dcollon Posted February 9, 2012 Share Posted February 9, 2012 http://www.bloomberg.com/news/2012-02-08/foreclosure-deal-to-offer-17b-mortgage-relief.html Link to comment Share on other sites More sharing options...
beerbaron Posted February 9, 2012 Share Posted February 9, 2012 Can someone explain how that would translate in their books? From my understanding they are not looking to refinance under-performing loans so we are talking 100% asset write-off. So by definition The big 3 would need to take a direct hit on their equity by the same amount... BeerBaron Link to comment Share on other sites More sharing options...
racemize Posted February 9, 2012 Share Posted February 9, 2012 Can someone explain how that would translate in their books? From my understanding they are not looking to refinance under-performing loans so we are talking 100% asset write-off. So by definition The big 3 would need to take a direct hit on their equity by the same amount... BeerBaron I presume it would just come out of reserves. Link to comment Share on other sites More sharing options...
beerbaron Posted February 9, 2012 Share Posted February 9, 2012 Can someone explain how that would translate in their books? From my understanding they are not looking to refinance under-performing loans so we are talking 100% asset write-off. So by definition The big 3 would need to take a direct hit on their equity by the same amount... BeerBaron I presume it would just come out of reserves. Would it? My understanding is that reserves are put up based on current NOL and past default rate. If you refinance users that are not classified in NOL then you take a direct hit. Maybe someone with more bank accounting knowledge could help... BeerBaron Link to comment Share on other sites More sharing options...
Uccmal Posted February 9, 2012 Share Posted February 9, 2012 According to this most of the money has already been reserved: http://www.reuters.com/article/2012/02/07/us-settlement-bankcosts-idUSTRE8161YD20120207 Link to comment Share on other sites More sharing options...
Kraven Posted February 9, 2012 Share Posted February 9, 2012 Can someone explain how that would translate in their books? From my understanding they are not looking to refinance under-performing loans so we are talking 100% asset write-off. So by definition The big 3 would need to take a direct hit on their equity by the same amount... BeerBaron I presume it would just come out of reserves. Would it? My understanding is that reserves are put up based on current NOL and past default rate. If you refinance users that are not classified in NOL then you take a direct hit. Maybe someone with more bank accounting knowledge could help... BeerBaron Reserves for losses are fungible. That is, it's just a pool of money that's been put aside to cover charge offs. It doesn't matter whether a dollar in reserves was put aside 5 years ago and is being used for a charge off today or whether current earnings need to be provisioned to cover losses. Link to comment Share on other sites More sharing options...
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