[quote=davelj]I’m curious… What does the “GSEs cracking down on delinquent loans” have to do with banks having to write down losses?[/quote]
Are you being serious? I ask because the chain of events is very straightforward. Delinquent, foreclosed, sold at auction, any loss written down. Once the property is marked to market, the loss is made real – hence the current “extend and pretend”. The GSEs are now explicitly saying that delinquent loans MUST be foreclosed and sold at auction w/i 60 days, rather than at the banks’ leisure as it has been so far.
Since foreclosures just hit a new record in August, AND the banks are already sitting on tons of delinquencies (squatters) that they have neglected to foreclose on, this new scrutiny could cause banks to suddenly have to write down large losses.
