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Middle-aged Mom, my understanding is, using the required mark-to-market accounting (don't even get me started), a property unsold while listed as an REO is fairly toxic to a bank's balance sheet. Banks have a major incentive to get these properties sold before foreclosing on them, for that very reason.
If a property is NEVER listed as bad debt then they would never have it as anything other than an asset. Once the debt goes bad they have problem.
The short sale leaves a real hole.
A borrower that continues to pay does not, even if the terms are changes and the length of the loan increased.
Similarly the "shadow inventory" of zombie borrowers living in places for FREE is not as bad to the twisted minds of the balance sheet obsessed as the realization that a foreclosure really costs money...
The banks are sorta like the computer in the 2001 movie -- one set of instructions says "never hurt the scientists on board" the other set says "keep all of your sensors trained on the moon of Jupiter". Thus the computer goes nuts and locks out the astronauts so they die in space/ their hibernation terminates.
Banks are being told "treat the foreclosed with mercy and compassion" at the same time they are told "do everything you can to make yourself attractive to recapitialization. They are going INSANE trying to pretty up balance sheets littered with loans that NEVER SHOULD HAVE BEEN MADE while trying not to incur the wrath of members of Congress.
Location: Mokelumne Hill, CA & El Pescadero, BCS MX.
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When it comes to market value of a property, these banks should look very carefully at their options vis a vis short sale or foreclosure. I see them deny a short sale and then foreclose and come back into the market at a price that makes their short sale number look like a bonanza. They also wasted 6 months worth of marketing time!
This truly confuses me, but then again, I'm not a drooling, knuckle dragging, cant find my a** with either hand, asset manager.
When it comes to market value of a property, these banks should look very carefully at their options vis a vis short sale or foreclosure. I see them deny a short sale and then foreclose and come back into the market at a price that makes their short sale number look like a bonanza. They also wasted 6 months worth of marketing time!
This truly confuses me, but then again, I'm not a drooling, knuckle dragging, cant find my a** with either hand, asset manager.
Ha! Well, I'm just one of the dopey fools at a global financial services firm.
Middle-aged Mom, my understanding is, using the required mark-to-market accounting (don't even get me started), a property unsold while listed as an REO is fairly toxic to a bank's balance sheet. Banks have a major incentive to get these properties sold before foreclosing on them, for that very reason.
Banks hammered Congress who in turn hammered FASB and voila, FASB 157e was born.
The banks claim that it's too difficult to MTM the underlying assets and that doing so, would unfairly impact their balance sheets. They claim that this is only a “temporary” problem and they shouldn’t be penalized because of that.
There is no incentive to sell off toxic assets, chop - chop.
The banks claim that it's too difficult to MTM the underlying assets and that doing so, would unfairly impact their balance sheets. They claim that this is only a “temporary” problem and they shouldn’t be penalized because of that.
FASB 157 makes up a lot of my day job...
Also, I actually agree with banks that mark-to-market accounting is pretty wretched in practice. Not just difficult to implement, but not "reality-based."
Of course, I'm perfectly willing to take advantage of this failure of policy to snag a good deal on a house. Very principled of me, I know.
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