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Merger Monday?
CB, thank you for the response. I'm not sure what prcentage of the total $300 billion wamu portfolio was securatized. Yes, I agree with the put back clause witg regards to the PSA for the portion of the portfolio that was securatized. I assume that was the reason for the DB lawsuit in the first place.
My concern mainly arises from the $165 billion off balance sheet report from the 2015 JPM 10k where they stated something like $80 billion of the loans were liquidated. Do you think they would be on the hook to redeploy those liquidated assets?
CB, in your opinion is the loan portfolio in safe harbor in runoff mode or is JPM required to replace loans that have been refinanced or paid off?
For example, if the portfolio started at $300 billion but $100 billion of loans have been refinanced or paid off during the last 9 years, is JPM required to replenish those loans with new ones?
My concern is that the portfolio is required to pay back 1.9% interest to the wamu deposit base that JPM acquired...and overtime as the portfolio in safe harbor gets smaller, that will start eating into the profitability of the portfolio unless JPM replaces to paid off loans with new ones.
I guess the other possibility is that once a loan has been paid off, the portfolio hands back the principle back to JPM to "pay off" the deposit base and then JPM at that point is responsible for redeploying that deposit principle and is now responsible for that 1.9% interest cost.
CB, the last wamu 10k from 2007 stated interest profit margin of 2.9% across entire portfolio. But I dont think that includes servicing fees. I dont know how much JPM was taking over the last 9 years for servicing. Do you have an estimate?
Thanks again!
CB, what is the typical cost of servicing loans. What do you think JPM was charging for servicing the loans for the last 9 years? .5%? 1%?
Thanks in advance for prividing your insight.
Here are all the wamu subs
https://www.sec.gov/Archives/edgar/data/933136/000104746908002083/a2182890zex-21.htm
Seneca Mortgage Servicing is not listed but all the Seneca subs seem to be holding entities. I wonder if Wamu Senecas are the ones that own the loans being serviced by Seneca Mortgage Servicing.
Anyone suspicious of extremely light trading volume today?
i'm hoping these are the remaining non-cash assets that WMIH is merging with for 3.5 billion shares to escrow. if this is true then we are looking at share price north of $20.
seamus, this is very interesting. this would imply that JPM did not buy the servicing right in the $2.7 billon dollar purchase. if they did, they have yet to pay for it. maybe the final $645 million payment to them is the net fees owed to them (payment for servicing right - what they owe to DB put back claims - servicing fees for last 9 years of portfolio in safe harbor). if this is true then we really are potentially looking at $100 billion+ returns. wow!
Ron, when did JPM raise the $1.4 trillion euros? Do you have a link to any s3 registration like document pointing to a date?
RD, I thought we have years until the NOLs expire. Anyway, I personally dont think those NOLs are valuable for a WMIH merger with anyone else other than returning legacy assets to escrow.
I keep thinking what decent size company in this bull market would want to be bought out by WMIH utilizing debt for purchase? For NOLs? Market is already pricing in Trump corporate tax cut to 20%.
I think the only chance for WMIH now is merger with legacy assets for 3.5 billion shares exchange with escrow holders.
I'm just hoping that there is an impetus for the government to close this out before the end of this current fiscal year (Sep 30). If WMIH merger doesnt happen past September, I fear we may be looking at share prices below a dollar as they come up to their Jan 2018 deadline with their preferred shares financing.
Do you guys think this will wrap up by end of fiscal year 2017 (sep 30)? Is there a motivation for FDIC to wrap this up for the fiscal year?
Can they appeal up to Monday or is tomorrow COB the last day for appeal? Does anyone know?
I dont know. The parent holding company showed a net $24 billion in equity when it declared bankruptcy. Where did it go? Maybe it was "gifted" to JPM. Its very difficult to find it in JPM 2008 balance sheet. Also, JPM could have played tricks with assets by writing them down. However, they cannot play tricks with interest income. So if they were gifted Wamu loan portfolio, where's the $9 billion jump in interest income in their 2008 10k? Let me know if anyone can find that.
In short, they could have possibly robbed the assets such as real estate holding. I'm not sure. However, I am pretty confident they didnt get the interest income stream of the loan portfolio. I am 99% sure it is sitting in safe harbor.
The gross interest profit margin on Wamu loan portfolio was $9 billion/year. That is not fantasy. It is in their 2007 10k. Unless anyone can show me an interest profit revenue rise of $9 billion in JPM 2008 10k, I'd say its pretty safe to assume our money is sitting in safe harbor.I still think we are looking at a minimun of $80 billion return even after accounting for 40 percent discount on wamu loan portfolio and about $24 billion in missing wmi equity.
Doesn't KKR need $1.25 average trading price at time of M/A to cover their tracks when they exercise their options for millions of shares? I don't think we are going to see a run up in price into the M/A. I think we are going to see $1.25 all the way to the announcement. This is a gift in my opinion - acquire as many shares as possible before next week. It may be our last chance at this low price. Make lemonade out of lemons.
Anyone have legacy unreleased common shares in their brokerage account? Correct me if I'm wrong but aren't all of the unreleased common shares canceled and deleted from the brokerage accounts? I release all mine so I can't verify this.
Anyone still have any unreleased shares showing in their account?
If there are no markers for the old unreleased shares, then there is no way any returning assets can go to unreleased shareholders. There is no record of them anymore.
Why Sep 5th? why is the effective date the day after labor day? maybe just a coincidence? or do you guys think they will take advantage of the short trading week? Any theories?
zulual, i have been thinking about that for some time also. my theory is that is the deposit base it inherited from the wmb purchase. it is a non-performing deposit base because the money has been used up to fund the wamu loan portfolio. As the portfolio is paid back, the principle plus 1.9% interest goes to this deposit base. however, jpm cannot use the deposit base to fund new loans for itself. maybe that is the reason why the assets are kept off balance so that its "non-performance" does not make their balance sheet look bad.
AZ, in your opinion, are the distributions to the preferred and common escrow markers tied to the ownership of the certificates to the trusts and not the 75/25 split from the global pool of all certificates?
Thanks again for bringing this up. This is very enlightening.
Does anyone recall any WMIH board members selling any of their "free shares" since 2012?
Thanks Option. But I wonder if WMIH will do a merger with the non-liquid assets before the 19th... If you are going to distribute the assets back to escrow before the 19th, I would think they would also want the WMIH shares in hand before then for the remaining illiquid assets. Otherwise, if the old escrow holders get a hold of the money before WMIH merger, they may end up dumping a large portion of it back into WMIH and hence the share price may rise and won't be at the price needed for the merger.
Welcome back AZ! Btw, what is your opinion on why Sep 5th is the "effective date" of the DB/FDIC/JPM settlement and not June 30th (DB probate judge approval date)? Why is it that JPM could book the $650 million payout for their last quarter when they clearly haven't been paid yet? or have they?
Do you think we will see a WMIH merger with assets before or after the final FDIC-R resolution? Do you think WMIH merger happen early September or more like end of October?
I really thought you were gone for good from the board. I hope you were just on vacation.
The depositions will be moot once the safe harbor assets come out in september. Profitability of safe harbor assets will clearly prove that the bank was simply illiquid and not insolvent. This has already been settled behind closed doors. Employees will get paid quietly. They will hold back some reserves when escrow pays out and employees will get paid a few months later.
Thanks. I cannot say "I am not uncertain!"
but I can say "I'm often a very Lucky Panda! and I can often smell my way to the right forest"
I think the golden parachutes claims will be paid out. I think the judge knows that the employees are entitled to them because the bank was never insolvent. This whole mess only happened because of liquidity issues caused by a bank run that was out of anyone's control or could have foreseen. The bank was properly funded with $20billion cash fir liquidity. Wamu employees managed the bank well. They could not have foreseen or prevented a bank run that withdrew $16 billion deposit in a week.
The judge knows this but cant allow golden parachutes payment without showing hard evidence of WMI solvency.
The only way to prove the bank solvency is to wait for the boat load of money coming out of safe harbor - which no one can legally address in the bankruptcy.
So the judge simply allowed golden parachutes claims to extend out to 2018 knowing that FDIC-R should close out the DB case by end of 2017 after the statute of limitation for "hidden assets" lawsuits runs out, and allow the safe harbor assets to come out.
I really think the judge is honerable and wants the truly impaired classes here, employees and shareholders, to get their value back while working witin the legal constraints of the bankruptcy. That's why she allowed Susman to represet equity comitte. That's why she was quick to allow Nate's testimony and threaten colorable insider trading claims against the hedgies. And that's why she allowed the employee claims to keep delaying until 2018 even though the law clearly stated that they were not entitled.
The honerable Mary sees what is behind the curtain and wants the hidden value behind it returned to the truly impaired, while following legal constraints of the bankruptcy process, and avoiding potential lawsuits that could drag this out for decades by cleverly using statute of limitation to run out.
No this one is pretty unique - once in a lifetime opportunity. This only happened because of a temporary liquidity problem that the bank experienced from a mysterious bank run. The bank's solvency was never in question.
Then it is a matter of a very simple question that one should ask oneself. Do I believe in conspiracies. If your answer is no then you simply ask yourself, "how could FDIC take over the bank legally?"
1) "What is FDIC's main objective? Unjustly enrich Paul by robbing Peter? making sure that banks are profitable? or protecting the depositer base so that it is not on the hook to payout from its DIF?
2) "How could FDIC legally accomplish 1 without being properly able to determine what the true market value of WMB bank was in 2008?" Remember, FDIC-R must sell WMB for max market value or it could be liable.
I think answering 1 and 2 and analyzing the lasf available WMI 10k from 2007 should give one a good top level estimation of what potential value could be had from this once in a lifetime speculation. Then it was a matter of betting on which inbestor class you thought would be the last to survive the POR. I just simply place all my bet on what Michael Willingham bet on.
No doubt brother! This is going to pay off huge and I don't think it cohld have happened without the secrecy. All the uncertainty due to the lack of visibility of safe harbor made this once in a lifetime speculation. IMO, the only major risk here was equity not surviving the POR. But we did!!
In America, anyone can sue even without merit. Have you heard of probate lawsuits that have dragged on for decades?
Likewise, if there were any evidence of assets being held by FDIC in safe harbor, I can guarantee you that there would be class action lawsuits "representing" old wamu shareholders - the money could be tied up in court for decades.
This has to be kept quiet until the statute of limitation runs out. Lucky for us, it did this past February. And now we could potentially see money in September...Coincedence?
i think you have to call your brokwr to remove them from your account or simply close your brokerage account.
Dont worry. Trust in the safe harbor process. FDIC is not interested in committing conspiracies and exposing themselves to criminal investigation. well, maybe it can happen is one or two person is involved and the amount being stoken is a few millions. But when we are talking about $80 billions in interest profit collected over 9 years, well, that kind of robbery is pretty hard to get away with. And FDIC is not going to do that out of the kindness of their heart - to rob thousands of Wamu shareholders just so they can gift the tens of billions to thousands of JPM shareholders.
FDIC's main concern is to keep the portfolio solvent so that it can pay back the bank's deposit base (portfolio owes principal plus 1.9% to deposit base that funded the loans). All FDIC wants is to let the portfolio run uts course under safe harbor where no creditor can force any kind of untimely liquidation and cause premature losses that can threaten the solvency and hence threathen the deposit base.
Dont worry, the 2.9% interest profits have been collecting in safe harbor and it will return to the rightful owners based on how the securatization documents were written.
Yes, JPM owns most of the portfolio's principal value plus 1.9% interest (liability to deposit base). It does not own the rights to the interest profit marfin of 2.9%. Those rights are somehow structured under the subs to flow back to WMI. You should read my post from 2 days ago.
The profit margin on that portfolio is very valuable. Some were securatized into various ABS certs. FDIC simply cant write down the value of the value of thag 2.9% profit margin as zero and gift it to JPM. First WMB didnt own it and hence FDIC cant touch it. Second, if they did gift it to JPM, there would be no need for safe harbor and no need for off-balance sheet assets and everything can be reported under JPM balance sheet -especially after nine years.
Go read my post from 2 days ago if you reallt want to understand my opinion on this.
It doesnt matter whether the loans were held in portfolio or securitized. We dont know how they were structured under the holding subs. All I know is that the portfolio was very profitable and only $16 billion of it were subprime. There is no way, FDIC can mark down the value of the entire portfolio as zero book value and gave it to JPM.
First, they cant because the loans did not belong to WMB. Second if they did, there would be lawsuits right now. No way in hell that FDIC convinced all the hedge fund lawyers to shut up and conspire with them by agreeing to value a portfolio that generated $14 billion a year as worth zero and gift it to JPM.
I may not see the individual trees but I can see the forest.
Bluzie, if you take a look at wamu 2007 10k, I believe they booked closed to $14 billion as gross interest income. If Wamu's main business was to simply make money by servicing the loans for the various ABS certs, you would not see this large of a number booked as gross "interest" income. I believe as a "savings and loan" they owned a huge percentage of these ABS certs to be able to book $14 billion gross interest income
matt, what i was alluding to was that the interest profit margin on the $300 billion portfolio was the main income stream of WMI which JPM didnt get.
JPm got servicing rights which they can generate some income especially with scale of efficiency from consolidation. They also got instantaneous retail presence with 4000 branches with trained personnel. So yes, while JPM essentially bought WMB with almost no then current income stream, they were ready to capitalize on the operational infrastructure that they gained with future business. That is the only way FDIC could have justified selling WMB for 2.7 billion.
Thank you Doc. I hope I'm right. It is the most reasonable assessment that I can come up with. I dont believe in conspiracy theories - especially when it involves tens of billions of dollars with thousands of counter parties standing to loose. If FDIC really did rob wamu shareholders (give away the profit machine of the loan portfolio to JPM), there would be lawsuits right now claiming 5th Mendment illegal taking. I cannot believe that FDIC convinced all the lawyers involved to not sue them. The only way this makes sense is if FDIC did everthing legally. Thats why I think my assessment of what went down is a very reasonable and logical explanation. Especially, with the recent evidence from 2015 JPM 10k filing showing $165 billion non-performing deposit base.
I think I'm the wrong person to enlighten you on the subject. You should go ask David Tepper.
general, the loans were mostly funded by the deposit base of WMB. remember "savings and loan"... bank takes the savings and then funds the loan. of course, the loan pays back much higher interest rate than what the bank pays back to the savings (deposit base) -- the difference is 2.9% profit margin on average.
WMI was never in trouble of solvency, only liquidity. WMB had 20 billion cash on hand. if on any given month the savings (deposit base) only redeemed(withdraw) like 5 billions, the bank could have easily funded it from the 20 billion cash buffer and refill the cash bussger with the cash flow from the loan portfolio. however, when there was a run on the bank in 2008, and thw deposit base redeemed 16 billion in a week, the bank suddenly had a liquidity problem. if the withdrawal rate continued, the bank will now be "forced" to sell some of the loan portfolio to come up with the cash to meet the witbdrawal demand. savings and loan only works if the withdrawal rate is a small percentage of the cashflow of the loan portfolio. if wamu started selling a portion of the portfolio in the depressed market of 2008, it would have only gotten 10 to 30 cents on the dollar. this selling would all of a sudden force the bank to "mark to market" the value of the rest of the $300 billion portfolio that it retains. if this happened, all of a sudden, the bank would seem "on paper", it is
insolvent to meet ths liability of the entire deposit base... what started out as a bank run liquidity problem (cashflow < withdrawal) would have become a bank insolvency problem (assets < liability)...worse yet, wamu's selling of its portfolio would also force other banks to write down the loans that they were also holding (mark to market rules). all of a sudden FDIC would be looking at a systematic insolvency (at least on paper) issues all across the board..an appocalypse scenario for FDIC.
Thats why FDIC suddenly took over WMB and placed its loan portfolio in safe harbor - so no creditoe can force it to sell it. The portfolio is then safely allowed to operate and pay back its deposit base in time. Meanwhile, if there were any more bank runs, JPM with more cash on hand, could temporarily meet the withdrawal demands.
Of the 300 billion loan principal, i believe around $40 billion was funded by in house money (WMI) and the rest were funded by the deposit base and other sources of cheap money. However, I believe WMI owned most of the profit margin of that $300 billion portfolio (2.9%). if i recall from their last 2007 10k, WMI was getting over $9 billion a year in operating interest margin on their entire portfolio. Of course, they did not book $9 billion a year in profit when they owned WMB, because they had other costs of running the bank (i.e. ezecutive pay) and other write downs (i.e. value of the bank buildings they owned). however, non of that WMB operating cost is our problem now since FDIC unloaded the entire bank (WMB) to JPM for $2.7 billion. now the portfolio in safe harbor gets to book all $9billion a year operating profit as net profit for its beneficiary (WMI/escrow holders).
JPM never stole Wamu. They bought a bank with no income stream. The value of Wamu had always been the income stream (interest profit margin) of its $300 billion loan portfolio. All JPM got was a working bank with personnel that could generste new loans but didnt have the profit margin to the loans in the book. Yes, it got most of the assets (principal value) of the 300 billion portfolio because it also got the 186 billion deposit base (liability) with the WMB bank purchase. However, it never got the 2.9% operating profit margin of tge $300 billion portfolio - that sits in safe harbor fillion our piggy bank for us escrow holders. Thats why I believe JPM reported $165 billion "non-performing" deposit base back in 2015. Its the deposit base that they inherited fron WMB purchase. It is non-performing for them because, the profits from the loans that thag deposit base funded, still belongs to WMI/escrow holders.
yku can argue that a functioning operation like WMB is worth more than $2.7 billion but not back in 2008 during the panic. just be thankful that safe harbor exists. the main purpose if the safe harbor rules is to ensure that the deposit base is protected by continual operation of the loan portfolio without untimely forced liquidation in turbulent 2008 market..as it should be as FDIC's main objective is to protect the deposit base. however, this forced sale of WMB and placing of the loan portfolio in safe harbor "accidentally" gave all of us Wamu bankruptcy investors a once in a life time chance to own that huge $9billion/year profit machine for less than a penny on the dollar.
now, dont you all rush to thank sheila blair to make all this possible for us WMI bankruptcy vultures!! :)
no worries john. we are all on the same team...most of us. LG may not be 100% correct but his heart is in the right place. it has been a long 9 yrs in the making. we need all the cheerleaders to keep our spirits up.
i'm not saying i am right. i may very well be wrong in "the big long"... its what i call it.
the problem with me is that i am right 95% of the time. the problem with people who are used to being right 95% of the time is that it is very difficult for them to see when they are wrong during the 5%...which can often lead to being spectacularly wrong when they are wrong.
i hope i am not wrong about this but even if i am, i think this has been a once in a lifetime bet, sponsored by FDIC. people like to bash FDIC. i think those people may be misplacing their frustration. when this finally pays out, everyone will be thanking sheila and the safe harbor rules.
sorry, typo. i think its suppose to be 4.9%.