04-11-2015, 09:54 AM
They were not marked down because of default risk per se. They were marked down because the underlying assets, the houses themselves, had lost value. TMA's jumbo loans generated great clients with high down payments and very low default rates. The value of the houses dropped, tHe value of mostly illiquid mortgage products dropped, covenants were breached, TMA's lenders feasted.
The claim of prospering goes pretty far, as NLY trades at less. than half of its pre 2008 highs. They did survive in part because the market for agency paper stayed relatively liquid, though for a long time was seriously depressed.
I may have used the term collaterized debt obligation wrong. If not mistaken, the originators bundle loans into packages with segments having various credit profiles. The bundling usually gives a pretty high overall rating. The originators either retain these bundles of loans or they sell them, usually retaining some kind of management/servicing fees.
The claim of prospering goes pretty far, as NLY trades at less. than half of its pre 2008 highs. They did survive in part because the market for agency paper stayed relatively liquid, though for a long time was seriously depressed.
I may have used the term collaterized debt obligation wrong. If not mistaken, the originators bundle loans into packages with segments having various credit profiles. The bundling usually gives a pretty high overall rating. The originators either retain these bundles of loans or they sell them, usually retaining some kind of management/servicing fees.
Alex