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johnheps, you are technically correct but I think you are missing the big picture. Yes, its true that JPM got most of the assets (299-40B) but they did not get the profit margin on that portfolio.
The real value of WMI is the 2.9% interest profit margin on that 299B portfolio which is promised to the various ABS certificates that WMI owned.
Yes, it is true thay JPM owned most of the assets of the portfolio (principle value) as it should to offset the deposit base liability that was used to fund the loan portfolio in the first place. However, the deposit base only gets about 1.9% and the portfolio generates about 5.8%. The difference, or interest profit margin, is pledged to the various ABS certificates that WMI owned a big portion of.
If JPM actually owned the profit margin on the portfolio (i.e. ABS certificates) then the $299B would be under their balance sheet and not off balance at FDIC. The reason, it is off balance at FDIC is because the portfolio is protected under safe harbor to insure its solvency against untimely liquidation. As FDIC receives loan payments for the portfolio, the principle plus 1.9% interest goes to JPM, the remaining 2.9% in interest profit margin goes towards the ABS certificates (WMI/escrow holders).
Escrow will ultimately receive a minimum $80 billion by my estimation.
looks like fdic trying ti wrap up everything by the 9th year anniversary of takeover on september 25th.
this is unusual. i thought the probate final ruling becomes final pending no appeal within 30 days. why is fdic waiting until september 5th to mark the "effective date"?
also, if you add 10 business day for the jpm payment, that brings it to september 19th. just 3 days before the weekend of the 9th year takeover anniversary.
Is there any significance to the 9th year anniversary of the takeover?
temocat, thanks for finding the great news. Its going to be a wonderful 4th.
By the way, dont go celebrating on that 0% capital gain tax. I thought I found a loophole also but no...there's a cap on how much captial gain you can take at that 0% rate. If I recall, I believe once yohr capital gains exceed the income tax bracket for that 0% rate, you start paying the cap gain rate on the next bracket. its a progressive rate...just like ordinary income.
Thank you. Do you know what the filing was for?
Will we see an 8k today for the $645 million payment to JPM? If DN pronaye was approved on June 16th, it would have marked the "effective date" of the DB-JPM-FDIC settlement and JPM has to be paid within 10 business days.
It could be but the big money is in the loan portfolio. I have a suspicion that the real estate holdings might still be under one of the trusts under wmiic. it could simply be collecting rent from wmb.
Thanks Az. I agree. This whole Wamu affair may have seen unfair but it had to be done legally. I generally don't believe in conspiracy especially where there are counter parties that can loose billions of dollars. If for some reason, FDIC did confiscate all the ABS interests owed to WMI during the bank sale, I think we would have seen lawsuits for fraud by now. The fact that we haven't seen such lawsuits is not because they are trying to "bury" an illegal conspiracy, but because no such act has occurred. The only logical conclusion that I could come to is that equity committee did not sue FDIC for wrongful seizure because the portfolio in safe harbor has simply not been seized. FDIC simply sold WMB to JPM without any income stream -- thus they could justify the sale for $1.9 billion. The main income stream of Wamu has always been the loan portfolio and that has been safely sitting in safe harbor protected from untimely liquidation.
Az, that means WMIIC should have at least 25% of ABS certs under DB trusts. So does that mean we should be seeing distributions within a week or two with DB probate distribution? Can WMIIC receive distribution from DB probate and not announce anything? or will they be legally required to announce an 8k?
I know DB trusts do not contain all of our assets in safe harbor but I was really hoping to see some sort of initial distribution with DB probate. Any initial distribution from DB probate would at least verify our long held assumption that FDIC just didn't illegally confiscate our assets in safe harbor.
Killinger was ceo for 18 years. He should have received plenty of common shares as part of his compensation. He must have at least a few million shares at time of bankruptcy.
How many shares did Killinger own in 2008 at filing of bankruptcy? Does anyone know? I must assume he owns at least that many escrow markers. Ehat if Killinger has been lurking on this board like many of us? :)
Az, do you expect the $650 million to JPM to happen by this Friday? I'm still not clear on whether the probate payout was approved by the judge on the 16th. I thought we would need to wait until July 27th to wait for the 30 day notices to "mom and pop" investors.
If the judge did approve on the 16th, should we expect JPM to announce the $650 million payment by this Friday? payment within 10 business days as part of last year's settlement?
Az, does this mean non-releasing common shares should also be getting back assets from the wmiic trusts? Perhaps the signed releases are only for the 75/25 split of WMILT as you say so the original beneficiaries of wmmic trusts should be all original wamu common shareholders? I don't know how they would implement that since the old shares have been canceled and all the shareholder information has been lost.
Az, I dont know about everyone else but I certainly do appreciate your presentation of how the WMB noteholders and preferreds are each supported by compartamentalized trusts. Thats why I was asking you about the DB probate closure to our ultimate escrow payout time table. Your presentation made me rethink my original estimation of payout timeline.
From your best estimate, can you layout a possible timeline of events that we should be looking from now until escrow markers payout and wmih merger with remaining illiquid assets?
I would appreciate your guess in both timing and the mechanism of how the funds would flow back to wmb noteholders, preferreds, commons and wmih.
Thanks again for your time this morning.
AZ, is DB probate payout then only going to affect WMB noteholders (class 17)? So we will still need to wait for the FDIC-R to close thereafter and then have the safeharbor assets released for return to escrow? So August 1st payout unlikely? Escrow payout by Nov 1st then?
AZ, may I clarify your position on the 75/25 split? Is the following your position?
Both preferreds and commons gets returns simultaneously at 75/25 spkit ratio until each "claim" on account is fully satisfied -- Preferreds claim being face value plus a court approved interest beyond maturity date (1.9%).
Once, preferreds "claim" is satisfied, they will no longer receive 75% and the commons will receive 100% thereafter?
No that 2.9% interest margin is actually really good. I dont think most rmbs portfolios can generate that kind of profit margin now. As I recall, the actual interest income for the portfolio was around 5.9% and the cost of the loan funding (i.e. interest owed to deposit base) as 2%.
You can find the numbers in the 2007 wamu 10k
The 2.9% interest margin can be found in the last published 2007 wamu 10k. my only uncertainty is whether or not that 2.9% includes the servicing cost owed to wmb.
WMI owned about $30 billion principle of $300 billion loan portfolio. It obviously didn't own most of the principle of the portfolio as the portfolio was mostly funded by WMB deposit base. But WMI, did own the rights to the profit margin of 2.9% of the $300 billion portfolio -- which produces about $9 billion in profits a year (times 9 years sitting in safe harbor).
So we are probably looking at $80 billion coming back in my opinion.
Thank you for the clarification. So in a gist, what you gathered fron your encounter with DB lawyers was in their eyes DTC was their "beneficiary" and they are not concerned with where the money goes thereafter?
Wamu999, thank you again for your time in attendance and the wonderful narration. This is what I am intrpreting from the judge's response. He said "no direct impact" to former wamu shareholders and "hundreds of thousands" of beneficiaries.
My intrepretation is he was telling Fernandes, the former wamu "shareholders" who really lost a lot of value during the takeover will not get anything back from DB closure...unless those shareholders released and are part of the hundreds of thousands of "escrow holders".
Does my intrepetation match the feeling you got at the court or are you more cautious in your reading of the judge?
Its still very interesting that he said mom and pop "shareholders" and not "bondholders". I think he is implying wmi shareholders (now escrow holders) and not wmb bondholders
He actually said mom and pop "shareholders"? Is that a disclosure by the court that escrow markers are getting payment?
You also mentioned that you were going to ask permission from court to disclose some things that you found out at the hearing. Were you able to get permission?
Option, that is actually good news. Proof of service requires 30 dy notice so that means we should probably get a notice of payment for our escrow markers by end of next week. And if FDIC/JPM settlement is approved as of today, we should also shortly see an 8K from JPM.
If service of proof is required down to the individual investor and not the certificate holders (i.e. brokerages?), does that mean escrow holders should be receiving notification of payment before july 27?
Wamu999, did the judge really refer to "mom and pop" investors? Were those the exact words?
Thanks again, for attending the court case today.
Check out that cup and handle forming on the MACD plot above. I'm not a technical trading guy but damn... that's a huge cup and handle. See black line on plot.
Well, that is just my theory based on my reasoning. I may be wrong just like anyone else here who is not an insider.
The good thing for all of us is that none of us can change any of the outcome now. We already signed our releases and none of my theories or anyone elses here is going to make a difference.
The die is cast and we shall see very soon. So lets not get upset here over nothing any of us any control over at this point. We all have our theories and placed our bets accordingly and all of us will be getting returns way above normal, regardless of how 75/25 split ends up being.
Lets just all pray together for June 16 to trigger the end of the receivership. I just want to see whats behind the safe harbor.
This is my theory on 75/25 split.
I think prior to POR7, everyone in the room knew about the very large assets in safe harbor including the judge, but for technical reasons, no one could include it in the payout matrix - due to the legal shielding of safe harbor.
So both commons and preferreds had good points. Preferreds claim that they should get all of APR. Commons claim that had it not been the unfair seizing of the bank by FDIC (government), we would have access to safe harbot assets, and preferred wcan be easily paid off.
So it was a conundrum for the judge. Technically, preferreds should get the entire of WMIH but it would not be fair in the spirit of the law... since everyone is aware of the very large assets shielded by safe harbor. Judge wanted to make a "fair" outcome. So 75/25 on "claims" on account.
If no assets ever came back from safe harbor (very unlikely), preferreds would get most of WMIH. But if alot of assets do come back from safe assets, preferreds would be easily paid face plus interest with 75/25 split and everything else going to commons there after. I think it was a brilliant move by the judge to bypass APR in a fair manner while not technically acknowledging the massive assets behind safe harbor.
IMO, 75/25 split until face plus interest for preferreds and everything going to commons there after.
This is also supported by my suspicion in keeping separate escrow markers for both commons and preferreds. If it is trult 75/25 split to the end, they would have issued a single escrow marker and split it 75/25 like they did with the initial issue of WMIH stock.
Simple. FDIC sold the bank (WMB) without its income stream for $1.8 bil... absolutely legal because bank had no income stream. The income stream is the 2.9% interest margin (profit matgin) on the $300 billion loan portfolio that the parent company WMI held...which is now shielded behind safe harbor. Although WMB got all the deposit base (liability) and most of the principle balance of the $300 billion loan portfolio (assets), it didnt get the 2.9% profit margin on the performance of those loans. -- which belongs contractually to MBSs that the bank sponsered and to the parebt WMI holding company (now escrow).
WMI had to declare bankruptcy because once the bank (WMB) was sold, it no longer had access to the profit income stream of $300 billion loan portfolio to service its corporate debt. Per long standing agreements with FDIC, the loan portfolio is shielded behind safe harbor protection to ensure its solvency (to ensure safety of bank deposit base) when the bank was seized. Hence, WMI had to declare bankruptcy because of lack of liquidity (even though it still owned a very large proit machine behind the safe harbor shield).
Fortunately, the shareholders somehow survived the bankruptcy with all creditors almost completely paid without needing money from the piggy bank behind safe harbor.
Once DB probate final distribution is approved on June 16, FDIC-R can finally resolve the bank case and shut down. Only then, will we be able to break that piggy bank behind safe harbor. a very, bery, very large piggy bank getting stuffed with $9 billion of profits a year for the last 9 years..
I'm feeling very very lucky this summer!
FDIC-R has to pay JPM $650 million within 10 business day of the "effective date" according to last year's DB/FDIC/JPM settlement. I believe if probate judge approves on June 16, that would mark the "effective date" of the settlement. So that means JPM has to be paid by June 30th...just in time for their quarterly earnings cutoff.
I don't believe FDIC-R can pay JPM $650 million without final resolution and closure. So I'm thinking there is a high chance that we may find out what's behind safe harbor by June 30th...and escrow payment/WMIH merger by August 1st ??
When Lehman went under, their bondholders were only expecting like 8 cents on the dollar. I think if I recall, they are already past 70 cents on the dollar as of last year, and the payout keeps coming still.
i'm going to go out on a limb here...pretty BIG
Ever wonder why we had a significant contingent of german shareholders? People in the "fatherland" knows what was valuable...imo.
seamus, i don't know how much of the total $300 billion portfolio DB controlled as trustee but it doesn't matter. As soon as the portion that DB controlled gets returned after probate approval, part/all of the safe harbor assets will be revealed and hence, there is no reason to shield the rest of the assets in safe harbor. Any partial revelation of the safe harbor assets upon DB trust dissolution, will trigger the rest of the portfolio revelation...imo.
imo, DB is receiving $3bil for trustee services and JPM is receiving $650mil for servicing fees minus loan put back liabilities from the DB lawsuit. All part of the settlement.
just 8 more days until probate court approval!! no contests filed! I think we are in the clear.
Go here and keep an eye on the filing:
https://ocapps.occourts.org/ProbPubv2NS/SearchCase.do#top_page
Enter Case Number: 30-2016-00892014
Enter Year: 2016
No adversarial filings so far.
Here is why I am really excited.
Here are the 4 parties typically involved in MBS:
1) the sponsoring bank (WMB, now JPM),
(responsible for replacing bad loans with good ones if the portfolio is not performing to spec -- reason for DB lawsuit
2) the servicer (WMB, now JPM)
(responsible for servicing the loans -- collect payments, foreclose, etc...)
3) the beneficiaries
(WMB bond holders & escrow holders)
-- have no rights to the loan assets but hold a contractual right to the profits of the portfolio
4) the trustee (DB)
(the referee making sure everyone is doing the part)
Note that this MBS business can no longer operate once the trustee dissolves the trust. This means, that JPM/FDIC can no longer just simply hold the portfolio for "servicing" purposes once the trust is dissolved. By definition, the dissolution of the trust (end of probate) means, all the assets must have been liquidated and distributed to the beneficiaries.
so if the judge approves on June 16, we are looking at final fireworks!
FDIC-R closing, escrow getting cash, WMIH merging with remaining portfolio in exchange for shares to escrow holders...chain of events within a few weeks, imo
Thanks Bbanbob. That's what I thought. They could have sold at $3 but not a single share. They must be expecting much higher valuation.
Has any WMIH executives or board members sold anu shares in the last 5 years?
Greywolf is an "event driven" fund. They are essentially "smart speculators" or insiders..who knows. Why would someone like Greywolf hold a shell company like WMIH for 5 years? no business. no merging. for NOLs? I dont think so. The only way WMIH makes a juicy bet us the 3.5 billion shares for exchange with something large coming out of safe harbor. thereby current 200 million shareholders can just ride on the upswing valuation with the 3.5 billion shares dilution for some large asset.
sorry, i dont think wamu was "gifted" to jpm. there was a run on the bank with $16 billion withdrawl in a week. As I recall the bank only had $20 billion on hand. that would have left them with only $4billion cash on hand - serious liquidity problem. Fisher made a mistake by writing to FDIC that he planned to raise money by selling some of the portfolio. FDIC panicked. Any large selling from Wamu would have further tanked the MBS market as there was already very little market. Further price depriciation in the MBS market would have forced all the other big banks to further mark down their holdings with the "mark to market" rule - hence potentially causing catastrophic solvency issues with phantom paper losses.
FDIC took over Wamu so that it can lock up their portfolio in safe harbor so that there would be no "dumping" of assets to further spook the market that could have caused a chain reaction of bank failures due to mark to market requirements. mark to market is a great idea when there is a market. when the market is jittery like back in 2008, there is no price discovery for accurate valuation of assets. hence it can create unnecesarry marking down of "paper losses" for banks that could cause artificial insovencies.