Using Veritas to Construct the "Per…

29-04-2017 Hits:71392 BoomBustBlog Reggie Middleton

Using Veritas to Construct the "Perfect" Digital Investment Portfolio" & How to Value "Hard to Value" tokens, Pt 1

The golden grail of investing is to find that investable asset that provides the greatest reward with the least risk. Alas, despite how commonsensical that precept seems to be, many...

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The Veritas 2017 Token Offering Summary …

15-04-2017 Hits:70322 BoomBustBlog Reggie Middleton

The Veritas 2017 Token Offering Summary Available For Download and Sharing

The Veritas Offering Summary is now available for download, which packs all the information about Veritas in a single page. A step by step guide to purchasing Veritas can be downloaded here.

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What Happens When the Fund Fee Fight Hit…

10-04-2017 Hits:68861 BoomBustBlog Reggie Middleton

What Happens When the Fund Fee Fight Hits the Blockchain

A hedge fund recently made news by securitizing its LP units as Ethereum-based tokens and selling them as tradeable (thereby liquid) assets. This brings technology to the VC industry that...

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Veritaseum: The ICO That's Ushering in t…

07-04-2017 Hits:71801 BoomBustBlog Reggie Middleton

Veritaseum: The ICO That's Ushering in the Era of P2P Capital Markets

Veritaseum is in the process of building peer-to-peer capital markets that enable financial and value market participants to deal directly with each other on a counterparty risk-free basis in lieu...

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This Is Ground Zero for the 2017 Veritas…

03-04-2017 Hits:70112 BoomBustBlog Reggie Middleton

This Is Ground Zero for the 2017 Veritas Offering. Are You Ready to Get Your Key to the P2P Capital Markets?

This is the link to the Veritas Crowdsale landing page. Here is where you will be able to buy the Veritas ICO when it is launched in mid-April. Below, please...

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What is the Value Proposition For Verita…

01-04-2017 Hits:72522 BoomBustBlog Reggie Middleton

What is the Value Proposition For Veritas, Veritaseum's Software Token?

 A YouTube commenter asked a very good question that we will like to take some time to answer. The question was, verbatim: I've watched your video and gone through the slides. The exchange...

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This Real Estate Bubble, Like Some Relat…

28-03-2017 Hits:42587 BoomBustBlog Reggie Middleton

This Real Estate Bubble, Like Some Relationships, Is Complicated...

CNBC reports US home prices rise 5.9 percent to 31-month high in January according to S&P CoreLogic Case-Shiller. This puts the 20 city index close to an all time high, including...

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Bloomberg Chimes In With My Warnings As …

28-03-2017 Hits:71120 BoomBustBlog Reggie Middleton

Bloomberg Chimes In With My Warnings As Landlords Offer First Time Ever Concessions to Retail Renters

Over the last quarter I've been warning about the significant weakness in retailers and the retail real estate that most occupy (links supplied below). Now, Bloomberg reports: Manhattan Landlords Are Offering...

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Our Apple Analysis This Week - This Comp…

27-03-2017 Hits:70900 BoomBustBlog Reggie Middleton

Our Apple Analysis This Week - This Company Is Not What Most Think It IS

We will releasing our Apple forensic analysis and valuation this week for subscribers (click here to subscribe - lowest tier is the same as a Netflix subscription). As can be...

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The Country's First Newly Elected Lame D…

27-03-2017 Hits:71292 BoomBustBlog Reggie Middleton

The Country's First Newly Elected Lame Duck President Will Cause Massive Reversal Of Speculative Gains

Note: Subscribers should reference  the paywall material here for stocks that should give a good risk/reward scenario for bearish trades. The Trump administration's legislative outlook is effectively a political desert, with...

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Sears Finally Throws In The Towel Exactl…

22-03-2017 Hits:74580 BoomBustBlog Reggie Middleton

Sears Finally Throws In The Towel Exactly When I Predicted "has ‘substantial doubt’ about its future"

My prediction of Sears collapsing once interest rates started ticking upwards was absolutely on point.

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The Transformation of Television in Amer…

21-03-2017 Hits:72900 BoomBustBlog Reggie Middleton

The Transformation of Television in America and Worldwide

TV has changed more in the past 10 years than it has since it's inception nearly 100 years ago This change is profound, and the primary benefactors look and act...

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This is part 3 in my quest for the truth in what lies off balance sheet of the big banks in America. Please reference If a Bubble Bursts Off Balance Sheet, Will Anyone Be There to Hear It? and If a Bubble Bursts Off Balance Sheet, Will Anyone Be There to Hear It?: Pt 2 - JP Morgan for the prequels. As was noted before, I also have a 30 part series on this Asset Securitization Crisis for those who are interested in my take on this from the beginning. It is a lot of reading, but it tells it like it is. Now, on to the bank to be owned by America - I'm sorry, that's Bank of America...

Bank of America Securitization Activities

Bank of America securitizes residential mortgages, commercial mortgages, credit card receivables, and home equity loans and automobile loans that it originates or purchases from third parties. As of June 30, 2009, the total principal balance outstanding of securitized portfolio was nearly 1.7 trillion (including 1.1 trillion of mortgage backed securities, securitized by Government sponsored entities). The total senior securities and subordinated securities held by BAC on its balance sheet amounted to about $27 billion (28% of tangible equity) and $10 billion (10% of tangible equity), respectively. 

 Click graphic to enlarge...

bac_qspe.jpg

Key observations

  • In the normal course, QSPE (securitization vehicles) are treated as separate entities with no right of recourse. However, the Bank has sold loans to these QSPE with various representations and warranties related to, among other things, the ownership of the loan, validity of the lien securing the loan, absence of delinquent taxes or liens against the property securing the loan, the process used in selecting the loans for inclusion in a transaction, the loan's compliance with any applicable loan criteria established by the buyer, and the loan's compliance with applicable local, state and federal laws. Under the Bank's representations and warranties, the Bank may be required to either repurchase the mortgage loans with the identified defects or indemnify the investor or insurer, in case of breach. In such cases, the Bank bears any subsequent credit loss on the mortgage loans. It is worth noting that during the three and six months ended June 30, 2009, the Bank repurchased $222 million and $582 million of loans from securitization trusts as a result of the Bank's representations and warranties, and corporate guarantees. In addition, the Bank repurchased $208 million and $968 million of loans from the securitization trusts as a result of modifications, loan delinquencies or optional clean-up calls during the three and six months ended June 30, 2009.The Bank also repurchased $77 million of loans from trusts securitizing home equity loans during first six months of 2009. However, the amount of loans repurchased during the three and six months ended June 30, 2009 are very insignificant when expressed as % of tangible equity which was $97 billion as of June, 30, 2009. This may not last, for as buyers, investors and insurer get more aggressive, and/or educated, they may push for more action on indemnification. For instance, I am confident that Wachovia's poorly written portfolio is rife with overstatement of income, over statement of assets, understatement of liabilities and debt, misrepresentation of collateral use, etc., as was endemic for the industry in the era of liar loans. A thorough audit of those loans should enable an activist investor to put back a significantly higher portion of that debt to BAC.
  • In the case of credit card securitization, the Bank is required to maintain a seller's retained interest of 4-5% as per the legal documents of the securitization trusts and as of June 2009, this seller's interest amounted to $9.7 billion or 10% of tangible equity. The seller's interest is not represented by security certificates, is carried at historical cost (this means it is drastically overstated), and is classified within loans on the Bank's Balance Sheet.
  • The bank also holds residual interests of $4.5 billion including subordinated interest in certain principal receivables, subordinated interests in accrued interest and fees, interest-only strips and the bank used a loss rate of 12% to value these residual interest whereas the loan losses rate for the managed credit card portfolio of BAC was 12.91% in 2Q09.
  • Further, under the recently issued SFAS 166 and SFAS 167, the Bank will be required to consolidate certain credit card securitization trusts, commercial paper conduits and revolving home equity securitization trusts which hold aggregate assets of approximately $150 billion as of June 30, 2009. However, out of this, $115 billion is related to credit card securitizations and commercial paper conduits that are currently considered in the Corporation's risk-weighted calculation for regulatory capital purposes.