Happy New Year and may 2012 not suck as much as 2011!
I’ve been on forced hiatus due to issues relating to a trip to Cuba, a woman named Carla and a small golden statue of significant religious value. I won’t bore you with the details.
Now that I’ve been released …err… returned to work, I’m on my way to the preeminent fixed income structured finance (FISF) conference; the American Securitization Forum (ASF). For those outside of the business, the FISF brought you such fine investment products as Collateralized Debt Obligations (CDOs), Subprime mortgage backed securities, Liar Loan mortgage securities, Commercial Mortgage Backed Securities (CMBS) and synthetic version of the same.
After the colossal market meltdown which lead to the bursting of the credit bubble and implosion of several small countries, the ASF held its 2010 conference in Washington DC as a sign of contrition and to let congress know we’ve learned our lesson and don’t need pesky laws regarding risk retention. In 2011, ASF ventured to Orlando because the business is family friendly and gave Rep. Garrett the forum to espouse his hatred for all things government especially the President, Fannie Mae, and Freddie Mac though he seemed to forget about FHA/VA loans. The time for slinking around is over and the ASF is back in its favorite city, Las Vegas!!
In a bit of delicious irony, the ASF chose to hold the convention in the opulent Aria Hotel. The Aria is located in the new City Center in Las Vegas. The construction of City Center was financed by a loan originated by a large investment bank with extremely loose underwriting standards (pro-forma underwritten and had interest only payments due). This large investment shop placed the loan into its own CMBS and made themselves a good deal of money.
The City Center loan failed as the construction project ran out of money. The equity owner was highly levered and had no interest in putting his own money into the work. The project stalled for months until a new partner came with a cash infusion for a significant ownership of the project. The ASF, having not learned its lesson, holds its conference in the very hotel which represented a shining example of how messed up the originate to securitize model had become.
BTW, the private residential mortgage backed securities continues to be stalled with two small deals in 2010 and the first deal of 2012 announced just before the convention.
Naked Bond Bear