Tony Rand

Is the U.S. Banking System Safe?

Great job - sound advise - outstanding analytics. There is no way that the housing market can begin to correct until we hit bottom. We can't hit the bottom until the affordability index corrects, consumer and investor confidence stabilizes, and the existing bad loans improve in performance - which is not likely unless more aggressive attempts are made toward modifications.

Look for hedge funds that are investing in non-performing mortgage paper to continue their large profit margins so long as they concentrate on keeping consumers in their homes. Increased foreclosures will only impede recovery if inventories continue to increase.

What I don't understand is that banks and servicers should just take this position on their own. It doesn't make any sense to see a non-performing pool of mortgages sell at 50 cents on the dollar when they can write off 30 cents, modify the asset and improve their balance sheets. Since fear follows the repercussions of greed, I do understand why they've lost all common sense at this juncture.