It’s my belief that if Countrwide were to sell all its REOs, that it would fall below these requirements and this is one reason that many banks refuse to lower prices on their REOs. However, if one of these banks fails completely, the Federal Government could come in and liquidate everything quickly. This could have a cascading effect in that all REOs on all bank balance sheets would have to be marked to the new market prices. If that happens … LOOK OUT BELOWWWWW!
Right now, REO prices are stable in the same way that two tectonic plates pushing against one another are stable. Eventually there’s going to be an earthquake though.
