Just think of the damage that has been done to the housing sector, as well as the national and global economies and financial markets, with only 3% of the probable foreclosures required as a result of the U.S. housing crash having been completed to date. Can you hear me now?
This is the biggest financial and economic disaster in U.S. history -- nothing else even comes close by comparison.
At the end of the fourth quarter of 2011, the outstanding value of mortgage loans tied to residential foreclosures already in OREO as a percentage of all loans outstanding at JPM, BAC, C, and WFC were 0.29%, 0.45%, 0.15%, and 0.35% respectively; very low and easily absorbed. However, the value of non-performing residential loans at these same institutions are 2.14%, 3.55%, 2.24%, and 3.10%, respectively.
If the probable losses associated with these loans had to be absorbed quickly by way of foreclosure and resale of the collateral property, the losses would almost certainly render all of these institutions insolvent and pummel housing values, the economy and global financial markets in the process.Until there is a known plan for how to deal with this issue, I will remain negative on housing. Pretending the issue does not exist simply by not foreclosing and hoping that the economy will rebound to the extent necessary for housing values to increase and mortgagors to start making payments again is ludicrous.
Select the service that is right for you!COMPARE ALL SERVICES
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV