When AI Goes Wrong: Zillow’s Half-Billion Dollar Writedown
Zillow Group provides information about homes, real estate listings, and mortgages through their website and mobile applications. Zillow serves homeowners, buyers, sellers, renters, and real estate professionals throughout the United States. In November, Zillow Group Inc.’s shares plunged almost 40% as the online real estate giant decided to wind down its house-flipping business. What will take longer to unfold? The impact on the $1.15 billion in residential mortgage-backed securities (RMBS) Zillow issued to support the business. On November 2, Zillow predicted writedowns of as much as $569 million to wind down the Zillow Offers business. The homes it bought and expected to sell at a profit were used as collateral for private-label, whole-loan RMBS it settled in August and October. Zillow Offers stumbled in recent months as it tweaked its algorithms to make more aggressive offers, causing it to overpay for houses just as the market began to cool. What happens when the underlying homes are unable to sell above the price in which Zillow paid for them?
Join Bloomberg for Education as we dive into the main metrics used to judge the performance of an RMBS. We will highlight our main collateral analysis tool and run projections using our own custom prepayment and default assumptions.
In this presentation, we will:
- View the structure of Mortgage Backed Securities as a whole and how the securitization process appeals to different investor types
- Learn how to analyze MBS cash flows history
- Use historical cash flows to project cash flows going forward, net of losses
- Share a takeaway assignment in which you can practice what you've learned
Join Bloomberg for Education as we dive into the main metrics used to judge the performance of an RMBS. We will highlight our main collateral analysis tool and run projections using our own custom prepayment and default assumptions.
In this presentation, we will:
- View the structure of Mortgage Backed Securities as a whole and how the securitization process appeals to different investor types
- Learn how to analyze MBS cash flows history
- Use historical cash flows to project cash flows going forward, net of losses
- Share a takeaway assignment in which you can practice what you've learned
Speakers
Mike Goolsby
Application Specialist
Bloomberg L.P.
Mike Goolsby is a Mortgage Backed Security and Structured Products Application Specialist at Bloomberg Headquarters in New York City with over 5 years of experience. Mike has covered sell-side accounts for Bloomberg, managed teams of fixed income and mortgage specialists, and has experience leveraging various programming languages for automation and collateral analysis purposes. He graduated from Rutgers University with a degree in Finance.