Gotta love the accounting profession. Only in this country could criminal Wall Street banks record income on mortgages even though the drone living in the house isn’t paying the mortgage. Isn’t that special. The banks don’t have to write-off the phantom income until they actually foreclose on the house. So, it is actually in the best interest of these criminal banks to keep recording the fake income, let deadbeats occupy the McMansion and not foreclose on the property. Isn’t that special. You may have seen the news yesterday that the number of foreclosures fell in December. I wonder why the criminal Wall Street banks aren’t foreclosing? Any guesses?
US Banks Reporting Phantom Income on $1.4 Trillion Delinquent Mortgages
Jan. 12 2011 – 8:36 am |
The giant US banks have been bailed out again from huge potential writeoffs by loosey-goosey accounting accepted by the accounting profession and the regulators.
They are allowed to accrue interest on non-performing mortgages ” until the actual foreclosure takes place, which on average takes about 16 months.
All the phantom interest that is not actually collected is booked as income until the actual act of foreclosure. As a resullt, many bank financial statements actually look much better than they actually are. At foreclosure all the phantom income comes off gthe books of the banks.
This means that Bank of America, Citigroup, JP Morgan and Wells Fargo, among hundreds of other smaller institutions, can report interest due them, but not paid, on an estimated $1.4 trillion of face value mortgages on the 7 million homes that are in the process of being foreclosed.
Ultimately, these banks face a potential loss of $1 trillion on nonperforming loans, suggests Madeleine Schnapp, director of macro-economic research at Trim-Tabs, an economic consulting firm 24.5% owned by Goldman Sachs.
The potential writeoffs could be even larger should home prices continue to weaken, placing more homes in the nomnperforming category on bank balance sheets.
About 6 million homes are still at risk, according to Schnapp, and at least 10% of them are 25% underwater, meaning their market value is 25% less than the mortgage– but the owners are still paying interest to their banks.
Kill Bill says:
More like Enron than Wall street.
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“,,,let deadbeats occupy the McMansion and not foreclose on the property” -Admin
Well, I guess it makes for free security and property maintenance, so theres that.
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13th January 2011 at 2:07 pm
Reverse Engineer says:
“Only in this country could criminal Wall Street banks record income on mortgages even though the drone living in the house isn’t paying the mortgage.”
Nah, this is the way the Irish Banks do it, the Spanish Banks, the British Banks…this is International Banking LAW! LOL.
RE
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13th January 2011 at 2:19 pm
Kill Bill says:
By Julie Schmit, USA TODAY
Foreclosures fell 26% in Dec., but 2010 filings set a record
http://www.usatoday.com/money/economy/housing/2011-01-13-foreclosure13_ST_N.htm
Gee, Julie, I wonder why. O. I Know. Because of loosey-goosey that toxic golden avian.
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13th January 2011 at 2:32 pm
StuckInNJ says:
That’s a neato accounting trick called Deferred Revenue. It’s fun!! Everybody does it … even Ivy League schools, I bet.
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13th January 2011 at 3:46 pm
Administrator says:
Stuck
We get our cash up front. No deferred revenue here.
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13th January 2011 at 3:49 pm
Thinker says:
Just wait until they start the amoritization…
/snark
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13th January 2011 at 4:03 pm
Buckhed says:
Even prostitutes get the cash up front…as do Congressmen.
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13th January 2011 at 6:15 pm
Plato_Plubius says:
Speaking of prostitutes, did you hear about those “freaky deaky Dutch” passing a tax on prostitution! I guess the red light district might need to start having blue light specials in order to bring in more clients to counteract the money the government is going to confiscate from them!
Now that is some hard core organized pimpin!
And no I am not a Dutch-hater but I am a “fat bastard!”
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13th January 2011 at 10:55 pm
Plato_Plubius says:
oopss…here is the link i forgot to post
http://www.cbsnews.com/stories/2011/01/12/world/main7239057.shtml
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13th January 2011 at 10:55 pm
TeresaE says:
So let’s look at what the big banks are up to.
Deadbeats are allowed to squat in their McMansions, and spend their house payments on credit card debt, Outback Steakhouse and cheap, Asian made electronics (don’t forget about the $150 a month service contract with that), so that banks can continue to pretend nothing is wrong AND make record “profits” AND pay out their outrageous bonuses.
Meanwhile, the SAME banks are running to small businesses all across our country, running appraisals MID CONTRACT, then looking at financials (which for us little guys are still way down, we are still down at least 40% from the last time we had to re-up our commercial mortgage in ’08) and deciding that said little business guy should either cash out any remaining 401k or retirement savings, or take a loan on their house, to keep their business from being repo’d EVEN IF THE BUSINESS HAS NEVER BEEN ONE DAY LATE ON A GODDAMN, FUCKING PAYMENT.
Result? Their commercial book looks better IF the little business manages to come up with enough funding (and of course, no banks are lending) which brings the banks in covenant with the FDIC (stress test bullshit anyone?). The business IF LUCKY, lays off more workers, cashes out the owner’s only remaining assets and limps along. For most of us though, we close our doors forever. Taking our jobs – and tax revenue – with us forever. The area gets one more empty commercial building.
So, if I bought something I couldn’t afford, then become a deadbeat, the banks are encouraged to let me squat and pay themselves bonuses.
But if I employ people and pay local, state and federal extortion, ‘er taxes, then the bank will shut me down and force my workers to try to hit the Squatters Lottery.
And the PTB actually have the audacity to say they are “helping” small business and creating/saving jobs.
Fuck them all. Hard. Dirty, thieving, bastards.
What is their big plan once the small guys are gone? Just how high will home property taxes have to rise to make up for the continued slaughter of the small, local businesses?
Guess they mean us to find out.
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13th January 2011 at 11:20 pm
Smokey says:
TeresaE—–+1000 BEST post, by far, that I have ever seen you put up. Small business takes it up the ass from banks and big business every GD day.
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13th January 2011 at 11:35 pm
Smokey says:
That’s why, when the time is right, I’m going to short those pieces of shit straight to zero.
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13th January 2011 at 11:37 pm
Smokey says:
Referring to big banks above (pieces of shit ).
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13th January 2011 at 11:39 pm
Opinionated Bloviator says:
Smokey, don’t leave the shorting run too late. The first action of Congress will be to outlaw shorting of the TBTF banking stocks when the next Wall Street collapse starts. Having said that, the true market value of the TBFT banks is ZERO and they will eventually go to that value, only the timing is in doubt.
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13th January 2011 at 6:50 pm