[quote=permabear][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.[/quote]
Yes, I’m being completely serious.
I think you’re confused as to the relationship between the GSEs and “the banks.” The GSEs INSURE all of the mortgages they underwrite and securitize. And the GSEs are now owned by the U.S. Government – that is, the American Taxpayers. When a servicer forecloses on a loan that’s held within an MBS insured by a GSE, the GSE – that is, We the People – is on the hook for the loss. NOT the servicer. And NOT the financial institution that holds the MBS being insured by the GSE. Consequently, “the banks leisure” has nothing at all to do with the GSEs. When the GSEs “crack down” and take losses in foreclosure, the holders of the MBS could care less – it’s We the People who are taking the loss.
So, having explained that, I’ll ask you again: What does the “GSEs cracking down on delinquent loans” have to do with banks having to write down losses? If the “chain of events is very straightforward” then you should have no problem explaining it to me.
