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Foreclosure Deal to Offer $17B Mortgage Relief


dcollon
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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

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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.

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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

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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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