...Capital Mortgage Insurance Corporation The following are a few guidelines to follow when entering into negotiations with Corporate Transfer Services (CTS): 1. Identify what is important to the organization, Capital Mortgage Insurance Corporation (CMI). 2. Be willing to make small concessions towards CTS. This helps to establish a spirit of co-operation while allowing CMI to stand firm on its main issues and gain accommodation from CTS. 3. Plan for obvious reservations from CTS. Though the four CTS owners a in a positive frame of mind, negotiations can at times bring about the worst in others. Steps in the negotiation process to be utilized are: 1. Be prepared: know what your organization wants and understand what the opposition is seeking. 2. Presentation: open your side up for them and openly listen to their needs and wants. 3. Justification: support the needs of your organization and expose the weakness in theirs. 4. Explore: understand their organization’s needs and wants and find ways to make the needs of both parties come together. 5. Show: present areas in which your organization is willing to concede in order to form a better working relationship. 6. Present: possible solutions which take into consideration all points presented by both sides. 7. Wrap it up: form a plan in which the needs of both sides are met. 8. Take action: realization of the plan negotiated. Often times during this part I am reminded of persuasive public...
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...Lewicki−Barry−Saunders: Negotiation: Readings, Exercises, and Cases, Fifth Edition Cases 1. Capital Mortgage Insurance Corporation (A) © The McGraw−Hill Companies, 2007 Case 1 Capital Mortgage Insurance Corporation (A) Frank Randall hung up the telephone, leaned across his desk, and fixed a cold stare at Jim Dolan. OK, Jim. They’ve agreed to a meeting. We’ve got three days to resolve this thing. The question is, what approach should we take? How do we get them to accept our offer? Randall, president of Capital Mortgage Insurance Corporation (CMI), had called Dolan, his senior vice president and treasurer, into his office to help him plan their strategy for completing the acquisition of Corporate Transfer Services (CTS). The two men had begun informal discussions with the principal stockholders of the small employee relocation services company some four months earlier. Now, in late May 1979, they were developing the terms of a formal purchase offer and plotting their strategy for the final negotiations. The acquisition, if consummated, would be the first in CMI’s history. Furthermore, it represented a significant departure from the company’s present business. Randall and Dolan knew that the acquisition could have major implications, both for themselves and for the company they had revitalized over the past several years. Jim Dolan ignored Frank Randall’s intense look and gazed out the eighth-floor window overlooking Philadelphia’s Independence...
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...Case 1: Capital Mortgage Insurance Company Overview This case is set in the late 1970’s and describes an acquisition attempt by Capital Mortgage Insurance of Corporate Transfer Services. CMI is a company that sells mortgage insurance to mortgage lenders and banks but executives at CMI want to grow into the real estate relocation industry. Corporate Transfer Services assists employees who have been transferred to a new city as they try to find a new home. Capital Mortgage Insurance Corporations goal is to acquire Corporate Transfer Services at the lowest cost. The president and vice president of CMI met with the owners of CTS many times. If CMI acquires CTS, it will provide them with an easy way into the relocation industry and a high potential for profit. This makes the acquisition appealing to CMI, regardless of the fact that financially, CTS has been struggling to break even. Corporate Transfer Services wants to be acquired, but is worried about their ownership levels after the acquisition. Analysis Capital Mortgage Insurance Company’s main interest is to expand their financial services capabilities and build a strong network that can rival Merrill Lynch. Growing at a 10-15% annual rate, the corporate relocation business was a very appealing market. CMI has to protect their close relationship with MetroNet, with which Elliott Burr sat on the board. MetroNet proposed and approved the acquisition attempt of CTI. Preservation of good relationships with the CTS...
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...Facts Mr. Smith lives in his principle residence in Indianapolis. The present balance on his home mortgage that was incurred after October 13, 1987 in acquisition and secured by such residence is $300,000. Mr. Smith has no other mortgages and no other residence. He is planning to take out a loan of $240,000 to purchase a condo, close to Northwestern, for his daughters to live and planning to sell the condo when the girls graduate from Northwestern University. The loan of 240,000 will be secured by the condo. Mr. Smith’s filling status remains head of household. He itemizes his deductions. And Mr. Smith has neither net investment income nor disallowed investment interest expense from previous year in the year when he purchases the condo. He will not pay points and mortgage insurance premium on this loan. Issues Can Mr. Smith deduct interest expense on his loan for a condominium? Conclusion Mr. Smith can fully deduct his interest expense as qualified residence interest. Analysis Code §280A(d)(2)(A) holds that the unit used for personal purpose by members of the family of the taxpayer is deemed to be used by the taxpayer for personal purpose. Code §280A(d)(1) states that a dwelling unit is used as the taxpayer’s residence if he uses it for personal purposes more than the greater of 14 days or 10 percent of the number of days during such year for which such unit is rented at a fair rental. Code §163(h)(4)(A)(ii) provides that besides the principal residence, one other...
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...______________________________________________ Comments: ______________________________________________ ______________________________________________ _______________________________________________ _______________________________________________ Abstract The need to encourage house or homeownership has been in the government’s strategic plan since 1934, however, the current financial policies and practices in the housing finance and the mortgage market has characterized by minimum flow of capital in the secondary mortgage market, confusion on the main control authority and various ill practices. This fact has necessitated various changes in the house and homeownership financial. This study collected both primary and secondary data, and found out that the government must set the right policies that will empower house and home consumers to circumvent biased practices and practice informed decision making, these sentiments. There must be improvement in the foreclosure processing and mortgage servicing, notably, from the beginning of the last financial crisis, foreclosures and NAR tried to work with administrators and regulators to formulate criteria for decreasing the risk of foreclosure. There should be increased...
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...pResented by the society of ActuARies, the cAsuAlty ActuARiAl society And the cAnAdiAn institute of ActuARies Risk Management: The Current Financial Crisis, Lessons Learned and Future Implications Copyright 2008 by the Society of Actuaries. R I s k M a n a g e M e n T: the current financial crisis, lessons learned and future implications introduction the current financial crisis presents a case study of a “financial tsunami” (as former federal Reserve chairman Alan Greenspan recently called it) on what can go wrong. its ramifications are far-reaching and the lessons learned will be embedded in risk management practices for years to come. As one of the premier enterprise risk professions in practice today, the actuarial profession is sharing its substantial insight into what went wrong and the implications for the future. on behalf of the society of Actuaries, the casualty Actuarial society and the canadian institute of Actuaries, we are pleased to provide a series of essays on Risk Management: The Current Financial Crisis, Lessons Learned and Future Implications. this e-book is the result of a call for essays on the subject coordinated by the following groups: • • • • The Joint Risk Management Section of the Society of Actuaries, Casualty Actuarial Society and Canadian institute of Actuaries The Investment Section of the Society of Actuaries International Network of Actuarial Risk Managers Enterprise Risk Management Institute International ...
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...The Global Roots of the Current Financial Crisis and its Implications for Regulation Anil Kashyap (University of Chicago) Raghuram Rajan (University of Chicago) Jeremy Stein (Harvard University) Where did the current financial crisis come from? Who or what is to blame? How will it be resolved? How do we undertake reforms for the future? These are the questions this paper will seek to answer. The analysis will have three parts. The first is a rough and ready sketch of the global roots of this crisis. Second, we will focus in a more detailed way on why it hit the financial sector, especially banks. Finally, we will end with some suggestions for future regulation, especially capital regulation. I. A Rough Sketch. It is always useful to start with the macroeconomic environment. In a sense, this is a crisis borne out of previous crises. An important difference between the recent period of sustained growth and previous periods is the low level of long term real interest rates over the last 5 years, certainly relative to the last two decades. Long rates fell following the collapse in investment in both emerging markets and developed countries after the crises in 1998 and the ICT bubble in 2001. Emerging market governments became more circumspect and increased budgetary surpluses, even while cutting back on public investment. For instance, in Philippines, investment fell from 24% of GDP in 1996 to 17% in 2006, while its savings rose from 14% to 20%. From borrowing 10% of its...
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...Danvers, MA 01923, website www.copyright A e t.com. Requests to the Publisher for permission should be r addressed to t Permissions Department, Joh Wiley & Son Inc., 111 Rive Street, Hobok NJ 07030the hn ns, er ken, 5774, (201)74 48-6011, fax (20 01)748-6008, we ebsite http://www w.wiley.com/go/ /permissions. To order book or for custom service, pleas call 1(800)-CA ks mer se ALL-WILEY (2 225-5945). Printed in the United States of America. e o ISBN 978- 0-470-56516-2 The Financial Crisis: 2007-2009 Objectives Understand the major influences that led to the 2007 2009 Financial Crises Describe the role that agency cost issues played in the financing of mortgages to developing mortgage backed securities and other financially engineered securities based on mortgages Describe the timeline of events that unfolded during the financial crisis Explain how financial managers must consider the risk, not only the return potential, of their activities Discuss the role of government intervention in the context of economy theory and practice INTRODUCTION How did the...
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...Foundations and Trends R in Finance Vol. 4, No. 4 (2009) 247–325 c 2010 V. V. Acharya, T. Cooley, M. Richardson and I. Walter DOI: 10.1561/0500000025 Manufacturing Tail Risk: A Perspective on the Financial Crisis of 2007–2009 By Viral V. Acharya, Thomas Cooley, Matthew Richardson and Ingo Walter Contents 1 Introduction 2 How Did We Get There? 2.1 2.2 2.3 The Panic of 1907 and Its Aftermath Bank Competition, Financial Innovation and Risk-Taking in the Last Decades of the 20th Century Risk-Taking Incentives of Financial Institutions 249 253 253 258 264 3 The New Banking Model of Manufacturing Tail Risk 4 Alternative Explanations of the Financial Crisis 5 Conclusion A Appendix: Tail Risk in the Rest of the World References 273 292 311 314 320 Foundations and Trends R in Finance Vol. 4, No. 4 (2009) 247–325 c 2010 V. V. Acharya, T. Cooley, M. Richardson and I. Walter DOI: 10.1561/0500000025 Manufacturing Tail Risk: A Perspective on the Financial Crisis of 2007–2009 Viral V. Acharya1 , Thomas Cooley2 , Matthew Richardson3 and Ingo Walter4 1 2 3 4 Stern USA, Stern USA Stern USA Stern USA School of Business, New York University, New York, NY 10012, vacharya@stern.nyu.edu School of Business, New York University, New York, NY 10012, School of Business, New York University, New York, NY 10012, School of Business, New York University, New York, NY 10012, Abstract We argue that the fundamental cause of the financial crisis of 2007–2009 was that large, complex...
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...What Needs to be Done – The Follow Through Plan Momentum is a beautiful force, especially if moving in the desired direction. However, economic momentum can be lost quickly if the inertia that mobilized it dissipates with waning enthusiasm. This article is about the continuation of what needs to be done to maintain positive economic inertia and provide a kinetic boost that will charge the US economy successfully into the foreseeable future. Although time is of the essence in any equation dealing with momentum, some of the “Follow Through Plan’s” planks discussed below have greater priority versus the remaining. But let us not pretend that if some of the plan is sacrificed due to the “feel good” inspirations fostered by the beginnings of proactive economic stimulus, it will not be sustainable if the core retains the properties of risk-tails that can demolish the forward curve permanently … and swiftly. Black Swan events, or those considered to be Gaussian anomalies or 9th degree standard deviation eclipses do not, and have not, occurred at the interval statistical quants have modeled. In fact the anomaly is to believe that Black Swan events are anything but a force of nature and occur about as common, as frequent and as necessary as the changing of the seasons. The “Follow Through Plan”, needed to retain economic leadership of the United States well into the 21st century, should include all of the following critical levels of change and direction. The order...
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...profits. (Pridgen, 2005) The U.S. Government Accountability Office (GAO) defines predatory lending as transactions that contain terms and conditions that ultimately harm borrowers. (Bond, Musto, & Yilmaz, 2009) Determining who benefits in the financial transaction helps to determine whether or not a transaction can be labeled as predatory. When a borrower does not benefit, the mortgage is viewed as a predatory lending practice. Predatory lenders often use aggressive sales tactics to compel borrowers into refinancing when the financing terms are not in the borrower’s interest. They pack excessive fees into the transactions, such as insurances, prepayment penalties, and yield spread premiums. (Pridgen, 2005) A refinanced mortgage can be filled with excessive, unnecessary fees. A predatory lender typically adds them into the loan amount to disguise them. The most common extra charge is insurance, including mortgage, fire, hazard, life, disability, and health insurance. Insurance premiums are added in to the loan, hiding it from the borrower. The lender receives large commissions every year on the insurance premiums paid. Predatory lenders make their money by adding extras. In 2001, Yasmeen El, a 61 year old woman in Philadelphia, received an unsolicited check in the mail from Household Finance for...
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...Why is corporate finance important to all manager? Corporate finance is important to all managers due to the priority capital has in a company. That is, without effective financial management, a company will be unable to develop products, get them to market and grow the business. Organizational forms a company may have as it evolves from start up to major corporation are: Sole Propietorship. Effectively a person “hangs a shingle” and becomes a business. It is subject to few government regulations and income is taxes as the proprietor’s personal income. However, its structure makes it difficult to generate growth capital, the proprietor has unlimited personal liability for company debts and the company only lives as long as the propietor. Partnership: This can take the form of a limited partnership and a general partnership where liability and control is divided along these lines. A limited liability partnership or limited liability company is structured to where all partners have limited liability with respect to the business’s liabilities. This works well for the partners but is an area of concern for the partnerships lenders, customers and suppliers. Corporation: This is created as a separate legal entity under law and as such is “separate and distinct” from its owners and managers. The advantages are is has unlimited life and can continue after the death of the owners. It also has easy transferability of ownership interest through transfer and sale of shares...
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...December 1, 2012 HRM 594-60124 Negotiation Skills Keller Graduate School of Management Cast Study 1: Capital Mortgage Insurance Corporation In any good negotiation, it is important that the Capital Mortgage Insurance Corporation (CMIC) and Corporate Transfer Services (CTS) understand the issue and must come into the negotiation with a clear idea of what the conflict is and what they would like to gain from it. Both companies should present their side of the case. The dilemma is the president of Capital Mortgage Insurance Corporation, Frank Randall and his senior vice president and treasurer Jim Dolan are planning a strategy in order to compete and successfully receive the acquisition of Corporate Transfer Services. In order for Capital Mortgage Insurance Corp to accomplish this, they must understand the interest and position of Corporate Transfer Services. Once this is accomplished, Randall and Dolan must come into the negotiation with a clear idea of what the conflict is and what they would like to gain from the negotiation. If the Corporate Transfer Services is unwilling to agree or reach an impasse, then CMIC should ask questions such as, what are you concerns and ultimately, what would you like to see happen with this transition? CMIC must be willing to actively listen to the concerns of CTS and be willing to explore other solutions in order to fulfill the agreement. The bulk of the negotiation process is a continuous back and forth of ideas, options, and even arguments...
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...CORPORATE FINANCE 307 LITERATURE REVIEW Student Name / ID: Chay Yu Xi 15907811 Jacqueline Teo Hui Yun 15805054 Ting Heng Huat 14973837 Tutor: Leo Kee Chye Tutorial Day / Time: Monday / 2pm Table of Contents Abstract The Tech Bubble Introduction Lowering of Interest Rates Adjustable Rate Mortgage Securitization Mortgage Backed Securities Collateralized Debt Obligation Credit Default Swap Government Reaction and Policies Emergency TARP Repercussions Basel Disadvantages Future Policy Requirements Controversy Conclusion Reference List Review of the causes of the 2008 Financial Crisis in US. Abstract This paper seeks to summarize a stream of research that has delved into the major causes of the financial crisis in 2008. More precisely, we will be looking at a combination of causes such as the sub-prime mortgage crisis, the mortgage backed security, the collateralized debt obligation as well as how the incidental credit-default swap contributed to the incident. This paper will begin from analyzing the past, when it happened and how it built up and resulted in the financial crisis. The significance of this literature review seeks to give a simplified explanation of the financial crisis of 2008 and will be useful for the people unversed in economics or finance but wish to have a basic understanding of its causes and history. The Tech Bubble During the early 2000, numerous companies and individuals bought new operating...
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...MCS 2100 Personal Financial Management Case Study Jingyao Zhang 0626757 November 9th, 2011 MCS 2100 – Personal Finance Management: Case Study Abstract Jane is looking for possible investment ideas in order to obtain her future house down payment. She does not want to spend much time in managing her investments and has a medium-low risk level. Her goal on investment is seeking for growth for down payments on a house if she decides to pay 25 percent down payment. However, if she decides to pay less than 25 percent down payment, her investment goal is seeking for income. Different investment goal differentiates investment choices. The purpose of this case study is to recommend possible investment choices for Jane and the criteria used to evaluate those investment choices. Introduction Jane has inherited $30,000 from her grandmother and plans to invest this money for a future down payment on a house. Her plan is to buy a house outside of Toronto area in the next three to four years. She has a lost risk level of four out of ten as she does not want to lose the money she got from her grandmother. Moreover, she would like to obtain tax relief on her investment. At the same time, she only wants to spend about one hour per month in managing her investment. She has an adequate emergency fund on hand; therefore, she does not need to access these funds. Her travel expenses will be paid by her income. Investment Goals The primary investment goal is to obtain...
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