dcollon Posted February 9, 2012 Posted February 9, 2012 http://www.bloomberg.com/news/2012-02-08/foreclosure-deal-to-offer-17b-mortgage-relief.html
beerbaron Posted February 9, 2012 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
racemize Posted February 9, 2012 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.
beerbaron Posted February 9, 2012 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
Uccmal Posted February 9, 2012 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
Kraven Posted February 9, 2012 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.
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