Good news for MBI, Deutsche Bank, OeBB Settle $882 Milli

关于我的MBI重仓，我的坎特不安的心终于获得了一些安慰。真的是好消息啊！真是希望MBI赶快涨，压力好大呀！

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Jan. 16 (Bloomberg) -- Deutsche Bank AG and OeBB-Holding AG, Austria’s state-owned railroad company, reached a settlement in a dispute regarding 613 million euros ($882 million) worth of derivatives.

Germany’s largest bank is receiving 295 million euros in return for dissolving the contract on collateralized debt obligations between the parties, the two companies said yesterday in an e-mailed statement. The CDOs will revert to Frankfurt-based Deutsche Bank.

OeBB bought the derivatives from Deutsche Bank in 2005 and 2006 to boost returns on its investments. The securities were hurt by the credit crunch that followed the collapse of the U.S. mortgage market, forcing Vienna-based OeBB to write down the entire value of the securities.

Derivatives are financial instruments derived from stocks, bonds, loans, currencies and commodities, or linked to specific events like changes in interest rates or weather. Credit-default swaps are derivatives used to protect against debt losses or speculate on credit quality, and pay the buyer face value in exchange for the underlying securities or the cash equivalent if a borrower fails to meet its obligations.

OeBB’s CDOs package credit-default swaps tied to debt including asset-backed securities and company bonds. They expire from 2013 to 2015. OeBB made provisions on the securities of 420 million euros in 2008, and 157 million euros the year before, the company said in April, when it reported a record 966 million-euro loss.

OeBB had appealed a February court ruling dismissing a claim that Deutsche Bank didn’t disclose the risks associated with the derivatives. Yesterday’s settlement ends all legal disputes connected to the case, according to the statement.

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JP Morgan forced to buy back soured mortgages; sets aside reserves

An excerpt from JP Morgan\'s Conference call on Friday Jan 15/2010.

One of the main drivers of the $1.4 billion Consumer Lending loss was higher reserves J.P. Morgan set aside to cover mortgages that the bank may be forced to buy back.

During the real estate boom, many banks packaged up mortgages into securities and sold them. These securities were often insured by bond insurers such as MBIA Inc and Ambac Financial .

Now that defaults and foreclosures have soared, these insurers have been left paying big claims. However, they\'re also scrutinizing a lot of the securities to see whether the underlying mortgages were underwritten properly.

If fraud or mistakes are uncovered, the insurers can try to force the banks that sold the mortgages to buy them back - at their original value. This potentially leaves the banks with the losses.

Mortgage insurers, including MGIC Investment and Genworth Financial , are also challenging the underwriting on home loans they covered.

Mortgage insurers have rescinded, or canceled, roughly $6 billion in claims submitted since January 2008 and they could cancel another $2 billion to $4 billion in the next few years, Moody\'s estimated in December. Bond insurers have reported more than $4 billion in credits for loan put-backs, the rating agency added.

During J.P. Morgan\'s conference call on Friday, UBS analyst Glenn Schorr asked how big an issue this could be for the bank.

Obviously it\'s picked up, Cavanagh said. All parties in the mortgage chain are taking a look at their rights and looking to bring claims.