Loan Modification

Wells' dubious off-balance sheet treatment of conforming loans avoids capital raises

By Implode-Explode Heavy Industries

So basically we are being asked to believe that impaired "conforming" mortgages are neither on the banks' balance sheets nor on the federal government's -- even though the banks are relying on the Fannie/Freddie backstopping to avoid consolidating these assets. Nice trick. We have trillions in loans officially in no-man's land.

One reason for the giant difference is that ?conforming? mortgages comprise a bit over half of Wells? off balance sheet assets. These are eligible for a government guarantee via Fannie Mae, Freddie Mac, or Ginnie Mae, argues the bank, so it needn?t consolidate them since they pose no risk to its balance sheet.

Full post as published by Mortgage Lender Implode-o-Meter on January 21, 2010 (boomark / email).