Open Thread: Coverup on Mortgage Defaults

A very interesting post:  by Karl Denninger, More Banking Fraud (Foreclosure Stats).

When does the willful blindness in terms of bank fraud taking place daily in the so-called "marks" on housing-related loans stop?

The Mortgage Bankers Association released its latest update:

The non-seasonally adjusted delinquency rate increased 64 basis points from 8.22 percent in the first quarter of 2009 to 8.86 percent this quarter.


The delinquency rate includes loans that are at least one payment past due but does not include loans somewhere in the process of foreclosure.  The percentage of loans in the foreclosure process at the end of the second quarter was 4.30 percent, an increase of 45 basis points from the first quarter of 2009 and 155 basis points from one year ago. The combined percentage of loans in foreclosure and at least one payment past due was 13.16 percent on a non-seasonally adjusted basis, the highest ever recorded in the MBA delinquency survey.

That's right folks.  That means that of all mortgage loans 13.16% are not in "accrual" status - that is, they're not performing in that interest and principal are not being paid.  This is no longer about "subprime" - it is now all about prime loans; the claim that this was going to be "contained' is now proved false.

That our banks are not being forced to take the marks associated with these delinquencies is an outrage.  It is the cause of the FDIC's losses, it is the cause of our credit system remaining locked up, and it is the cause of our continued moribund economy, as without a functioning credit system there can be no actual economic recovery.

These institutions are being protected by our Congress and the willful, intentional blindness of The Federal Reserve, FDIC, OTS and OCC.

These agencies and persons have the same data that is being released to the market.  The stock market continues to rally not based on improving economics but based on the federal government and The Federal Reserve continuing to allow institutions to LIE about their financial condition and the expectation that the LIES will be permitted to continue!

... snip ...

The system is bankrupt and we MUST clear it of these non-performing loans.  We have spent two years playing "extend and pretend", believing that somehow the economy will imminently turn and thus all these "bad assets" will suddenly become good, even though statistically once you miss two payments the odds of you "curing" that delinquency - due to the fact that you would have to come up with BOTH overdue payments plus the current one - are near zero.

No votes yet


To be honest, I can't figure out what the economy is actually running on. A lot of folks I know are stretched very thin as work got scaled back, hours reduced, projects delayed or cancelled. And now just isn't the time to be spending. It just feels like a very big shoe is about to drop in the fall.

I think so.