September 30, 2008
Why are you guys not suspending Mark to Market rules?
Clearly this rule does not apply to paper assets underpinned by tangible assets.
Thus CMO should not be set to mark to market rules.
The holder of the CMO becomes the owner of the real estate at the time of foreclosure. Therefore at sheriff’s foreclosure sale, the holder of the CMO can set the floor on the value of the tangible asset. For example, the holder of a CMO with a mortgage for a house in Las Vegas can reasonably set the floor at about 50% of face value (33% decline in market valuation of the home, and 10-15% for carry costs, repair, and marketing). This is far more than the 22% current market value of the CMO. The current value is far below the actual value.
The rule change would go along way to solving the problem. Your inaction is truly not helpful.