Mortgage Collateral Package Consist Of: Fill & Download for Free

CDOs, or collateralized debt obligations, are financial tools banks use to repackage individual loans into a product sold to investors on the secondary market. These packages consist of auto loans, credit card debt, mortgages, or corporate debt. Yes, but: Today's synthetic CDOs are largely free from exposure to subprime mortgages, which drove much of the carnage in the crisis. Most are credit-default swaps on European and U.S. companies, and amount to bets on whether corporate defaults will increase in the near future.

I didn’t exactly retire as I had originally planned, because a little more than two years ago when I was 58 years old, the corporation I had worked at for 22 years laid off thousands of employees. It was mismanaged and we were collateral damage, but that could certainly be a whole ‘nother Quora answer.I was given a small severance and had made sure to max out my 401k while working, so I had some of my own savings, the severance package, and my 401k. I also had a car payment, a mortgage and every intention of finding another job. I had dug my way out of credit card debt many years ago, learned my lesson, and never fell into the vacuum of credit card debt ever again. At first I worked hard at getting a job, doing all the things my career advisor had suggested, long story very short, for whatever “ism” you want to blame it on, I could not find work. So, even though I didn’t have the means to retire according to AARP and every financial advisor in the United States, I decided that I was going to figure out a way to retire and finally enjoy myself. I had been working since age 11, starting with babysitting and always worked in some capacity up until the day I turned the key and locked the door on that last job.Over two years later, I can say it was the best decision I ever made. I am no longer beholden to corporate America, I do not answer to anyone, nor do I have to follow directives that made corporate executives millionaires and even billionaires while the rest of us, well, became or stayed middle class, at best.I had to make some adjustments, figure out healthcare, give up some luxuries I could once afford, and I spent my money much more thoughtfully. But, here is the payoff, about a year before my position was terminated, my mother needed to be taken care of at a nursing facility due to mobility issues. Now, that I had the time, I spent many, many days and evenings with her talking, laughing, participating in art classes with her, going to crazy senior sing-alongs, getting to know the staff and other residents at the facility, and generally just enjoying my mother’s company. I would bring her shrimp with lobster sauce from her favorite Chinese restaurant, dress up with her for the annual Halloween party, sit at her regular Bingo table with other residents she regarded as her friends, and attended as many events as my mother wanted me to attend. We watched TV in her room together, and we would go through clothes catalogs and pick out which dresses she wanted to order.So, was I bored? The answer is, not for one single minute. I was grateful that fate allowed me all the freedom and time to be with my mother during her last few years. If I wasn’t “pushed” into retirement, I would have lost all those incredible moments laughing and talking with my mother who eventually died of age-related complications just short of her 85th birthday. My father passed away seven months later at age 87. I wasn’t as close to my father as I was to my mother, but I was still able to be there during his final years as well.Now that they have both passed, my family is very small, but I am still free to do whatever it is I want, within financial reason.I no longer stress about meetings, deadlines, accountability, making my numbers, meeting regulation requirements, pleasing the board, conference calls, presentations or wearing a suit. I now spend my time in comfortable casual clothes working to improve the quality of MY life. I work in my yard making it as beautiful as I know how to and I have a small garden and grow vegetables. I groom and play with my big lovable Bernese Mountain Dog, laugh and have little “conversations” with my talking Yellow-Necked Amazon parrot. I can read a book now and NOT fall asleep after two pages because I’m just too tired from working hard at making other people rich for 12 hours that day. I no longer have a company cell phone that ultimately required me to be available to corporate whims 24/7. Now, I pay for my own cell phone and I use to contact family and friends to make plans to spend time with them.I go to Estate Sales and wonder about the person who once lived there and what their life was like. I took an online writing course for fun. I go to farmers markets and visit local vineyards. I have finally gotten to know some of my neighbors, something I never thought I had the time to do when I was working 50-70 hours a week. I was always rushing out the door in the morning and too tired to care at night. I love music and still play the guitar, ukulele and bass. Listening to music is an engaging, active process to me, not just background noise.Bottom line, I am never bored. But I am grateful and fortunate enough to know that I need to enjoy every day knowing it is my own. And, as far as money goes, I realized I don’t need as much as I once thought I did. Whatever money I have now serves to give me the time to live for myself, my family and friends. What more could I ask for? As soon as I reach legal retirement age, I’ll collect my social security check, whatever little that might be. I was never the person who believed in working into my later years in order to collect the maximum amount allowed me. I have and had seen too many people do exactly that, only to die just a few months or just a few years after retiring at that later age.I know that when people retire, they dream of traveling. I was never much of a traveler, more of a casual vacationer. I did a little more traveling in my younger years, and can honestly say that for me, it’s a bit overrated. The packing, the unpacking, and then the packing again, dragging bags around, taking my shoes off, putting them back on, getting buzzed because I forgot a key in my pocket, the over head bins, and the fees! The list goes on. Actually, I have always said that I feel like a tourist here on earth everyday! I’m certainly not saying one shouldn’t travel, but like Dorothy, I too have learned that there is no place like home.And now, I take each day as it comes and I try to enjoy the hell out it. I’m pretty lucky that I’m relatively healthy and so far can still afford my home. If that ever changes, I’ll cross that bridge when I drive up to it and make the best decision I can with what I’ve got.Thanks for sticking with me for this long. Believe me, I understand just how precious your time can be.ADDENDUM:I had answered a comment regarding if I inherited anything from my parents that helped with my unplanned retirement. Andy, the commenter, suggested I add my answer to him to this original post. So, here it is, I hope it brings something to the table…That’s a great question for those of us whose parents were/are blue collar, working class people. My mother was a factory worker and my father was a custodian. I could write an entire essay on the healthcare system, long-term health care, hospice, hospitalizations and how programs created to help the elderly and veterans are only half-heartedly employed. But, that’s not the question. While my parents left us, what was their long-lifetime’s savings as well as what financial consultants call “assets”, that wasn’t really what “helped” me. My mother needed to live in a skilled-nursing facility for the last few years of her life, so most of our money went into making sure she had what she needed to live her best life there. My father needed 18 hour a day assistance, 12 of which consisted of home healthcare aids, the rest of the time my brother made sure my father had everything he needed. So, monetarily it had very little impact on my life. But what they did leave that was truly the most valuable and helpful to me was the skill to make something out of nothing, the attitude that money is really, just only a tool, and the one piece of advice that I still look to when I start to question whether or not I’ll be able to make it. It is this budgeting gem that turns everything we’ve ever heard from every Suze Orman type consultant on its head:I’ll quote my mother exactly, “If you sit and write it all down you won’t believe you can do it, that you won’t have enough. You just have to do it and as you go along and live it you will figure it out. Stop worrying, money comes and money goes, you just need to go after what you want and you’ll figure it all out.”BEST advice I ever got. So, yeah, Andy, I did inherit something from them that helped.Thanks for the question.

Let us try to imagine the 2008 financial crisis in the form of a structure or dominoes consisting of various floors/levels.Level 1: The FoundationNow, for any structure to hold strong, the foundation has to be very strong. The foundation in our case would be the mortgage loans issued by various lending agencies and banks to borrowers. To have one’s own home has always been an American Dream and that is why increasing home ownership has been the goal of several presidents including Roosevelt, Reagan, Clinton and George W. Bush.Level 2: The DerivativesDerivatives are financial contracts that derive their value from an underlying asset. I know it is difficult to understand, but stay with me.In order to keep the capital flowing in the home mortgages market for people to take loans and realise their dream, two GSEs (Government Sponsored Enterprises) Fannie Mae and Freddie Mac were instituted in the 1970s. Their purpose was to buy mortgages from lending agencies and securitise them to be sold as MBS (Mortgage Backed Securities).Another financial jargon….. but don’t skip yet.What is an MBS ?In simple terms, I buy a house by taking out a mortgage i.e. a bank or a lender gives me a loan and I make the repayments every month with some interest payments. Now banks and lending agencies wanted to transfer the risk of my defaulting and make their books appear debt free. This is where Fannie Mae and Freddie Mac helped them. They bought all the mortgages issued by banks and lenders and pooled them together to form a mortgage bond or a Mortgage Backed Security.As an investor, instead of investing in individual mortgages, you invest in thousands of individual mortgages and thus mitigate your risk as the odds of all the mortgages in the pool failing are quite low. Thus you bet on systemic risk. Also, these securities were equivalent to AAA rated bonds (highest credit rating) or in layman’s term risk free bonds.Now, going back to the definition of derivatives, MBS are the derivatives in this case and their underlying assets are the mortgage loans. The stronger the loans, the stronger will be the MBS. So, the chances of the bonds failing were very low as loans were issued to people with good credit history or in other terms they were Good Loans. So, where did they mess up ?The answer is Bad Loans or also popularly known as sub-prime loans which were issued to people with poor credit history and the risks of them defaulting is high. I know what you must be thinking, why would anyone give a loan to someone who won’t be able to repay it ?This brings us to the regulatory aspect of the crisis.In 1992-93, questions were raised over the allocation of loans by lending agencies to only a certain segments of society. This lead to reforms in the Credit Reinvestment Act (CRA). Under these reforms, banks had to show that they had actually made a requisite number of loans to low and moderate-income (LMI) borrowers. Also, an act passed in 1992 mandated Fannie Mae and Freddie Mac that 30% of their loan purchases from the lenders should be related to affordable housing. This was further increased to 40% in 1996, 50% in 2001 and 56% in 2008.It had a negative effect on the market since it lead to loosening of mortgage lending standards throughout the banking industry. The standards were relaxed for low-income borrowers. Credit was made available to them and housing market speculation began ultimately forming the bubble in housing prices.This lead to bad bonds or riskier bonds that had poor credit ratings. This is where the structure started becoming weak.Another regulatory failure was the Gramm-Leach-Bliley Act, which allowed consolidation of commercial banks, investment banks, securities firms, and insurance companies.Level 3: Investment BankersWall Street wanted to join in on the party and have their share on the profits made by securitising mortgages. Using financial innovation, Investment banks came out with a CDO or a collateral debt obligation.What is a CDO ?CDO is nothing but a pool of the riskiest tranches of mortgage bonds (Bad MBSs) and other risky securities with the assumption that the average level of risk would get minimised by packaging them together. But any smart investor had to be completely insane to invest in them as it was a pool of the riskiest of bonds with very high chances of defaulting. But, unfortunately, they weren’t aware of it.Why ? Because investment banks got the CDOs rated from the rating agencies as AAA thus assuring investors that it was a safe investment.If AAA rated CDOs or Good CDOs were made up of risky bonds, then Bad CDOs or BBB, BB rated CDOs were made up of complete junk bonds.Multiple loans being issued to the same borrower, no down payments were some of the factors that aggravated the situation. In 2005, as much as 43% of first-time home borrowers made no down payments.Level 4: Betting AgainstVarious economists and some people within the system identified that the entire system was infected and that the collapse of the housing market was imminent. So they started betting against the market through CDS (Credit Default Swaps).What is a CDS ?CDS very closely resembles an insurance, only that they were not regulated. Suppose you felt that a sub-prime backed CDO was not safe, so you would buy an insurance or a CDS on that CDO from an insurance company like AIG. Just like an insurance, you would pay premiums to the seller of CDS. The sellers of CDS knew that the CDOs would not fail as they were AAA rated and so they very willingly offered insurance on them. The buyers of CDS had identified that the system had become infested and hollow from within and could collapse any day.Level 5: Synthetic CDOsIn principle, CDOs can be constructed out of anything that has a steady flow of cash like mortgage repayments. The premiums paid on the Credit Default Swaps was also a steady source of cash flow. The banks used these swaps and created another CDO called as Synthetic CDO. The more credit default swaps outstanding, the more synthetic CDOs can be created.CDS and Synthetic CDOs fed on each other and grew bigger and bigger.The CollapseHousing prices fell in 2006 and homeowners couldn’t borrow more and they couldn’t sell their homes for enough to pay-off their mortgages. Mortgage repayments failed leading to failure of thousands of individual mortgages. The mortgage bonds that were made up of thousands of individual mortgages failed. The CDOs that were made up of thousands of risky mortgage bonds failed. BB, BBB, A, AA, AAA all the tranches collapsed. CDS contracts were triggered. Insurance companies and banks that sold these CDS contracts had to pay in billions. The risk of CDS buyers of betting against the market paid off.In NumbersBetween 2004-2007, $1.3 trillion worth of CDOs were issuedSynthetic CDOs accounted for $5 trillion worth of investmentsThe outstanding amount of CDS was $62.3 trillionThe overall monetary loss was more than $12 trillion.ReferencesWhitehouse-President Hosts Conference on Minority Home Ownership, October 15, 2002"43% of first-time home buyers put no money down". USA Today.Reckless Endangerment : How Outsized ambition, Greed and Corruption Led to Economic Armageddon. New York: Times Books, Henry Holt and CompanyISDA Market Survey; Notional amounts outstanding at year-end, all surveyed contracts, 1987-present". International Swaps and Derivatives Association (ISDA).The True Origins of This Financial Crisis, The American Spectator, 2009 issueFannie Mae and Freddie Mac:Past, Present, and Future, U.S. Department of Housing and Urban Development