jtmortgagebanker

The Banking Time Bomb Test

Large banks like BAC and WFC are refinancing billions of dollars of mortgages as fast as they can process and fund them. Large percentages of these loans are being sold to FHA. The impact to the banks' bottom lines is not just the fee income but getting loans off their books and offloading the risk to FHA (or FNMA or FHLMC). Undoubtedly, banks had set asided loan loss reserves for a large number of loans being refinanced. What impact does that have on the bottom line? I suspect the freed-up reserves are counted as profit. It would be interesting to know the difference in risk to the bank between selling a loan to FHA and securitizing a loan with many others and selling the paper ...

Loan Modifications: BofA Gets Taken to Court

Do you or anyone reading this know if the same requirement (buying the loan back at face value) applies to "short sales"? In this context, BAC may negotiate with the homeowner to reduce the principal of the mortgage if the homeowner sells the house. This is getting more common as the seller wants to get out but cannot pay off the full amount of the loan since the house is worth less than what they owe.

It seems lillogical for a lender to let a house go into foreclosure rather than accept a short sale but if this is the explanation, it would be economically rational.