Loan Modification

Friedman Billing Ramsey came out and said they believed that Bank of America needs $60 billion all on its own, while Egan-Jones piped up and said the number was $100 billion! SNL Financial, a research firm, thinks the number is $50 billion each for Citi and Bank of America - minimum - and might be closer to $70 billion for Bank of America. Nor does it end there. Wells is projected to need $66 billion and JP Morgan needs $33b, according to these folks.

But if you think those numbers are a horror show, the real ugliness isn't found there. It is in fact found in all the foreclosed-but-unsold and not-yet-foreclosed "but will be" housing stock. Through the nation I am getting reports, some hard and some anecdotal, that lenders are sending out NODs (default notices) and then sitting on the process intentionally.

...

If they sell they are forced to realize the loss; so long as they have a "reasonable belief" it will perform or be bought out (e.g. a government-sponsored and funded refinance) they can carry it this way if it is held to maturity. This of course makes their books look much better than they really are when you've got $500,000 in cash out against collateral that the market values at $150,000!