“What's in a name? That which we call a rose By any other name would smell as sweet.” William Shakespeare, Romeo and Juliet



Bloomberg is reporting Toxic CDOs Renamed Re-Remics, Come to Life With Pension Funds.



Collateralized debt obligations that helped drive banks to $400 billion of writedowns and credit losses are finding buyers under a different name: Re-Remics.



Re-Remic stands for "resecuritizations of real estate mortgage investment conduits,"the formal name of mortgage bonds. They are composed of AAA rated bonds backed by so-called Alt-A mortgages, issued to borrowers with higher credit scores who don't prove their incomes, seek higher debt ratios or buy investment properties.



Holders of mortgage bonds use Re-Remics to separate better- quality from riskier debt. That increases the chance the higher- ranked debt will retain its AAA rating, enhancing its value enough to boost the total worth of the mortgage pool, said Doug Dachille, chief executive officer of New York-based First Principles Capital Management LLC, which oversees $7 billion in fixed-income investments. A bond trading at 40 cents on the dollar could be split into a piece worth 80 cents and another piece that could then be sold cheaply enough to offer returns as high as 20 percent, Dachille said.



Commercial banks and savings-and-loans held more than $370 billion of non-agency mortgage bonds on March 31, according to Federal Deposit Insurance Corp. data. Much of that can only be sold at fire-sale prices after record subprime-mortgage defaults and home-price declines sparked losses on the underlying loans.

ALT-A Garbage Repackaged