Note-on-Note Financing: Banks’ Loan Modification Morass Explained

Sources: https://x.com/JackFarley96/status/1969134703039922648My Crude Representation with Rough Calculations for a 2-year off-the-books move from Chase to Hedge Fund* A simple file/model. It is more complex than shown…but you get the idea.* Hedge Fund is not liable for anything that goes awry with the underlying asset (home mortgage). * Likely too, the cost to maintain collection rate (or lower delinquencies) will eat into the $3.76M. * Does the Hedge Fund B hire a (LLC Debt Collector) for like $500,000 per year? To spot those delinquencies that can be coerced to pay up ASAP… or keep the status quo?* Chase just wants to buy time and make their bad loans disappear for awhile.* Hedge Fund gets a profit - without a ton of work, if they make sure they can calculate that interest flow and maintain it above cost of interest paid back to Chase.* https://www.trepp.com/trepptalk/cmbs-delinquency-rate-climbs-again-in-july-2025-multifamily-drives-uptick : remember, some Mortgage Backed Security (MBS) is bound to have a 2-3 sigma deviation from average rate of delinquencies. This is a public episode. If you'd like to discuss this with other subscribers or get access to bonus episodes, visit jasonpowers.substack.com/subscribe