Wednesday, May 23, 2007

The Fed Is Desperate to Mop Up the Mortgage Mess Before Reality Hits the News

Just read this letter from the Federal Reserve's main office to all Fed-supervised banks. It states, in sum, that the loan departments would do well to work out repayment difficulties rather than impose foreclosure.

"We don't want to look bad, right?" [Paraphrased]

obeysticker
[Thanks to rocket-travel.com/seasia for the image.]

"The agencies will not penalize financial institutions that pursue reasonable workout arrangements with borrowers who have encountered financial problems." [Actual quote]

But of course they won't.... Oh, I see. Does that mean that they would penalize those that don't want to bite this particular bullet?

The carrot for good behavior is "favorable Community Reinvestment Act (CRA) consideration" whatever goodies that consists of.

Looks like the Fed is scrambling to avoid the increase of evidence of foreclosures in the statistics.

"Wonder why they're so nervous," she asked, tongue in cheek. (For her answer, see the last post, among others.)
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