Do you wonder why Citibank (C), JP Morgan (JPM) and Bank of America (BAC) are rushing to rework mortgages and keep people in their homes? The following chart tells us why.
This chart is stunning. The shear number of homes, 30% in many states, means the banks can't resell them for anything if they foreclose on them. It is in the banks' best interest to keep these people living in their homes. The losses the banks will take holding the real estate will far outpace whatever diminished losses they take on a reworked mortgage.
Months ago, before this whole mess got started, there was a plan for banks to cut loan payments in return for a portion of the future appreciation of the home. One has to wonder if some of the price decline from the flood of foreclosed homes hitting the market could have been avoided had banks acted sooner to keep people in those homes.
Disclosure: Long C
