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Delinquent jumbo loans in Coastal California pollute bank balance sheets


By golfplan18   Follow   Sun, 20 Jan 2013, 11:10pm PST   730 views   8 comments   Watch (0)   Share   Quote   Permalink   Like (1)   Dislike  

http://ochousingnews.com/news/delinquent-jumbo-loans-in-coastal-california-pollute-bank-balance-sheets?source=Patrick.net

The good news in the mainstream media is that delinquency rates are down year-over-year. Of course, they ignore the fact that delinquencies have flatlined since the settlement agreement in February 2012 because that fact doesn’t fit with their optimism bias. The delinquency rate is a national average, so it doesn’t reflect where the delinquencies have declined and what segments of the loan market are recovering.

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Oil Can   befriend   ignore   Sun, 20 Jan 2013, 11:57pm PST   Share   Quote   Like   Dislike     Comment 1

You wonder how long will this go on? We are talking 5 years now.

iwog   befriend   ignore   Mon, 21 Jan 2013, 12:18am PST   Share   Quote   Like   Dislike     Comment 2

If 2013 looks like 2012 with respect to real estate appreciation, the problem will be diminished greatly.

Like it or not, the solution to jumbo delinquencies is a re-inflated housing market. The banks can simply wait it out.

bmwman91   befriend   ignore   Mon, 21 Jan 2013, 7:09am PST   Share   Quote   Like   Dislike     Comment 3

iwog says

Like it or not, the solution to jumbo delinquencies is a re-inflated housing market.

What is the solution to the re-inflated housing market? Maybe a discussion of the merits of high levels of consumer debt belongs in the economics section, but is a situation where people take on a level of debt that precludes discretionary spending elsewhere what the economy wants for long term stability?

"Well you see, we got this here rat problem. So me and Billy went and got us some cats to kill them rats. Well, you see now we got this here cat problem! So me and Billy went and got some rottweilers to chase away them cats. Well, you see..."

iwog   befriend   ignore   Mon, 21 Jan 2013, 7:14am PST   Share   Quote   Like (1)   Dislike     Comment 4

bmwman91 says

What is the solution to the re-inflated housing market? Maybe a discussion of the merits of high levels of consumer debt belongs in the economics section, but is a situation where people take on a level of debt that precludes discretionary spending elsewhere what the economy wants for long term stability?

We are back to a pre-1930's boom-bust economy that will be difficult to navigate and cause lots of financial hardship. Obviously the next economic boom will end badly just like the previous one did.

You can't treat the symptoms. If real estate transactions were reigned in, the money sloshing around would just go into stocks or oil or corn or something else that would make life difficult.

The solution is to limit wealth disparity.

bmwman91   befriend   ignore   Mon, 21 Jan 2013, 7:24am PST   Share   Quote   Like   Dislike     Comment 5

iwog says

The solution is to limit wealth disparity.

That's the real trick.

As far as I can tell, the (or one of them) root causes is regulatory capture. The question is, though, can FDR style crack-downs on Wall Street happen without completely imploding the economy? Just about everyone with a retirement account or mutual finds is invested in the inflated financial sector and the baloney valuations of its products. Are we just delaying the next Great Depression, or can the corruption be reigned in without dire consequences? It looks to me like everyone is basically dependent on the continuation of current asset bubbles if they want to maintain the current quality of life.

raindoctor   befriend   ignore   Mon, 21 Jan 2013, 8:45am PST   Share   Quote   Like   Dislike     Comment 6

They appear delinquent to us. Since banks are not employing Basil III Mark to Market accounting, they don't worry about these jumbo loans. If they use mark to market accounting, banks end up loosing the capital. This is the reason why banks do not want to sell underwater homes. If they sell these, they have to show losses on the balance sheet. Losses will eat into the capital.

We all think that it is rational for banks to just sell. Banks are rational too!

fedwatcher   befriend   ignore   Mon, 21 Jan 2013, 10:06am PST   Share   Quote   Like   Dislike     Comment 7

"raindoctor" got this right. The accounting rules were changed to allow insolvent banks to appear solvent. Thus, they sit on these delinquent jumbos.

A further problem in California for the banks is that California has a single acction rule, that is even though the loans could be full-recourse (not original purchase money), to secure a deficancy judgement they have to use judical foreclosure. In many cases, the bank lacks the proper paperwork.

HEY YOU   befriend   ignore   Mon, 21 Jan 2013, 12:26pm PST   Share   Quote   Like   Dislike     Comment 8

Oil Can says

You wonder how long will this go on? We are talking 5 years now.

I always liked the saying: "What can't continue, won't continue." I don't have any idea "how long" in this giant ponzi fraud economy.

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