As the FDIC takes control of IndyMac bank after the third largest bank failure in History, the Wall Street Journal wrote an article in which they announced that they would be halting foreclosures .
While I understand the political necessity of doing something perceived as positive by the public, and I understand that if they are able to make some of these loans productive, they improve the assets of the bank by moving these from “non-performing” to “performing” loan statuses. However IndyMac specialized in “Alt-A” loans a category between prime and sub-prime that frequently included loans in which borrowers didn’t fully document their incomes or assets. These “liar’s loans” as they have become known, may not provide the best workout opportunities, since they often provided unrealistic financial information to the lender.
The foreclosures will not be stopped, but the FDIC will be reviewing the loans to see what workouts are possible before sending them on to foreclosure.
Taken with the reassurances that Fannie Mae and Freddie Mac are stable, and now have the explicit guarantee of the government behind them, hopefully we’ll be on to better financial news for the rest of the summer – Maybe Price reductions on Salt Water Taffy at the New Jersey Shore! What could be better?