Julie brought up the mark-to-market accounting requirement for banks.
I don’t think the banks worry much about marking to market. Of the 43 Countrywide/B of A listings I’ve sold, I can’t think of one of the foreclosed mortgages that was actually owned by them. CFC was selling their paper on Wall Street as private-label MBS, and those owners may have some requirement – but B of A is just the servicer on the majority of CFC paper.
Without the accounting requirements, the servicers might keep kicking down the road forever the 17,247 San Diego County properties in default.
Here is another example of can-kicking. The FDIC just agreed to sell two portfolios of loans with a combined unpaid balance of $3.05 billion to Lennar Corporation.
MIAMI, Feb. 10 /PRNewswire-FirstCall/ — Lennar Corporation, one of the nation’s largest homebuilders, today announced the closing of two structured transactions with the Federal Deposit Insurance Corporation (“FDIC”).
The transactions represent the purchase of two portfolios of loans with a combined unpaid balance of $3.05 billion. A subsidiary of Lennar, Rialto Capital Advisors, will conduct the day-to-day management and workout of the portfolios. Lennar acquired indirectly 40% managing member interests in the limited liability companies created to hold the loans for approximately $243 million (net of working capital and transaction costs), including up to $5 million to be contributed by the Rialto management team. The FDIC is retaining the remaining 60% equity interest and is providing $627 million of non-recourse financing at 0% interest for 7 years. The transactions include approximately 5,500 distressed residential and commercial real estate loans from 22 failed bank receiverships.
My point is that here are another 5,500 loans that should be foreclosed on, but instead they are being shuffled off for additional processing.
For those of us who are seeking more REO inventory, it appears that we may be in for a long wait.