MBIA Mortgage Math Victory Overwhelmed by CMBS Seizure

Mark Tapley was neither emotionally nor intellectually prepared for outsized CMBS deterioration. Commutation gains were of course far from surprising though slightly underwhelming, but the details are interesting.
This quarter sums up the quarter nicely:

"… $604 million of incremental economic losses on transactions backed by pools of commercial mortgage-backed securities offset by a reduction of approximately $227 million in economic losses on multi-sector ABS CDO transactions, primarily as a result of commutations during the quarter."

The commutations appear to have been roughly 2/3 AAA exposure and 1/3 BIG exposure. CIBC, CMBC, RBC, Barclays, and JP Morgan were most likely the five counterparties commuting in the fourth quarter and Citi is the only commuter in the first quarter.

We are eager to learn who Barclay's struck a deal with in January. As for MBIA, we hope for more color on CMBS tomorrow.

Update 3/2: Based on Jay's comments, the CMBS losses suggest that in addition to adverse developments and model changes, MBIA is increasingly trying to settle these exposures via commutations. Perhaps the Citi deal was in this vein. The biggest positive we took from the call was Jay's affirmation of targeting full recoveries through putbacks rather than booked loss reserves. We previously assumed this to be the reason that a deal had not already been struck with Ally in this post.