reinstated and reorganized on January 25, 2005 with new management and operated as Aquaplan, Inc. until January of 2007. Aquaplan was unsuccessful in executing it's business plan.
On January 2, 2007 the Corporation changed its name to National Health Alliance, Inc. but abandoned the business plan to provide health insurance related products.
On April 20, 2007 the Board of Directors changed the name of the company to Oxford Funding Corporation and reorganized the business and conducts its operations to purchase portfolios of loans and resell them at a profit after improving the value of the individual loans that comprise he portfolio.
(end quote)
My reading? Small time opportunists that were all over the build-up in the sub-priem market, and are now positioning to make some money off of the fall-out.
Uncritical reading of PR puffery can be dangerous--nothing new there.
They're looking for investors, though. I'm sure they will welcome your money.
I'm with CB. Oxford's press releases set off a number of yellow flags for me.
I am second to none here in my appreciation of Tanta's writing and the knowledge she shares with us. So she loses none of my respect or admiration (dammit, just admit to the cybercrush, ottnott) for posting this press release, but I believe that the quality of this data point is far below the usual CF standards.
i guess this is just an example of how to make money in the coming years as a mortgage vulture?
Actually I think it's quite possible this is an example of how to lose money in the coming years as a mortgage vulture.
Nonetheless, a price is a price and you can mark to it.
(I don't think anyone with a "90% ROI" knows how to make money buying very small pools of nuclear waste. They aren't going to make anything up on volume.)
This deflation of residential homes will have an echo effect down the road. Rentals occupancy rates will initially rise as people exit homes and move to rentals. Rental prices will rise as a result. Then as homes stablize at much lower values look for a mass exodus into homes and the rental market will collapse. The significantly reduced home prices will be viewed as a once in a lifetime opportunity for today's younger generation.
I kept telling my kids, just wait, home prices will come down significantly. Don't worry about the inflated prices. Glad I was around to see it happen.
I believe that the quality of this data point is far below the usual CF standards
That must be why I misread your earlier comment. I don't see what's wrong with this as "data." It depends on what you might be trying to "prove" with it.
We're now "CF"? If I apologize for having posting something merely entertaining instead of "serious," can I have my R back?
Let's face it: Ocwen would let that go with a bid of $1. They are still on the hook for insurance, upkeep (insert joke here), taxes, liability (letting the house go and it becomes a crack den and the city goes after deep pockets), etc.
Imagine attaining Pride of Ownership for a dollar!
OT - Freddie Mac: Mortgage rates rebound after five-week decline
"NEW YORK (MarketWatch) -- U.S. fixed-rate mortgages rose for the first time in five weeks, according to Freddie Mac's survey released Thursday. The national average interest rate on the benchmark 30-year, fixed-rate loan averaged 5.68% in the week ending Thursday, up from 5.48% a week ago, but down from 6.34% a year ago. The 15-year fixed-rate loan averaged 5.17%, up from 4.95% a week ago, but down from 6.06% a year ago... "Mortgage rates ended their five-week descent this week, with average rates on 30-year and 15-year fixed rate mortgages coming up by about 0.2 percentage points," said Frank Nothaft, Freddie Mac vice president and chief economist. "This increase completely erased the previous week's decline. The movement in fixed mortgage rates was broadly consistent with the movements of Treasury bonds over the week."
So if 30 cents on the dollar results in approximately 90% ROI, does that mean that the buyer figures the portfolio of mortgages/REO/whatever is worth at least 57 cents on the dollar? But when will that 57 cents be realized? The seller cannot wait for it. Tanta, sounds like you believe this an investment that cannot be evaluated without knowing more about the properties. [Just trying to understand.] Tanta, your posts are super great. You could be a finance college professor.
I met a judge from an antique land
Who said: Vast and forked-up assignments
Wont stand in Ohio! Near by, on the sand,
Half sunk, a shatterd visage lies, whose tan
And wrinkled skin and sneer of cold command,
My name is Angelo, King of Kings:
Look on my works, Bernanke, and despair!
Nothing beside remains: round the decay
Of that colossal wreck, boundless and bare,
The lone and level bonds stretch far away
Imagine those mile upon mile tracts in Palmdale, Riverside and Phoenix when the first REO breaks down values 40%. The other banks wont care that 40% off of the highest price only compares to a few of all homes and they wont care that interest rates also ate 20% of the equivalent price. What theyll care is that on the books every single mortgage in the entire development is seriously underwater. Im going to embark on a new career; Mortgage Falcon, MF if you prefer . I will circle overhead watching the lemmings. Ill visit the County Recorders Office and Assesors Office making sure there arent any liens or tax arears. Ill fly over the houses, looking for garage conversions and cable disconnections and brown lawns. Ill look for the signs of going out in style, the New Tundra and LS450 in the driveway, moving vans, Garage Sales, FSBO ads. And every week Ill circle down and land on the arm of a banker and wisper in his ear. Hell reward me with a chunk of flesh from the latest kill. Itll get so Im famous. The neighbors will see me and call out in appreciation Hey! MF! (Mortgage Falcon) and Ill continue my patrol, keeping the worlds financial system safe for all mankind. - April 20, 2006.
Shnaps writes:
Snark aside, that charming bungalow WAS someone's dream, once.
Nobody's saying it can't be again some day.
Those windows in the front and probably some of the other architectual details and possibly the copper might justify the effort to deconstruct but that's about it.
I agree w/ Shnaps and
Dale | 01.31.08 - 10:07 am
in that if we rid ourselves of magical thinking and remember that TANSTAAFL there is still hope for Detroit and Cleveland (even).
Isn't the markdown on this pool the same as E-Trade's fire sale? As I recall, that one was 2.2 billion face value, which sold for 600 million or so -- about 30 cents on the dollar.
So is a 70% haircut the mark to market for distressed CDO pools?
hmmm . . . I'm going to dig through the couch cushions, to see if there are a few million lying around to fund one of these buyouts.
It's undoubtably hard to relate from your manse in Ventura, but bear in mind that the average household income in this country is something like $45-50k. Which puts an average house at about $150k. Which, with a little TLC, is what a 1300 sf urban bungalow goes for in flyover USA.
And yes, that is the 'dream' of those 'little' people, and some of us are in the business of making their little dreams come true, without disparaging them.
I'm not too fond of the operators that caused the housing markets to go haywire. There is plenty of blame to go around. One might start with his tanness et al coming along and making the little people believe their little dream is just another entitlement.
Cagey bunch... their press-releases seem boilerplate, with broad declarations of success, no hard numbers, and the only specifics name-dropping of companies like C, BAC, and MER as "companies that have announced cutbacks" while OXFD is growing. (Sounds like they're into servicing, however... CFC, look-out!)
Either they're small-time gamblers; or, they're hoping a regional bank will notice them and decide to use them to move their struggling mortgage portfolio off-balance-sheet (via a nice loan to OXFD, of course). No one will care when OXFD collapses... as long as it's a few years from now.
Isn't the markdown on this pool the same as E-Trade's fire sale? As I recall, that one was 2.2 billion face value, which sold for 600 million or so -- about 30 cents on the dollar.
That was 30 cents on the loan dollar.
Expressing a price as cents on the collateral dollar is just weird. You aren't buying the collateral. You are buying the loans.
You can't know how this compares to the ET price until you know what the price was as a percent of the loan balances.
Assume--just for giggles--that the loans in question are underwater by 10% (current value of property is 90% of loan balance). So that means collateral value of this pool is 90% of 2.6MM or 2.34MM. Price paid was 30% of 2.34MM or 702K. 702K on 2.6MM is 27 cents on the dollar.
Because these are nonperforming loans, you can pretty much assure yourself of liquidation expenses on the high end. But say it only costs you 20% of the loan amount to foreclose. That would mean best-case recovery of 70%, which would certainly be a profit if you paid 27% for the loans.
I don't think 30% recovery is exactly average yet, but if it is likely for this pool, then Oxford makes 3%.
Well, see, that's the problem. I thought it was in English.
Those are HELOC pools. That means the borrower can borrow more money than what was originally "funded" when the loans were securitized.
These deals were set up so that the issuer, CFC, would advance the funds for a new HELOC draw when a borrower requested one. It's an advance because CFC is just supposed to be the servicer, not the investor. The advance is supposed to be paid back to CFC on cash flow (other borrowers making payments or prepaying). In other words, CFC advances the day the borrower draws his HELOC, and then "settles up" and the end of the month by taking positive cash flow first to cover those draws, then remitting the remainder to the bondholders.
This deal, however, was apparently structured so that the servicer's claim on cash flow to reimburse advances is not absolute: there have been so many losses in this deal that it hit a "cap" that the bond insurer has to pay. Therefore, CFC has to wait to get reimbursed until the credit enhancement of the deal gets back to where the deal specifies it must be.
So "rapid amortization" is paying all the collected cash flow to the senior bondholders first, to reduce the outstanding amount of the senior bonds, which brings the ratio of subordinate/OC/insured amount back to acceptable.
Theoretically, it "just" means that CFC will wait a while before getting reimbursed on advances.
Realistically, it means that CFC isn't likely to get reimbursed for all those advances; there just won't be enough money left over. That's why CFC took a write-down on those advances.
This is one of those deals that really ought to be on the issuer's balance sheet. If it puts the servicer on the hook like that, the servicer is really providing credit enhancement and should be treated like a subordinate bondholder.
You sense of sarcasm and irony is sometimes even too much for this sarcastic blog commenter. I didn't really understand your post at all until you made your thoughts known later in the comments
But I am still confused about this:
(I don't think anyone with a "90% ROI" knows how to make money buying very small pools of nuclear waste. They aren't going to make anything up on volume.)
Are you being sarcastic again? A person who has 90% ROI on a consistent basis is usually smart and can continue to achieve such a return especially on $2.6million (or fractions thereof) portfolios...
Obviously I should have had more coffee before I posted this.
The only way anyone can make money buying nuclear waste is with efficiency.
You can develop an efficient operation by buying small pools to combine into a large pool. However, you are probably not going to show 90% ROI for quite some time doing that. It's a skinny-margin business. (They say, btw, that they had 90% ROI last year. They didn't exactly say they expect 90% ROI on this deal.)
That was Ginger Yellow's point above about this being 5-10 loans or something. There are a lot of fixed costs to cover on such an investment.
Interesting that this comes out of Houston. I practiced law there back in the 80s and 90s and the RTC routinely auctioned off packages of loans that it had acquired when S&Ls failed for pennies on the dollar. A number of investors did quite well buying them, then settling with the debtors. It is a viable business, but from cyberspace, it's simply not possible to say much about the potential returns on this particular bid.
It's undoubtably hard to relate from your manse in Ventura, but
I'm from the Olde New England originally. I know the America of which you speak. I know frugal and I certainly know about living within one's means. I also know these houses are worth far more as materials than they are as potential homes.
bear in mind that the average household income in this country is something like $45-50k. Which puts an average house at about $150k. Which, with a little TLC, is what a 1300 sf urban bungalow goes for in flyover USA.
Absolutely. And God bless them. The thing is that with about 4 million too many houses it becomes a case of battlefield triage and the Detroit bungalo gets a red tag on on its' toe. Same for Buffalo and a dozen others I could name.
OT but is anyone else being driven nuts by the new "so-and-so writes:" on the top of each comments? It is really making it hard for me to read the comments.
Turning and turning in the widening gyre
The falcon cannot hear the falconer;
Things fall apart; the centre cannot hold;
Mere anarchy is loosed upon the world,
Baco Dreamz and Shnaps- I'll go in with you. But we need more funding. How about the Sub Aqua High Grade Investment Fund? Or we could stick Enhanced in there,...
Using Oxford or Cambridge in the title can usually dupe a few suckers at least.
Zac | 01.31.08 - 10:41 am |
Heh. That is one of the yellow flags.
Another is that they provide numbers and language that strongly imply things that aren't actually stated.
For example: The pool of loans carries principal balances of $2.6 million...
...based on current valuations our cost of the portfolio will equate to approximately 30% of the collateral value
If you are one of the sheep to be fleeced, you might read this as Oxford paying $0.8 million for $2.6 million in value. But, as Tanta points out, the collateral value could be much less. She used a "for giggles" example where collateral value is only 90% of the loan principal balance. But it could be far less.
Let's say that these are a pool of second mortgages that have already been rejected by the various other outlets for distressed mortgage debt. What's left could conceivably have a collateral value of just pennies on the dollar. Let's say $260,000 of collateral value. Then the potential profit is $180,000 instead of $1.8 million.
But wait, that potential is based on "current valuations". What is a current valuation? When was it done, and by whom? How far off would that "valuation" have to be from true markeet value to make most of the profit disappear? And how much would the cost of trying to convert collateral value to cash impact the potential profit.
If we are talking 2nd mortgages with an average value of, say $50,000, representing an average of, say, 10% of the initial purchase price, then there are 52 homes in the pool with an average initial purchase price of $500,000. The collateral value has dropped to $5000 per home using my assumptions above. It doesn't take much in the way of expenses or overvaluation to completely wipe out that collateral value.
The press release gives me nothing to base my assumptions on. The above is just an example of how the words in the Oxford release could be disguising a scam.
But there's more. Oxford says "has won the bid and secured financing for the purchase of a portfolio of mortgage loans offered by a national lender which is finalizing its bankruptcy proceedings". That means they soon will be handing over the $??? they bid in return for ownership of the loan pool, right? No.
First of all, "has secured financing" is totally meaningless from a pink sheet stock with a shaky history. In cases where money does actually change hands, it usually is given in exchange for lots and lots of stock at a fraction of the current trading value. This stock is then either dumped on the market (after a pumping campaign, of course) or is used to cover shares that were already sold short at much higher prices.
Second, "has won the bid" doesn't tell you that the loan pool will be sold to Oxford. If the loans are offered by a national lender which is finalizing its bankruptcy proceedings, there may be other parties involved which have to agree to the sale.
It is true that my suspicions rely on my assumptions, not the information provided in the press release.
The more difficult sniff test is to ask why this business is being run as a public company that is listed on the pink sheets (where raising capital is so difficult and expensive that it negates the value of being public) and why Oxford would be working so hard to let others know how profitable their business niche is? Why alert competitors?
The easy sniff test is to enter the ticker symbol and the word "disclaimer" in google and see if the stock is being pushed by penny stock pumpers who are being paid for the effort. That is a sure sign that you are dealing with a company that is in the business of selling shares rather than whatever their stated business activity might be.
Don't waste anymore time on it when a company has a history like this (posted above)
(quote)
We (Oxford) were incorporated on August 16, 1982 as Amee, Inc. The corporation subsequently changed its name to Aquaplan, Inc. in December 1998.
In June of 2003 the charter of the corporation was revoked due to Inadvertance and negligence of the Officers and Directors of the Corporation; therefore, depriving the shareholders of any equity interest therein.
The Company was reinstated and reorganized on January 25, 2005 with new management and operated as Aquaplan, Inc. until January of 2007. Aquaplan was unsuccessful in executing it's business plan.
On January 2, 2007 the Corporation changed its name to National Health Alliance, Inc. but abandoned the business plan to provide health insurance related products.
On April 20, 2007 the Board of Directors changed the name of the company to Oxford Funding Corporation and reorganized the business and conducts its operations to purchase portfolios of loans and resell them at a profit after improving the value of the individual loans that comprise he portfolio.
Wow! First?
Earlier this week, Oxford announced that its portfolio reflected an annualized return on investment exceeding 90% during 2007.
EXCUSE my bad english but is 90% return equal to 10% loss
Jobless claims shoot up to 375k. PCE up 0.2%, PI up 0.5%, which aren't terrible.
PCE is slightly down in real terms however, according to the BEA website, so not sure why CNBC is trumpeting it as great news.
30% of collateral value is so much lower than would be recovered from foreclosure and auction that I suspect Oxford is engaged in chest puffing - either by using valuations that it knows are bogus, or by neglecting to disclose other terms of the transaction.
dunham,
They are playing the reduced expectations game, it's a 'beat' of 0.1% the street expected...or some bs like that.
$2.6 million? Wonder what their definition of national lender is?
90% ROI would be a great number if the company had audited financial statements available, SEC filings, and was traded on a something other than the pink sheets. With all those caveats I don't really believe the figure.
"The pool of loans carries principal balances of $2.6 million"
Does this mean each loan is 2.6mil and above or is that a typo meant to say 2.6 billion?
is 90% return equal to 10% loss
No. Try this:
Rate of return - Wikipedia, the free encyclopedia
30% of collateral value is so much lower than would be recovered from foreclosure and auction
Um, why do you say this? We don't even know where this collateral is located. I don't know of any market in which average severities for all (first lien) loan types is now more than 70%.
I think you misread what I wrote, Tanta.
Jobless claims shoot up to 375k
I refuse to believe it until I see a graph.
Does this mean each loan is 2.6mil and above or is that a typo meant to say 2.6 billion?
No, I don't think this outfit has the capital to buy $2.6 billion.
I'm sorry to confuse everyone. I didn't post this because I thought it was a major transaction.
This Oxfam--I mean, OxFund--is buying a small pool of a bankrupt lender's portfolio. It is relevant to the rest of us only to the extent that you got a BK trustee to agree to it. (This was the high bid.)
So 2.6MM is the current loan balance of the pool. If the loans are underwater, that means the collateral value is less than $2.6MM. All this is saying is that the price paid for the loans worked out to 30% of whatever they think collateral value is.
I think you misread what I wrote, Tanta.
Apparently I did.
Jobless claims release should be enough of a catalyst for Ben to unleash his prearranged 125bpts rate cut ahead of the open.
Baaaaaaaa - Just a flesh wound.
To make sense of an annualized performance return, you need to know the period. If you are up 10% in a month, that's 120% annualized.
I wonder who the national vendor might be?
I don't know of any market in which average severities for all (first lien) loan types is now more than 70%.
You got that right. I'd like to know which market you know of that is experiencing avg loss severities of 69%?
btw, did you see the new UBS forecast on OA loss severities? I'd link to it, but I only saw an article about it in Inside Alternative Mortgages (1/25/08, page 6) and that is sub only.
That's, what, 5-10 loans or so? It's hard to believe it's worth the transaction cost.
Approximately 80% of working families would be bankrupt within 3-1/2 months if they lost their jobs. Most of the families in the lower quintiles could not last 1 month. Scary numbers in the face of a recession and housing bust.
The notion that wall street and housing is a SUBSTITUTE for household savings is a farce. Stocks, bonds and real estate can indeed be good forms of saving, but only when purchased at reasonable valuations.
I'd like to know which market you know of that is experiencing avg loss severities of 69%?
well for subprime first liens in michigan it was 71% in 2007.
i guess this is just an example of how to make money in the coming years as a mortgage vulture?
"for subprime first liens in michigan it was 71% in 200"
bacon dreamz | 01.31.08 - 9:23 am
We're all Michigan now?
By the way, enjoyed your "damn! i was betting on 37.5!". It was my favorite comment yesterday.
I was looking at the pools coming out of a Credit Union doing IO loans in the 260k range. Most of the assets were in Lee and Charlotte county. POst BK they might have been worth .30 on the dollar. This pool was nonperforming. Probably worth .10 on the dollar. All built in 2006 and unoccupied. Scary.
By the way, enjoyed your "damn! i was betting on 37.5!". It was my favorite comment yesterday.
thanks! glad to see my Original Material is appreciated!
A word of caution is in order,
OXFD -oxford funding corporation is newly established and listed on the pink sheets.
They have issued 20million shares initially to 10 investors par value $0.0001/share.
28 mill shares currently outstanding and total of 200 mil share planned for sale.
the unaudited Sept earnings indicate that they had $2,000 in the bank and a roughly 18000 loss on the books.
This sounds like an investor fleecing operation.
bacon -
ah, yes. Detroit subprime. What a great business. Hey bacon, you wanna go halvsies on this charming bungalow? I think I'm ready to do some specuvesting. Or do you think we should wait for the price to drop? $2 grand seems a little steep. I mean, there's only one bath.
cut the rate of the collateral loan
Lively Money
Hey bacon, you wanna go halvsies on this charming bungalow?
let's see...i've got $2.13, some lint, and a fig newton in my pocket. can you come up with the rest? sorry, but i lost all my money when IMF busted me forwarding my copies of their publications to other people.
OT: Jingle mail box or walk a way. New web site tells you how to do it and protect yourself.
You Walk Away - Foreclosure FAQ's Frequently Asked Questions, Question and Answers, Foreclosure Prevention, Stop Foreclosure, Avoid Foreclosure
If I was looking to buy the CDO's etc, I would be arguing this and current purchases to get a better price.
Oxford Funding Corporation
CEO is Ron Redd, former head of Huntington Fianacial Corporation-a company specializing in subprime mortgages, founded 1998.
Bob Dunn, president, head of San Filipe Commerical Mortgage--from their site it looks like mainly "affordable" housing, distressed commecial and industrial properties.
From their Pink Sheet Filing
(quote)
We were incorporated on August 16, 1982 as Amee, Inc. The corporation subsequently changed its name to Aquaplan, Inc. in December 1998.
In June of 2003 the charter of the corporation was revoked due to Inadvertance and negligence of the Officers and Directors of the Corporation; therefore, depriving the shareholders of any equity interest therein.
The Company was reinstated and reorganized on January 25, 2005 with new management and operated as Aquaplan, Inc. until January of 2007. Aquaplan was unsuccessful in executing it's business plan.
On January 2, 2007 the Corporation changed its name to National Health Alliance, Inc. but abandoned the business plan to provide health insurance related products.
On April 20, 2007 the Board of Directors changed the name of the company to Oxford Funding Corporation and reorganized the business and conducts its operations to purchase portfolios of loans and resell them at a profit after improving the value of the individual loans that comprise he portfolio.
(end quote)
My reading? Small time opportunists that were all over the build-up in the sub-priem market, and are now positioning to make some money off of the fall-out.
Uncritical reading of PR puffery can be dangerous--nothing new there.
They're looking for investors, though. I'm sure they will welcome your money.
I'm with CB. Oxford's press releases set off a number of yellow flags for me.
I am second to none here in my appreciation of Tanta's writing and the knowledge she shares with us. So she loses none of my respect or admiration (dammit, just admit to the cybercrush, ottnott) for posting this press release, but I believe that the quality of this data point is far below the usual CF standards.
wait, i just found another nickel in my other pocket. that'll cover the downpayment, right?
i guess this is just an example of how to make money in the coming years as a mortgage vulture?
Actually I think it's quite possible this is an example of how to lose money in the coming years as a mortgage vulture.
Nonetheless, a price is a price and you can mark to it.
(I don't think anyone with a "90% ROI" knows how to make money buying very small pools of nuclear waste. They aren't going to make anything up on volume.)
We are in ur mortgage ops, installin our tanning bedz.
This deflation of residential homes will have an echo effect down the road. Rentals occupancy rates will initially rise as people exit homes and move to rentals. Rental prices will rise as a result. Then as homes stablize at much lower values look for a mass exodus into homes and the rental market will collapse. The significantly reduced home prices will be viewed as a once in a lifetime opportunity for today's younger generation.
I kept telling my kids, just wait, home prices will come down significantly. Don't worry about the inflated prices. Glad I was around to see it happen.
I believe that the quality of this data point is far below the usual CF standards
That must be why I misread your earlier comment. I don't see what's wrong with this as "data." It depends on what you might be trying to "prove" with it.
We're now "CF"? If I apologize for having posting something merely entertaining instead of "serious," can I have my R back?
Hey bacon, you wanna go halvsies on this charming bungalow?
The bars on the front door add to the charm.
I believe that the quality of this data point is far below the usual CF standards.
ottnott | 01.31.08 - 9:50 am | #
As Tanta was trying to tell you, the source of quality for this datapoint is the BK trustee, not the buyer.
Let's face it: Ocwen would let that go with a bid of $1. They are still on the hook for insurance, upkeep (insert joke here), taxes, liability (letting the house go and it becomes a crack den and the city goes after deep pockets), etc.
Imagine attaining Pride of Ownership for a dollar!
Hey bacon, you wanna go halvsies on this charming bungalow?
Snark aside, that charming bungalow WAS someone's dream, once.
Downgrades should occur Friday AH. The PPT is working on it. Gives Ben a chance to UP the pre-arranged rate cut approval from 125bpts to 250bpts.
here Tanta, i found you a new R.
R
don't ask where i found it. se iously.
"Hey bacon, you wanna go halvsies on this charming bungalow? "
Enough of the Detroit jokes. I grew up there and I have not shot at anyone in at least 10 years.
Thanks, bacon deamz.
The way I read it, if they pay 30% and if they do get a 90% ROI on that, then the price should move up from 30% because 90% ROI is amazing.
bacon dreamz ...
You a e funny.
From the FOMCers Almanac: "A rate cut a day keeps the doctor away."
I'm puzzled. When we get to 0% will the cuts be bigger or smaller?
OT - Freddie Mac: Mortgage rates rebound after five-week decline
"NEW YORK (MarketWatch) -- U.S. fixed-rate mortgages rose for the first time in five weeks, according to Freddie Mac's survey released Thursday. The national average interest rate on the benchmark 30-year, fixed-rate loan averaged 5.68% in the week ending Thursday, up from 5.48% a week ago, but down from 6.34% a year ago. The 15-year fixed-rate loan averaged 5.17%, up from 4.95% a week ago, but down from 6.06% a year ago... "Mortgage rates ended their five-week descent this week, with average rates on 30-year and 15-year fixed rate mortgages coming up by about 0.2 percentage points," said Frank Nothaft, Freddie Mac vice president and chief economist. "This increase completely erased the previous week's decline. The movement in fixed mortgage rates was broadly consistent with the movements of Treasury bonds over the week."
recessionary level here
U.S. Initial Jobless Claims Rose to 375,000 Last Week
U.S. Initial Jobless Claims Rose to 375,000 Last Week (Update1) - Bloomberg.com
So if 30 cents on the dollar results in approximately 90% ROI, does that mean that the buyer figures the portfolio of mortgages/REO/whatever is worth at least 57 cents on the dollar? But when will that 57 cents be realized? The seller cannot wait for it. Tanta, sounds like you believe this an investment that cannot be evaluated without knowing more about the properties. [Just trying to understand.] Tanta, your posts are super great. You could be a finance college professor.
Snark aside, that charming bungalow WAS someone's dream, once.
Nobody's saying it can't be again some day.
I'd suggest the whole neighborhood has a better shot once we get back to reasonable-downpayment-land
One of my favorite bacon dreamz "classics"
I met a judge from an antique land
Who said: Vast and forked-up assignments
Wont stand in Ohio! Near by, on the sand,
Half sunk, a shatterd visage lies, whose tan
And wrinkled skin and sneer of cold command,
My name is Angelo, King of Kings:
Look on my works, Bernanke, and despair!
Nothing beside remains: round the decay
Of that colossal wreck, boundless and bare,
The lone and level bonds stretch far away
I wish everyone would stop insulting me with this "mortgage vulture" business. The term is "Mortgage Falcon." As in:
A Real MFer
Imagine those mile upon mile tracts in Palmdale, Riverside and Phoenix when the first REO breaks down values 40%. The other banks wont care that 40% off of the highest price only compares to a few of all homes and they wont care that interest rates also ate 20% of the equivalent price. What theyll care is that on the books every single mortgage in the entire development is seriously underwater. Im going to embark on a new career; Mortgage Falcon, MF if you prefer . I will circle overhead watching the lemmings. Ill visit the County Recorders Office and Assesors Office making sure there arent any liens or tax arears. Ill fly over the houses, looking for garage conversions and cable disconnections and brown lawns. Ill look for the signs of going out in style, the New Tundra and LS450 in the driveway, moving vans, Garage Sales, FSBO ads. And every week Ill circle down and land on the arm of a banker and wisper in his ear. Hell reward me with a chunk of flesh from the latest kill. Itll get so Im famous. The neighbors will see me and call out in appreciation Hey! MF! (Mortgage Falcon) and Ill continue my patrol, keeping the worlds financial system safe for all mankind. - April 20, 2006.
las,
don't forget about leverage. also, don't forget that some of those loans are still current.
BTW,
Homebuilders!
I need to get approval to short HB stocks, like today.
30% of peak price (70% off peak price) is the new (temporarily) bottom.
We 'r' all "CR" now and we 'r' in yur headz.
Shnaps writes:
Snark aside, that charming bungalow WAS someone's dream, once.
Nobody's saying it can't be again some day.
Those windows in the front and probably some of the other architectual details and possibly the copper might justify the effort to deconstruct but that's about it.
I'm with CB. Oxford's press releases set off a number of yellow flags for me.
Using Oxford or Cambridge in the title can usually dupe a few suckers at least.
I agree w/ Shnaps and
Dale | 01.31.08 - 10:07 am
in that if we rid ourselves of magical thinking and remember that TANSTAAFL there is still hope for Detroit and Cleveland (even).
Isn't the markdown on this pool the same as E-Trade's fire sale? As I recall, that one was 2.2 billion face value, which sold for 600 million or so -- about 30 cents on the dollar.
So is a 70% haircut the mark to market for distressed CDO pools?
hmmm . . . I'm going to dig through the couch cushions, to see if there are a few million lying around to fund one of these buyouts.
For sure, Dunham. I honestly don't know how it all fits. I don't know how leverage fits in.
Rob - your elitism is showing.
It's undoubtably hard to relate from your manse in Ventura, but bear in mind that the average household income in this country is something like $45-50k. Which puts an average house at about $150k. Which, with a little TLC, is what a 1300 sf urban bungalow goes for in flyover USA.
And yes, that is the 'dream' of those 'little' people, and some of us are in the business of making their little dreams come true, without disparaging them.
I'm not too fond of the operators that caused the housing markets to go haywire. There is plenty of blame to go around. One might start with his tanness et al coming along and making the little people believe their little dream is just another entitlement.
Cagey bunch... their press-releases seem boilerplate, with broad declarations of success, no hard numbers, and the only specifics name-dropping of companies like C, BAC, and MER as "companies that have announced cutbacks" while OXFD is growing. (Sounds like they're into servicing, however... CFC, look-out!)
Either they're small-time gamblers; or, they're hoping a regional bank will notice them and decide to use them to move their struggling mortgage portfolio off-balance-sheet (via a nice loan to OXFD, of course). No one will care when OXFD collapses... as long as it's a few years from now.
Isn't the markdown on this pool the same as E-Trade's fire sale? As I recall, that one was 2.2 billion face value, which sold for 600 million or so -- about 30 cents on the dollar.
That was 30 cents on the loan dollar.
Expressing a price as cents on the collateral dollar is just weird. You aren't buying the collateral. You are buying the loans.
You can't know how this compares to the ET price until you know what the price was as a percent of the loan balances.
Assume--just for giggles--that the loans in question are underwater by 10% (current value of property is 90% of loan balance). So that means collateral value of this pool is 90% of 2.6MM or 2.34MM. Price paid was 30% of 2.34MM or 702K. 702K on 2.6MM is 27 cents on the dollar.
Because these are nonperforming loans, you can pretty much assure yourself of liquidation expenses on the high end. But say it only costs you 20% of the loan amount to foreclose. That would mean best-case recovery of 70%, which would certainly be a profit if you paid 27% for the loans.
I don't think 30% recovery is exactly average yet, but if it is likely for this pool, then Oxford makes 3%.
Tanta,
Can you render this in English?
Moody’s: Rapid Amortization on HELOCs a Concern : HousingWire || financial news for the mortgage market
Can you render this in English?
Well, see, that's the problem. I thought it was in English.
Those are HELOC pools. That means the borrower can borrow more money than what was originally "funded" when the loans were securitized.
These deals were set up so that the issuer, CFC, would advance the funds for a new HELOC draw when a borrower requested one. It's an advance because CFC is just supposed to be the servicer, not the investor. The advance is supposed to be paid back to CFC on cash flow (other borrowers making payments or prepaying). In other words, CFC advances the day the borrower draws his HELOC, and then "settles up" and the end of the month by taking positive cash flow first to cover those draws, then remitting the remainder to the bondholders.
This deal, however, was apparently structured so that the servicer's claim on cash flow to reimburse advances is not absolute: there have been so many losses in this deal that it hit a "cap" that the bond insurer has to pay. Therefore, CFC has to wait to get reimbursed until the credit enhancement of the deal gets back to where the deal specifies it must be.
So "rapid amortization" is paying all the collected cash flow to the senior bondholders first, to reduce the outstanding amount of the senior bonds, which brings the ratio of subordinate/OC/insured amount back to acceptable.
Theoretically, it "just" means that CFC will wait a while before getting reimbursed on advances.
Realistically, it means that CFC isn't likely to get reimbursed for all those advances; there just won't be enough money left over. That's why CFC took a write-down on those advances.
This is one of those deals that really ought to be on the issuer's balance sheet. If it puts the servicer on the hook like that, the servicer is really providing credit enhancement and should be treated like a subordinate bondholder.
Tanta,
You sense of sarcasm and irony is sometimes even too much for this sarcastic blog commenter. I didn't really understand your post at all until you made your thoughts known later in the comments
But I am still confused about this:
(I don't think anyone with a "90% ROI" knows how to make money buying very small pools of nuclear waste. They aren't going to make anything up on volume.)
Are you being sarcastic again? A person who has 90% ROI on a consistent basis is usually smart and can continue to achieve such a return especially on $2.6million (or fractions thereof) portfolios...
??
oh ok, assuming FC...
Are you being sarcastic again?
Obviously I should have had more coffee before I posted this.
The only way anyone can make money buying nuclear waste is with efficiency.
You can develop an efficient operation by buying small pools to combine into a large pool. However, you are probably not going to show 90% ROI for quite some time doing that. It's a skinny-margin business. (They say, btw, that they had 90% ROI last year. They didn't exactly say they expect 90% ROI on this deal.)
That was Ginger Yellow's point above about this being 5-10 loans or something. There are a lot of fixed costs to cover on such an investment.
Understood. Thanks Tanta!
Interesting that this comes out of Houston. I practiced law there back in the 80s and 90s and the RTC routinely auctioned off packages of loans that it had acquired when S&Ls failed for pennies on the dollar. A number of investors did quite well buying them, then settling with the debtors. It is a viable business, but from cyberspace, it's simply not possible to say much about the potential returns on this particular bid.
Oh ok... I was assuming that this was one small, out of many, portfolio purchases. But still the legal costs are probably 100k+ I guess..
Shnaps writes:
Rob - your elitism is showing.
It's undoubtably hard to relate from your manse in Ventura, but
I'm from the Olde New England originally. I know the America of which you speak. I know frugal and I certainly know about living within one's means. I also know these houses are worth far more as materials than they are as potential homes.
bear in mind that the average household income in this country is something like $45-50k. Which puts an average house at about $150k. Which, with a little TLC, is what a 1300 sf urban bungalow goes for in flyover USA.
Absolutely. And God bless them. The thing is that with about 4 million too many houses it becomes a case of battlefield triage and the Detroit bungalo gets a red tag on on its' toe. Same for Buffalo and a dozen others I could name.
OT but is anyone else being driven nuts by the new "so-and-so writes:" on the top of each comments? It is really making it hard for me to read the comments.
TIA
Beth
Rob Dawg-
Turning and turning in the widening gyre
The falcon cannot hear the falconer;
Things fall apart; the centre cannot hold;
Mere anarchy is loosed upon the world,
Baco Dreamz and Shnaps- I'll go in with you. But we need more funding. How about the Sub Aqua High Grade Investment Fund? Or we could stick Enhanced in there,...
Using Oxford or Cambridge in the title can usually dupe a few suckers at least.
Zac | 01.31.08 - 10:41 am |
Heh. That is one of the yellow flags.
Another is that they provide numbers and language that strongly imply things that aren't actually stated.
For example:
The pool of loans carries principal balances of $2.6 million...
...based on current valuations our cost of the portfolio will equate to approximately 30% of the collateral value
If you are one of the sheep to be fleeced, you might read this as Oxford paying $0.8 million for $2.6 million in value. But, as Tanta points out, the collateral value could be much less. She used a "for giggles" example where collateral value is only 90% of the loan principal balance. But it could be far less.
Let's say that these are a pool of second mortgages that have already been rejected by the various other outlets for distressed mortgage debt. What's left could conceivably have a collateral value of just pennies on the dollar. Let's say $260,000 of collateral value. Then the potential profit is $180,000 instead of $1.8 million.
But wait, that potential is based on "current valuations". What is a current valuation? When was it done, and by whom? How far off would that "valuation" have to be from true markeet value to make most of the profit disappear? And how much would the cost of trying to convert collateral value to cash impact the potential profit.
If we are talking 2nd mortgages with an average value of, say $50,000, representing an average of, say, 10% of the initial purchase price, then there are 52 homes in the pool with an average initial purchase price of $500,000. The collateral value has dropped to $5000 per home using my assumptions above. It doesn't take much in the way of expenses or overvaluation to completely wipe out that collateral value.
The press release gives me nothing to base my assumptions on. The above is just an example of how the words in the Oxford release could be disguising a scam.
But there's more. Oxford says "has won the bid and secured financing for the purchase of a portfolio of mortgage loans offered by a national lender which is finalizing its bankruptcy proceedings". That means they soon will be handing over the $??? they bid in return for ownership of the loan pool, right? No.
First of all, "has secured financing" is totally meaningless from a pink sheet stock with a shaky history. In cases where money does actually change hands, it usually is given in exchange for lots and lots of stock at a fraction of the current trading value. This stock is then either dumped on the market (after a pumping campaign, of course) or is used to cover shares that were already sold short at much higher prices.
Second, "has won the bid" doesn't tell you that the loan pool will be sold to Oxford. If the loans are offered by a national lender which is finalizing its bankruptcy proceedings, there may be other parties involved which have to agree to the sale.
It is true that my suspicions rely on my assumptions, not the information provided in the press release.
The more difficult sniff test is to ask why this business is being run as a public company that is listed on the pink sheets (where raising capital is so difficult and expensive that it negates the value of being public) and why Oxford would be working so hard to let others know how profitable their business niche is? Why alert competitors?
The easy sniff test is to enter the ticker symbol and the word "disclaimer" in google and see if the stock is being pushed by penny stock pumpers who are being paid for the effort. That is a sure sign that you are dealing with a company that is in the business of selling shares rather than whatever their stated business activity might be.
Apologies to all for the length of this comment.
sdtfs,
That ain't the Dawg that's -Yeats, "The Second Coming."
The new paradigm: "Yeats was an optimist."
ottnott,
If you ever apologize again for quality we'll kill you.
Sheesh.
In spite of the length, I left out some words.
Should have read:
It is true that my suspicions rely on my assumptions, not the information provided in the press release.
But give this situation a sniff test, and you will understand my skepticism about Oxford's statements.
The more difficult sniff test is...
probert: Don't tase me, bro!
Don't waste anymore time on it when a company has a history like this (posted above)
(quote)
We (Oxford) were incorporated on August 16, 1982 as Amee, Inc. The corporation subsequently changed its name to Aquaplan, Inc. in December 1998.
In June of 2003 the charter of the corporation was revoked due to Inadvertance and negligence of the Officers and Directors of the Corporation; therefore, depriving the shareholders of any equity interest therein.
The Company was reinstated and reorganized on January 25, 2005 with new management and operated as Aquaplan, Inc. until January of 2007. Aquaplan was unsuccessful in executing it's business plan.
On January 2, 2007 the Corporation changed its name to National Health Alliance, Inc. but abandoned the business plan to provide health insurance related products.
On April 20, 2007 the Board of Directors changed the name of the company to Oxford Funding Corporation and reorganized the business and conducts its operations to purchase portfolios of loans and resell them at a profit after improving the value of the individual loans that comprise he portfolio.
(end quote)
Neal - that's called "nimble management".