Banks' Troubled Real Estate Loans Up 36 Percent

[Purveyor]

Source: Reuters

WASHINGTON (Reuters) - Banks' troubled real estate loans rose for the fifth consecutive quarter to a total $66.9 billion at the end of the second quarter, the U.S. Federal Deposit Insurance Corporation said on Wednesday.

Noncurrent real estate loans -- those overdue by 90 days or more -- were up 36 percent from a year before and up 10.6 percent from the end of the first quarter, the FDIC said.

Noncurrent home mortgage loans totaled $27.5 billion, up 47 percent from a year earlier and up 12.6 percent from the end of the first quarter, the FDIC said.



Read more: http://www.reuters.com/article/ousiv/idUSWBT00744320070822

[JPZenger]

1. Even Responsible Banks May be Hit

There are many responsible banks that did not participate in the orgy of predatory, exploding interest rate, and no-documentation mortgages. However, they may still be hurt by the side effects. That is because they provided loans and financial guarantees to housing developers. Too many housing developers were also tied into games with mortgages, including mortgages offered through their own financing divisions. As fewer people are eligible under the new mortgage rules, fewer new homes are being built, and some developers are walking away from developments that are half-completed.

As a result, the mainstream banks that provided the developers' construction financing or provided financial guarantees to municipalities that the developers would install public improvements may get screwed.

[sarcasmo]

2. Local radio said 14,000 foreclosures in the 49507 area code, Grand Rapids, MI.

This snowball is getting bigger.

[fasttense]

3. And the subprime readjustments and resulting foreclosures haven't even peaked yet.

In October 2007 the biggest ARM readjustment will occur and it will drop to Aug 07 levels again in December 07. But hang on to your hats, again in January and April 08 there are two big readjustment of interest rates on ARMs, not as high as October 07 but higher then this month. This bad loans coming due problem will continue until about Sept 08. So it looks like things will get a whole lot worse before they get better.

Look at figure 3 at this link:
http://www.financialsense.com/Market/wrapup.htm

Thank Ozy for the link.