One of the problems I am having with people saying escrows will get paid 100’s of Billions from the "assets" coming back is that most of the assets WMI/WMB/WMBfsb had were Mortgages, about 240 Billion(I know they owned land, buildings, ATMs, Visa shares Boli/Coli etc., etc....) I am not talking about any of that right now, let’s assume just Mortgages.
Example
So a guy gets a 30 year 4% Loan from WMI/WMB/WMBfsb for his house for $24 million (it's a big house) and then plenty of others do the same thing. We all put $2.5 mil down (almost 10% of the House value)
So, the house is the collateral and I am the guy paying principal and interest to the bank, I will pay about $17.2 million in interest and about $41.2 million in total for my $24 million dollar loan over 30 years, remember I kicked in $2.5 million and have immediate equity.
What is the value to the Bank?
The answer is about $17.2 million over 30 years
The bank makes about $952,000 on the first year they held the loan, minus their costs (salaries etc.) and will be less and less each year as the principal and interest are paid. The average per year is about $575,000 over 30 years.
If they sell the loan(s), let’s say 1 year later, how much do they get in the transaction?
The house value increases about 1% and now is worth $26.8 million and the loan value decreases down from $24 mil down to $23.6 mil based on the 12 payments made.
Now multiply the example by 100 (for the full Loan portfolio)
So if WMI/WMB/WMBfsb(or the FDIC) sell the loan(s) to XYZ Bank what would it look like to them?
So the new Buyer (servicer) assumes the risk that the consumer will pay the monthly payments, I am not sure what the new Bank would pay for the loan, is it a premium over the loan value or the property value? Or is it at a discount? I imagine it is a premium when things are normal and a discount in years like 2008, 2009 etc…….
So for the sake of this example, let’s say a premium is paid , whatever that might be, so when the transaction is completed WMI/WMB/WMBfsb receives the premium, which then could be doled out to claimholders. Even though they would get the Loan value plus the premium, the collateral(House and property) moves to the new Bank , meaning WMI/WMB/WMBfsb couldn’t have the rights to the full $240 Billion, it is just an entry on the Books, sure it is an asset, but it is also an accounts receivable. Once they sell it, the only thing that is left on the WMI/WMB/WMBfsb’s Books would be the Premium that could be paid to escrow holders, once everyone else is paid out, and NOT the full $240 Billion.
Does this make sense?
I can see it being 10’s of billions, but not the $240-350 billion some people espouse…..all IMO
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